Sunday, March 26, 2006

NJ Budget - Expanding Health Insurance for Children II

In our last installment, I noted that

Family Care has added 278,928 kids and 141,516 adults due to the enactment of the "Family Health Care Coverage Act," boosting its penetration to 25% of the total market for children's health insurance.
The Governor's budget proposes spending $5,000,000 to recruit 50,000 more children into the program. That's $100 for each and every child added.

Enlighten New Jersey and Paul Nelson of NJ Fiscal Folly have uncovered some additional facts showing that this increase will do nothing for our fiscal problems. First, in the comments on my first post, Enlighten notes a line from the Budget in Brief:
"$70 million – Medicaid and a FamilyCare shortfall caused by higher than anticipated enrollments, increased drug costs, and a shift to the General Fund of costs that are no longer supported by the Health Care Subsidy Fund."
Based on this data, we could conclude that the additional 280,000 kids cost the state at least $250 each. Spending $5,000,000 to recruit 50,000 more would thus cost the state an additional $12,500,000. for a total expenditure of $17,500,000. This is not exactly a wise choice in the eyes of the typical investment banker, but there may be more to it than that.

Fortunately, Paul Nelson found that there is more to it. He researched the legislation that caused the drastic increase in FY06 costs, and found this [emphasis mine]:
The Office of Legislative Services (OLS), which provides professional, nonpartisan staff support services to the NJ Legislature, analyzed various costs related to the NJ FamilyCare program (go to page 6 of this June 2005 Senate Budget Committee report). The OLS found that the state spends $113 per month for each child in the program. For every additional 10,000 children, the gross annual cost (paid with both state and Federal funds) would be $13.6 million. Thus, the cost of an additional 50,000 children would be $68 million per year, not $14.3 million as Corzine claims in his proposed budget.
One thing that Paul missed, is that the $14,300,000 increase is not all intended to pay for the recurring cost. As I noted above, $5,000,000 of that total is intended to support growing a losing business, and the governor has irresponsibly planned an additional $9,300,000 for an additional expense which he surely knows will be significantly larger.

Given that this expenditure cannot possibly be motivated by fiscal reasons, I can only conclude that it is being made for political ones. The far left has long been enamored with the failing single-payer health care system of Canada and other quasi-socialist states. They attempted to enact one nationwide early in the Clinton administration. I believe Governor Corzine's goal is to create such a system here in New Jersey. Why else would he be spending the taxpayers' money in an attempt to corner the health insurance market for children? He's already got 24% of the 18-and-under crowd locked in, and wants to expand his "customer" base by 10% this year.

Governor Corzine, the state is losing money on each and every person added. Children are not a loss-leader, and you can't make it up on volume. Drop your plan to take over state-wide health insurance.

Tags: New Jersey, Budget, Corzine, Health Care, Children

Thursday, March 23, 2006

NJ Budget - Expanding Health Insurance for Children

In his campaign health care plan, Jon Corzine claimed he would expand health insurance availability to 265,000 uninsured children. Back in June 2005, I questioned that plan. The latest data available at the time (from June 2004) showed 229,743 people enrolled in the plan.

A few census facts are in order here. There are estimated to be 8,414,350 people living in New Jersey, of whom 24% (2,087,558) are aged 18 and under. There are 669,668 individuals below the poverty level, or 8.3% of the population.

If the proportion of children among those in poverty is the same as that of the general population, then there are about 161,000 children in poverty. This ties pretty closely with the census estimate of 135,549 families below the poverty level.

The latest Family Care data, from Feb 2006, indicate that 508,671 children and 141,516 adults are now enrolled. Family Care has added 278,928 kids and 141,516 adults due to the enactment of the "Family Health Care Coverage Act," boosting its penetration to 25% of the total market for children's health insurance.

Why should we spend $5 million of additional state funds? Give the existing legislation, only in effect for the past six months, time to work. We do not need "aggressive interdepartmental collaborative efforts to maximize existing enrollment opportunities," nor do we need "targeted marketing and outreach" to recruit an additional 50,000 children, especially when those children are likely to come from the upper end of the allowed 350% of the poverty level. Our state plan currently provides insurance for more than 3 times the estimated number of children living in poverty.

