“We are nearing the abyss,” is the opinion of Tom Byrne, son of former Governor Brendan Byrne, and past Democratic State Chairman. The state must present a balanced budget by June 30th, and they are still $1.2 billion short. This is in spite of the stimulus, tax hikes, and spending cuts. Revenue projections continue to fall. In April the state found it had $800 million less in income tax revenues than initially projected. (that’s 40 percent less than last year’s collections.)
What is left? Property tax rebates are now cancelled for eveyone except seniors and the disabled (they are paid for mainly in income tax collections). And the Governor has cancelled plans to expand state spending on pre-school. The income tax is being hiked from 6.37 percent to 8 percent on those earning between $400,000 and $500,000 and the rate is being increased from 10.25 percent to 10.75 percent on those earning over $1,000,000.
It won’t be enough. So the state is seeking a line of credit from a bank. The Treasurer has asked a willing “cash borrowing facility” to lend them $2 billion. California may need to do the same in the next year, for 10 times that amount.
There is a common denominator in the problems of both states. They surrendered control of their budgets to public sector unions and interest groups. New Jersey has the added problem of having 40 percent of its budget (and its income tax system) crafted by court mandates on education spending.
Perhaps this new fiscal fix is not surprising. Credit cards will soon be the refuge of habitual debtors.
Congress is actively reshaping credit card companies, restricting interest rate increases and fees to help those who can’t make their bills. The outcome: those with good credit will be subsidizing those who walk away from their payments.
The financial market bailout that began in September has infected everything. With the same principles at work and outcomes observed. Those who behaved badly or made poor choices are being rewarded by those who paid their bills on time and lived within their means. Result – An insatiable redistribution of resources from the market economy and into bureaucracies of all kinds.
The bailout bulldozer shows no signs of running out of fuel.