Delanco School District Election

Yesterday, the voters of Delanco chose to accept my offer of volunteer service on the school board. Thank you! I'll do my best to represent the interests of the entire township over the next three years. If you ever have an issue regarding the schools, I'd be happy to discuss it with you. My email address is kmadams85 AT gmail.com, and I am listed in the local phone book. You can also come to the board meetings the second Wednesday of each month, 7:30 PM, at Pearson School.
The voters also rejected the proposed school budget by a margin of 200-158. I'm not surprised, given the heavy anti-tax sentiment prevalent in the state and township right now.
Is it more than that? Are the voters of Delanco really rejecting the budget as a general protest against more taxation? This budget increased property tax on the average township homeowner by $38 for the general fund, and $105 for servicing the debt approved in a bond referendum several years ago.
If you are a Delanco voter, and voted either for or against the tax levy, please let me know why. We will be negotiating potential changes to the levy with the Township Committee, so you have more opportunity for input in the coming weeks.

New Jersey 2008 State Budget - Municipal Aid

Enlighten New Jersey notes today the inequality in state aid to municipalities.

As required by law, each Legislative Distinct (LD) has approximately the same number of residents, and yet proposed municipal aid ranges from a low of $23,625,299 in LD-24 to a high of $119,422,814 in LD-29. The proposed average municipal aid per Legislative Distinct is $43,178,397.

Proposed state aid for each municipality and Legislative District can be viewed here and New Jersey population statistics as of December, 2006 can be found here.

Why are there differences? Enlighten doesn't come out and say it, but the two districts cited provide a clue. District 24 has a large number of small municipalities, 31 in all, receiving an average of $768,558.

District 29, on the other hand, covers Hillside Township and a portion of Newark. The average state aid in 29 is $59,721,407; Hillside will receive $5,676,440, while the tab for Newark is $113,766,374.

The observant will note that in addition to the difference in character (rural vs. urban), District 24 is represented in the Senate and Assembly by Republicans, while 29 is a Democrat District. Surprise!

Actually, it gets better. Breaking down the municipalities statewide by their representation, an interesting trend emerges. All-Democrat districts (Senator + 2 Assemblymen) receive an average of $5.3 million (per municipality) in total state aid, while all-Republican districts average $1.59 million. Here's the breakdown by representation:

Senate	Assembly	Average Aid	Average Increase
D	D, D	$5,304,771.40	1.95%
D	R, D	$2,582,107.63	1.91%
R	D, D	$2,106,762.21	1.91%
R	R, D	$3,081,757.84	1.91%
R	R, R1	$1,589,208.16	1.88%

Breaking it down by county, it's clear that this year's state budget remains, as always, a vehicle for transferring cash to the New York area, at the expense of the rest of the state. Hudson County, with the largest starting aid level, also leads the way in growth at 1.97%

COUNTY	0607 Average Aid	0708 Average Aid	%Change
Hudson	$15,408,884	$15,711,918	1.97%
Essex	$9,831,517	$10,023,886	1.96%
Mercer	$8,766,272	$8,938,238	1.96%
Middlesex	$6,204,436	$6,324,626	1.94%
Passaic	$5,883,483	$5,996,404	1.92%
Union	$5,791,894	$5,904,388	1.94%
Camden	$3,359,636	$3,424,738	1.94%
Ocean	$2,129,170	$2,169,268	1.88%
Somerset	$2,074,086	$2,113,291	1.89%
Monmouth	$2,036,287	$2,075,099	1.91%
Bergen	$1,824,555	$1,858,832	1.88%
Cumberland	$1,781,920	$1,816,349	1.93%
Morris	$1,717,062	$1,749,088	1.87%
Atlantic	$1,679,125	$1,710,660	1.88%
Burlington	$1,630,726	$1,661,178	1.87%
Salem	$1,619,646	$1,651,477	1.97%
Gloucester	$1,512,750	$1,540,960	1.86%
Cape May	$1,390,098	$1,416,850	1.92%
Hunterdon	$815,436	$831,054	1.92%
Warren	$780,444	$795,219	1.89%
Sussex	$739,841	$753,266	1.81%
Grand Total	$2,993,880	$3,051,477	1.92%

Furthermore, larger municipalities continue to grow faster than smaller ones:

Municipality Type	0607 Average Aid	0708 Average Aid	%Change
City	$11,846,443	$12,079,345	1.97%
Town	$4,418,015	$4,503,779	1.94%
Township	$2,953,055	$3,009,313	1.91%
Village	$1,629,736	$1,660,126	1.86%
Borough	$1,043,348	$1,062,833	1.87%
Grand Total	$2,993,880	$3,051,477	1.92%

Combining the representation cut with municipality type, the disparity in state aid to municipalities becomes abundantly clear.