Leave well enough alone, Governor Corzine. Government should not be a growth industry.

Tags: New Jersey, Taxes, Health Care, Corzine, Budget

Wednesday, March 22, 2006

New Jersey 2007 State Budget - First Impressions

I've just finished reading Governor Corzine's Budget in Brief. I'm putting together some thoughts on specific issues, but wanted to point out something I think is missing.

How many people does the state employ? How many people are currently eligible for state-funded pensions? What has been the change in those numbers over the last several years?

I cannot find these basic facts anywhere in the Budget. Since "mandatory" increases in wages and benefits are driving a large percentage of the higher spending each year, I think it's important for the taxpayers to be provided with this information. The governor tells us in the highlights:

Reduction of more than 1,000 staff positions with accompanying savings of $54 million through a rigorous hiring freeze, administrative efficiencies and responsible reorganization of select government functions. Limiting the filling of attrited vacancies will yield opportunities to not only control government growth but also to do more with less by enhancing management efficiencies and streamlining services
What he's not telling us is how much of an impact this "reduction" will have on the overall budget. I find it hard to believe that the average government employee only costs the state $54,000 per year.

I will follow with more questions later. In the meantime, stop in to see Enlighten New Jersey, Dynamobuzz, NJ Fiscal Folly, and NJ Conservative for more interesting commentary.

Tags: New Jersey, Taxes, Spending, Corzine

Monday, March 20, 2006

A Conversation with a Seven-Year-Old Cub Scout

While in the car this evening after a den meeting, my second grade Cub Scout noticed that the outside temperature was 40 degrees Fahrenheit. A few minutes into the ride to pick up his older sister at the dance studio, he remarked as the temperature was falling, first to 39 then 38 degrees.
I asked him if such rapid temperature change in a short time meant that it would keep dropping until it got below zero tonight. "Dad, don't be silly," he responded. "The temperature can't keep changing like that!"
A few minutes later, the temperature jumped back up to 39 degrees. So I asked him, "Does this mean the temperature will keep rising now?"
"No way!" he shouted from the back seat.

Why is it that a seven-year-old understands that short term trends cannot be extrapolated to predict long term behavior of a particular measurement, but "most scientists" as portrayed by the media ignore this?

Tags: Kids, Global Warming

Carnival Time

The Carnival of the New Jersey Bloggers is up over at The Center of New Jersey Life. Sharon does her usual fine job of hosting.

Also, one of my posts was included in the Carnival of the GOP Bloggers! I mentioned this new carnival a few weeks ago. Go check it out.

Tags: Carnival of the New Jersey Bloggers, Carnival of the GOP Bloggers

Saturday, March 18, 2006

Definition Time

I normally don't do this, but I've seen so much in the press and on the NJ blogosphere lately that I just have to point this out. Forgive me for shouting, but I feel it's necessary in this case.


That is all.

Tags: New Jersey, Taxes

Friday, March 17, 2006

A Conservative Goes to the Library

[Welcome, Carnival of the New Jersey Bloggers and Carnival of the GOP Bloggers! Thanks for stopping by.]

Thurman Hart, the Xpatriated Texan at, writes: Ken is a liar. He's trying to fool us all! Don't let him snow you. Or words to that effect. What he really says is that my post on the State Business Tax Climate Index is "intentionally misleading" and contains "disturbingly inaccurate info."
Let me start by stating that Thurman appears to care about the subjects on which he writes, and is normally polite in his discourse, so when I saw that he had linked to my post, I was encouraged that someone from the left side of the blogosphere wanted to engage in debate on the subject. My encouragement quickly turned to disappointment when I read his introductory remarks. As a former naval officer and Naval Academy graduate, I have always tried to conduct myself honorably. To be called a liar in a public forum is a slap in the face, and is very much unappreciated. While Thurman may disagree with my conclusions about the data, none of the information provided is inaccurate (although I did make one mathematical error, as described below). It is all verifiable at the links I provided to the State Business Tax Climate Index and the Gross State Product Report. (For the true geek, the actual data behind the report on GSP is here.)
Thurman appears to have gone to the data, and includes in his post the growth rates and growth ranks for each state I listed in the top and bottom 10. What I said was that "overall US growth rate was 4.3 percent," "the top 10 states ... hit an average of 4.67 percent," and "the bottom 10 states averaged 3.44 percent." He attempts to refute my analysis by pointing out that two of the top 10 business tax climate states, "Wyoming and Alaska badly underperform," and 60% of the states in the top 10 meet or exceed the national average. In Thurman's view, 60% beating the average isn't good enough. Unfortunately, his view is based on a flawed analysis - only the two states he cites, Wyoming and Alaska, are below the 4.3% national average, while Montana equals it, as shown in this copy of his table (emphasis added).

