Tag Archives: Governor Corzine

Furloughs v. Bankruptcy: The New Unionism

New Jersey continues to stare straight at bankruptcy.  Revenue projections indicate that this is not an ordinary crisis . A shortfall of $2 million is projected.  Income tax revenues have fallen 40 percent. It is going to be painfully tough for Governor Corzine to balance the budget by June 30th. His latest proposals to cut spending include a furlough for union employees, a request for a $2 billion line of credit, less aid for colleges, and a $125,000 cut in aid to 12 independent living centers for the disabled. But program beneficiaries are not happy. There is a protest against the latter today at the Trenton statehouse.  Union workers are threatening to take the governor to court over his proposed furloughs.

Part of the driving force behind New Jersey’s imminent bankruptcy is the growth in salaries, pensions, and health benefits for unionized workers, including teachers. The state’s income tax is 100 percent Constitutionally dedicated to providing “Property Tax Relief.” This is a misnomer. It actually goes mainly (70 percent) to supplementing school budgets, and most of that take goes to 31 Abbott districts. Administrative  costs for teachers have skyrocketed in these districts over the decades.

Another source of trouble – the state’s pension system – negotiated by unions, agreed to by the state, with the costs passed through to municipalities, which are responsible for paying for fire and police benefits.  Result – the second highest property taxes per capita in the nation.

The mark of  public sector unions in directing New Jersey’s state and municipal budgets has been strong and devastating. And New Jersey is by no means alone. Steven Malanga of the Manhattan Institute,  writes in today’s Wall Street Journal about a very important distinction that bears repeating:   these are public sector unions – not private sector,  heavy industry unions

This phenomenon – the decline of the private sector union and the rise of the public sector union was identified and developed by my  economics professor, Dr. Leo Troy of Rutgers.  See his book, The Twilight of the Old Unionism.  His work on this subject is worth reading.

New Jersey 2010 Budget Proposal

New Jersey Governor Jon Corzine released his proposed 2010 budget today in a speech before the legislature. The budget is $3.4 billion below last year’s adjusted appropriation and $1 billion below Governor Corzine’s first budget in 2006.

So where did the savings come from? A quick analysis shows that $380 million was cut from government budgets and another
$420 million comes from salary freezes and workforce furloughs.

But the bulk of New Jersey’s budget fixes come from one-time fiscal maneuvering: propping up a budget suffering from perennial instability. The $2.2 billion in federal stimulus dollars and $1 billion in “revenue solutions,” including a one-time tax hike for those earning over $500,000 and increased taxes on cigarettes and alcohol, don’t get at the underlying problems that have plagued the state for years.

Particularly troubling is that the federal stimulus funds are not merely subsidizing the state out of its present trouble, but helping the state expand spending on education in the form of a $25 million increase on pre-K education and $300 million in direct aid for schools.

The bottom line: New Jersey’s budget fixes don’t bode well for long-term fiscal recovery, and may permanently expand spending and taxes while shifting the cost of pensions to the future.

Assorted Links: March 9, 2009