	All-Democrat	All-Republican
City	$ 22,981,789.73	$ 4,145,897.80
Town	$ 9,016,540.40	$ 1,996,690.78
Township	$ 3,909,956.64	$ 2,266,959.05
Village	$ 1,891,688.50	$ 1,428,564.00
Borough	$ 1,470,199.91	$ 817,775.29

The budget does not, as the governor said in his address, provide "an across-the-board two percent increase in municipal aid." It provides additional aid at less than the 2% he claims, and in the most divisive and partisan manner possible. If he had any shame, Governor Corzine would resign after submitting this garbage.

---

¹ Posted edited 3/2 9:20 AM to fix a typo

Exercise in Futility

This evening, after my second consecutive weekend road trip to Connecticut, I filled out my "FAIR" rebate application. I was hoping to get a little of the tax relief Governor Corzine promised during his campaign. Sure would be nice to get a few hundred dollars back from the property tax relief fund.

The state provides a nice, online form with which to submit an application. It walks through all of the values required, and generates a receipt at the end. It even reminds the user to either save or print the receipt, as it is the only record that an application has been submitted.

Unfortunately, I probably won't get the rebate. You see, I worked really hard last year to generate enough cash flow to pay my bills, feed my kids, and fund my copious tax liabilities. In fact, I worked about 17% overtime, and that put me into the realm of the ineligible "rich" by a couple hundred bucks. Had I only worked 16% - 20 hours less - then I would be eligible to receive the rebate.

Really "FAIR" system, isn't it? Thanks, Governor!

Tags: New Jersey, Taxes

Taxing Us to Death, Revisited

Enlighten New Jersey notes today that New Jersey Democrats are Not Satisfied With $16,667 Per Person In Taxes.

Taxpayers want Trenton to cut state spending, not come up with new ways to extract money out of their wallets. Shifting taxes around and identifying new things to tax does not solve the problem.

The people of New Jersey already pay more than their fair of taxes, no matter what Governor Jon Corzine, Senator Bob Menendez and all the other state Democrats might have you believe. These numbers don’t lie. New Jersey’s per capita tax of $16,667 is the second highest in the nation. And that's before Corzine’s new hospital, sales and other proposed taxes.

The specific numbers to which Enlighten refers were provided by the Tax Foundation. In addition to the raw dollars, where New Jersey ranks second behind Connecticut, they also have a table showing the state, local, and federal tax burdens as a percentage of income, along with a projected "Tax Freedom Day" for each year starting in 1970. Back then, NJ's workers had "paid off" their taxes by April 18th; it now sits at May 6th. We rank 3rd in total tax burden across the country, and have only been out of the top five twice since 1982.

An interesting comparison from that table is the difference between New Jersey's state/local tax burden and the average across the country. Back in the days of Brendan Byrne and Tom Kean, New Jersey was consistently close to the national average, as shown in the graph below.



Over the long haul of the data available, New Jersey has on average been less than 1/10th of 1% higher than the national average; under Governor Florio, however, we were significantly more taxed than the rest of the country, to the tune of nearly 3/4%. The "Whitman tax cuts" our liberal friends like to rail about were really just a return to the mainstream of America from Florio's confiscatory scheme.

Governor Corzine, by proposing to increase our sales tax 16.7%, seeks to return to the Florio model of taxing us to death. The real solution is to cut total spending, not increase it by $2 billion and demand more tax money to cover a manufactured "deficit."


Tags: New Jersey, Taxes

Who Knew? School Administrators Come Out Against Cuts

Corzine Watch reports that, surprisingly, school administrators don't want their budgets cut. In fact, the administrators of our institutions of higher education feel so strongly about it, they've almost taken to threatening the legislature in testimony:

The administrators also argued that the financial hardships would be far worse than the $169 million in cuts, because the state has asked schools to take on an additional $121.8 million in new costs. The heavy financial burden the state is putting on the schools could have a long-term effect. Less students would be able to afford state schooling, which could force students out of state.

The state of New Jersey spends boatloads of money on its colleges. Take Rutgers, for example. In 2006, net subsidies through the Department of State budget totaled almost $331 million; 2007 net subsidies will be just short of $275 million (click to enlarge):

What's staggering to me is the gross amount of state support to Rutgers through Grants-in-Aid -- nearly $1.6 billion. The cut in state aid, shown in this budget line, is less than $31 million, or 1.9% of the total grant. This will hardly bankrupt an institution that has been in existence since 1766.

You'll notice from the table that one other line is significantly different between 2006 and 2007: Receipts from Tuition Increase. In 2005 and 2006, Rutgers had extra income of $26 and $28 million, respectively, from higher tuition rates.

The table below, again taken from the Department of State budget, shows the cost of attendance at Rutgers increased by 3.6% in 2005, and by 5.5% in 2006. In each of those years, tuition for both in-state and out-of-state undergrads increased by 8% (click to enlarge).