StateTax Climate RankGrowth RateGrowth Rank
S. Dakota24.520
New Hampshire65.49

He then really confuses matters by trying to average the rankings and compare it to the median ranking, and excluding the highest percentage performer, Nevada, from the comparison to reinforce his position that the difference isn't really all that significant. Problem is, it's apparent that he averaged the growth rates, without accounting for the total growth in each of the states involved. He states that "If you separate Nevada from the rest, the average drops to 4.5." His calculation is correct for his flawed methodology, but doesn't really tell you the complete story. To do that, you have to sum the total GSPs and total growth, not average the averages.

Dollars in millions

State 2004 Total Percent Growth 03-04 03 Total 03-04 Growth Overall Tax Climate Rank
Wyoming 23,979 3.3 23,213 766 1
South Dakota 29,386 4.5 28,121 1,265 2
Alaska 34,023 3.4 32,904 1,119 3
Florida 599,068 5.9 565,692 33,376 4
Nevada 100,317 9.3 91,781 8,536 5
New Hampshire 51,871 5.4 49,213 2,658 6
Texas 884,136 4.6 845,254 38,882 7
Delaware 54,274 5.0 51,690 2,584 8
Montana 27,482 4.3 26,349 1,133 9
Oregon 128,103 4.5 122,587 5,516 10
Top 10 States 1,932,639 5.2% 1,836,804 95,835
Percentage of US 16.6%
16.4% 19.9%

With Nevada in the mix, the combined growth rate for the top 10 states is 5.2%.[1] Without Nevada, the combined growth rate falls to 5.0%. Thurman's argument doesn't hold water here. His method is akin to computing a team batting average by totalling the averages of each player, then dividing by the number of players. These states taken in the aggregate significantly outperform the nation as a whole, even if you exclude the top performer.
The next attempt to portray my analysis as "intentionally misleading" and inaccurate looked at the bottom 10 states. Thurman points out, correctly, that 40% "outperform" the US economy. His conclusion "guess," that "it must be something besides tax rates" is obviously correct, but not pursued or supported by any other data or analysis. What exactly is it then, Thurman? 70% of states with favorable business tax climates outperformed the US economy, while 60% of states with unfavorable business tax climates underperformed. I stand by my conclusion.
Let's put it another way. Look at the economic performance of the bottom 10 states, and compare with the top 10.

Dollars in millions

State 2004 Total Percent Growth 03-04 03 Total 03-04 Growth Overall Tax Climate Rank
Arkansas 80,902 5.3 76,830 4,072 41
Iowa 111,114 5.5 105,321 5,793 42
Nebraska 68,183 1.5 67,175 1,008 43
Kentucky 136,446 3.7 131,578 4,868 44
Maine 43,336 3.9 41,709 1,627 45
Vermont 21,921 4.6 20,957 964 46
Ohio 419,866 2.6 409,226 10,640 47
Rhode Island 41,679 3.5 40,270 1,409 48
New Jersey 416,053 3.4 402,372 13,681 49
New York 896,739 4.7 856,484 40,255 50
Bottom 10 States 2,236,239 3.9% 2,151,923 84,316
Percentage of US 19.2%
19.2% 17.5%

The monetary difference in growth between the top 10 and bottom 10 states is large.

