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.