This year's budget only anticipates $860,000 from higher tuitions, and this is a proper position for the governor to take. Like the state, Rutgers (and the other institutions of higher education) must learn to manage expenditures within expected revenues. The model of the past, in which revenues are managed to cover desired expenses, has got to go. Students, as the administrators have correctly recognized, can no longer afford annual 8% increases in tuition. Neither can the state.

Tags: New Jersey, Taxes, Budget, Education

Budget Nitpick

One thing that really bothers me about this budget -- I find that I can't trust any of the numbers found therein. Let me share one example:

The compensation of members of the Legislature is $49,000 per year (C52:10A--1). The President of the Senate and the Speaker of the General Assembly, by virtue of their offices, receive an additional allowance equal to one--third of their compensation.

This should be a pretty straightforward piece of the budget, as the law spells out exactly what the budget should be. If you do the quick math, you find that 40 and one third times $49,000 is $1,976,333.33. The budget plans to spend $1,990,000 (see page D-3), or nearly $14,000 more than the law allows.

Fourteen thousand dollars may not sound like a lot, but lets take a hypothetical extension of this budgeting and see where it leads. $13,667 (the actual overrun) out of $1.99 million is 0.69%. The total spending plan for the entire state is $30.9 billion. If 0.69% of the $30.9 billion total is in excess of the requirements (like the Senators' salary budget), than that would work out to $211.75 million dollars of, as Bob calls it, slippage.

Can we afford to lose more than $211 million in slippage?

Tags: Jersey, Taxes

State Personnel Hiring Freeze

Claim: The State of New Jersey is operating under a freeze on hiring, and is reducing state personnel to save money.
Source, Budget in Brief, p. 1

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

Fact:
Under Corzine's budget, the total number of people to be employed by the state in 2007 will be 1.5% higher than in 2006.

Source: Departmental budget details.

Supporting Data:
According to the budget documents submitted by the departments, state employment for 2006 stands at 84,886. 71% are paid through direct state taxes, 16% using federal funds, and 13% using "other" funds. The budget documents explain that "Other includes positions supported by fees or other dedicated resources previously reported as State Supported." [This sounds like doublespeak for a shell game, doesn't it?]
In 2007, the "state supported" headcount will drop by 1.0% (612 personnel). Those paid by federal funds will increase 4.9%, or 661 people, while the "other" category will increase by 8.5% -- 933. The net increase in state employment (and future pension liabilities, no doubt) is 1,331 more people.



Nearly every department increases its total headcount. Only three see decreases: Corrections, Personnel, and the Chief Executive. Those reductions total 164 personnel. The Public Advocate, State, and Community Affairs, on the other hand, each achieve double digit growth in their number of employees. Between them, those three departments add 220 people, more than eliminating the token reductions of other departments.



Proposal:
A true reduction of 1,000 staff positions would mean a state workforce reduction of approximately 1.14%. I would propose that this reduction rate be applied to every department of the government.



My (admittedly broad-brush) plan would actually reduce the number of people the state has on payroll by 1,230 people, and is more than 2,500 fewer than the governor's plan. I don't believe that this is anywhere near enough to restore fiscal sanity to our state, but it is a step in the correct direction.

I don't like to hurl accusations of lying, but the governor's statement above reeks of untruth. This budget contains massive spending increases, unsupportable personnel increases, and blatant lies about the nature of the changes. As has been said before, a reduction in the desired rate of growth does not constitute a spending cut, and a plan which ADDS 1,331 people to the payroll cannot be reconciled with a claim of a "reduction of more than 1,000 staff positions."

It was a grave mistake for the people of New Jersey to place Jon Corzine in Drumthwacket.

Tags: New Jersey, Taxes, Budget

Tough Choices?

As I mentioned in earlier posts, I've been going through the detailed department budgets posted on the New Jersey Office of Management and Budget website. The exercise has been a real eye-opener.

In his address to the legislature, Governor Corzine presented his budget as a series of tough choices.

The task ahead is daunting and not particularly attractive politically, for anyone. That said, the task must go forward -- no matter how tough the choices -- with a readiness to share the sacrifices.

I agree with the governor. Tough choices need to be made, but this budget does not make them. With a few notable exceptions like university funding, the governor has chosen to support the status quo of unrestrained growth. Take a look at the budgets requested by each of the departments (dollars in thousands):



Departments with increases will see an additional $3.1 billion in funding; cuts to individual departments total $493 million. A six-and-a-quarter to one ratio between increases and decreases doesn't seem much of a tough choice to me.

Maybe the tough choices become apparent when you look at what the departments requested vs. what the governor recommended to the legislature. Let's see:



Nope, no touch choices here. Twenty of twenty-two departments got exactly the tax dollars they demanded of the governor. Only Treasury (1.8%) and State (20.1%) saw reductions between their requested and recommended funding levels. Reducing the desired $4.8 billion dollars of growth by less than $350 million is more like tokenism than real fiscal management.