2003 Economy 03-04 Growth
Top 10 $ 1,836,804 $ 95,835
Bottom 10 $ 2,151,923 $ 84,316
Delta $ (315,119) $ 11,519
% Delta -14.6% 13.7%

The top 10 states generated $95.8 billion in growth, while the bottom 10 states generated $84.3 billion in growth starting from a much larger base. Their favorable tax climate let them create 13.7% more economic growth, using 14.6% less working capital. If these were companies, in which one would you invest? The data clearly show that states with a favorable business tax climate, in general, outperform the states with unfavorable business tax climates.

Tags: New Jersey, Taxes

p.s. Thanks to Enlighten-New Jersey and New Jersey for Change for weighing in on this as well.

[1] As I put together this rebuttal, I realized that I had made a calculation error. The top 10 states did not average 4.67% growth as I had noted. As you can see from the table, the average growth was actually 5.2%. I can't account for the error (didn't save my working Excel™ file), and I stand corrected on this point. This correction will also be appended to the original.

Monday, March 13, 2006

Budget Priorities

Enlighten-NewJersey says, "Tell Corzine No Tax Increases - Cut Spending."

The Courier Post recently conducted a survey on how Gov. Jon Corzine should balance the state budget. The number one choice was “cut government jobs and benefits”, favored by two thirds of the voters. The second highest vote getter was “cut services”.
The choice Governor Corzine seems to be leaning toward, “increase taxes and spending”, is not an option favored by the people of New Jersey, at least not taxpayers reading the Courier Post.

I agree with Enlighten (surprise!), and decided to send the governor a little note about the subject. Here's what I wrote, via his email web form:
Dear Governor Corzine,

With regard to the Fiscal Year 2007 budget as briefed in your recent town hall meetings, I believe you have your priorities exactly backwards. The slides presented talked about how dire the spending problem is, yet did not offer a coherent plan to reduce spending. In fact, it appears that your budget plan increases spending by over 17% from the current fiscal year.
I find this level of increase to be totally unacceptable. I demand that you reduce spending significantly. From 1997-2004, state expenditures (from your presentation) grew at an annual rate of approximately 7.3%, while Gross State Product grew at an annual rate of 5.5% (unadjusted for inflation). Had we held state spending growth to the rate of economic growth, our 2004 expenditures would have been $22.4 billion rather than $24.5 billion, and we would have spent $12.6 billion less over the cumulative seven year period.
Your plan, as presented, states that expenses "will grow" at an annual rate of over 10.5% from 2007-2010, despite projected revenue growth of only 3-4% annually.
It would be appropriate, in my opinion, to set a baseline for your budget based on the growth in the economy over the long term (say, 10 years or so), so that the sustainable level of revenue based on current taxes covers spending. If the sustainable revenue does not support a new program, then that program must not be initiated. It would be much more fair to the taxpayers, and more favorable to the business climate, to have a stable tax code over a long period, rather than having the constant threat of new taxes deterring financial decisions.
There are reports that the state has collected some $500 million in excess of this year's budgeted revenue, due to the strength of economic growth this year. Those funds must not be spent frivolously, but should be used to either reduce next year's tax burden, or to satisfy some of the unfunded liabilities you highlighted in your briefing. It would be irresponsible to take this excess revenue as "found money" and expend it to the for other purposes.
Governor Corzine, it is vitally important to the future of our state that you get our spending house in order. The state collects more money than it budgets, yet every year reports a "budget hole" in the billions of dollars. Break the cycle and restore fiscal sanity to our government by stopping the spending increases.

Tags: New Jersey, Spending, Taxes, Corzine

Sunday, March 12, 2006

New Jersey For Change

Dear reader[s],

Let me introduce you to a relatively new blog, New Jersey For Change. Started only three weeks ago by Chanice, with help from her nameless cousin, NJFC has already covered a local teacher gone big time, the Corzine bail scandal, state government spending, school performance, and corruption. She's even been attacked by the left side of the state blogosphere in her comments, where DBK called her a "[phallic epithet]", "complete schmuck," "full of [fecal matter]," "ignorant," "lying, dishonest little [phallic epithet]," "lying [fecal matter]," "low-life," and "lying [alternative phallic epithet]," all in the span of two hours. I'd say Chanice is off to a good start. Stop by New Jersey for Change and see for yourself.

Tags: New Jersey Bloggers, Spending, Corruption, Taxes, Corzine

Saturday, March 11, 2006

The Governor's Budget Presentation

In a piece titled One Dimensional Thinking, Paul Nelson of NJ Fiscal Folly critiques the governor's recent budget presentation. He concentrates on the weakly stated debt problem, which is huge, but I'd like to point out another hidden feature of the presentation.
The governor claims, on slide 3, that "Deterioration began in the late 1980’s and continued Deterioration began in the late 1980’s and continued under both Democratic and Republican under both Democratic and Republican administrations," but the data don't really support that claim. Look at the slowing growth in appropriations on slide 5, where from FY 1997 through 2004 the annual rate of increase averaged about 7.5% per year. The most significant problem was the McGreevey budget of 2005, which increased appropriations by more than 16%, using an unprecedented number of gimmicks and shams to pretend that it was balanced.
Acting Governor Codey's 2006 budget, in contrast, appropriated about 3% less than 2005. He recognized that spending restraint was required to get the state's financial house in order.
Corzine wants to return to the McGreevey policy of ridiculous growth in spending. As shown in slide 12, projected growth this year is $4.9 Billion, or more than 18%, with the largest chunk dedicated to "State, College, and Teacher Employee Pension & Health Benefits."
This kind of profligate spending cannot stand. Revenues are projected to grow at 3-4% each year without any changes to the current tax structure. State expenditures growth should be limited to what we can afford, and if hard choices must be made, so be it. I have not taken a vacation or bought a new car since moving to New Jersey in 2001 because my personal revenue growth did not allow for such additional expenditures. Shouldn't I expect the same behavior of my government?

Tags: Spending, Taxes, Corzine

Thursday, March 02, 2006

State Business Tax Climate Index

Enlighten-New Jersey, Dynamobuzz, and NJ Fiscal Folly have all hit on The Tax Foundation's State Business Tax Climate Index. New Jersey, in case you didn't already know it, is just about the worst possible place to locate a business when considering tax issues.

I was curious what the overall impact of this tax climate was on the state's economy, so I went and dug up the latest Gross State Product (GSP) report from the federal Bureau of Economic Analysis. The numbers are pretty staggering, especially when you look at the top and bottom 10 states identified by the Tax Foundation:

The ten best states in the Tax Foundation’s 2006 State Business Tax Climate Index are as follows:

1. Wyoming
2. South Dakota
3. Alaska
4. Florida
5. Nevada
6. New Hampshire
7. Texas
8. Delaware
9. Montana
10. Oregon

The ten worst states in the SBTCI are as follows:

41. Arkansas
42. Iowa
43. Nebraska
44. Kentucky
45. Maine
46. Vermont
47. Ohio
48. Rhode Island
49. New Jersey
50. New York
In the latest year for which state-level data were available (2003-2004), the overall US growth rate was 4.3 percent. The top 10 states in the rankings above hit an average for 4.67 5.2 percent, while the bottom 10 states averaged 3.44 percent[1] . This supports the point made by the Tax Foundation, and also highlighted by Enlighten - Taxes Matter. States with favorable tax climates outperformed the overall US economy, while those with unfavorable taxes underperformed. The 10 best states accounted for 16.6% of the total US economy, and delivered 19.9% of the growth. Meanwhile the bottom 10 states made up 19.8% of the economy but only created 18.5% of the growth. New Jersey's GSP is 3.6% of GDP, but our growth was only 2.8% of the national total.
It doesn't get much simpler than this. Make your tax system fair, and your state will prosper. Complicate your tax system, failing to treat taxpayers equally and you will lag behind.

Tags: New Jersey, Taxes

[1] As I put together this rebuttal to Xpatriated Texan's post on this subject, I realized that I had made a calculation error. The top 10 states did not average 4.67% growth as I had noted. As you can see from the table in the rebuttal, the average growth was actually 5.2%. I can't account for the error (didn't save my working Excel™ file), and I stand corrected on this point. This correction will also be appended to the original.