One last thought about the governor's "tough choices." According to the US Bureau of Economic Analysis, New Jersey Gross State Product grew 3.4% in 2004, and averaged 2.7% annually from 1997-2003. A budget which made tough choices would reduce growth in spending in at least one category, if not all of them, below the rate of economic growth. That doesn't happen here:



In this budget, overall spending grows at nearly three times the growth in our economy. It is irresponsible for the governor to make claims of fiscal responsibility when he proposes a budget that so far exceeds our means.

Tough choices, indeed.

Tags: New Jersey, Taxes, Budget, Corzine

Details, Details II

I've been going through the details of the state budget, and found this interesting little tidbit of information. In the Budget in Brief (page 80), the governor took credit for a $28,000,000 reduction in one-time funding for UMDNJ. The detailed budget information for the Department of State (pp. D-348-51), however, shows that there's more to the story.
UMDNJ is a huge business, with 2006 operating income projected at $1,166,984,000. In executing its operations, it expects to spend $1,402,723,000 this year, with a net cost to taxpayers of $235,739,000. The university proposed to increase its operating income (from fees, tuition, etc.) by 2.8%, and increase its general operating costs by only 0.3%, saving the taxpayers about $28 million. This seems like a very reasonable business case, and is the way a state enterprise should manage itself. Two-point-five percent productivity improvement is a pretty easy putt for an organization with over a billion dollars of income. When I worked for GE, the business expected each manufacturing plant to generate 4-5% every year.
But the university, being a state institution, cannot run itself like a business. Included in its budget request was a separate line item, titled "Appropriation Funding Difference," calling for an additional $28 million in Grants-in-Aid. It appears that this is the $28 million in one-time expenditure reduction for which the governor took credit.
Of course, UMDNJ didn't stop there. They also included separate line items for Increased Utilities Costs ($10 million), Capital Renewal / Replacement ($15.2 million), and Research Faculty Development ($5 million). Somewhere, either at State or in the governor's office, these additional funds were zeroed out. In addition, this year's general operating budget is being reduced to $1,386,375,000 (1.2%) for 2007.
The net impact of these changes is significant - $79 million less than the school requested. Without those expenditures, the net cost to the taxpayer for each graduate of the university decreases by $47,000. Now if we can get rid of the remaining $151,266 per graduate, we'll be in really good shape.

Tags: New Jersey, Taxes, Budget, UMDNJ

Details, Details

One area of the New Jersey budget where Governor Corzine has proposed significant growth is the Department of Children and Families (DCF). The summary of major increases and decreases from the Budget in Brief (page B-65) shows that the governor proposed to spend $50,364,000 more in 2006-07 than projected for current year state operations, plus $64,611,000 more in Grants-in-Aid for "Child Welfare Reform."

I was curious about the nature of the child welfare reform and its costs, so I did a little digging around, and found the DCF budget recommendations.

The Fiscal 2007 Budget for the Department of Children and Families (DCF) totals $974.8 million, an increase of $235.6 million in State funds over the fiscal 2006 adjusted appropriation of $739.3 million for the Department of Human Services’ (DHS) Office of Children Services.

This increase of $235,600,000 is broken down into 3 buckets -- $93,165,000 for direct state services, $132,397,000 for Grants-in-Aid, and $10,000,000 for Capital Construction. Within these three categories, expenditures are identified by program, as shown below.

Direct State Services
Child Protective and Permancy Services
Prevention and Community Partnership Services
Education Services
Child Welfare Training Academy Services and Operations
Safety and Security Services
Administration and Support Services

Grants-in-Aid
Child Protective and Permanency Services
Child Behavioral Health Services
Prevention and Community Partnership Services

Capital Construction
Administration and Support Services

Summing up the totals and looking at how the growth is distributed, it becomes clear that no "tough choices" were made to develop the DCF budget. Across the board, huge increases in spending are planned (click the table below to see).



The topline DCF budget is most disturbing, but not nearly as disturbing as this next little bit.
In Child Protective and Permanency Services, the active caseload expected for 2007 is 58,100 children (page D-35), costing $9,565 for each child. In 2006, the caseload is 59,200 children, driving a cost per child of $7,211. Reaching back into 2005, the caseload was 64,300 children, and the actual spending was $7,453 per child. State spending for Child Protective and Permanency Services, on a per-child basis, has increased over 28% in the last two years, but goes up by nearly 33% this year.

Why the increased cost? Simply put, the program has added a significant number of staffers. In 2004, 3,450 people were employed by the CPPS program. That grew to 4,154 in 2005, and 5,059 in 2006. 2007 headcount isn't available in the budget, but DCF planned for nearly 10% growth in total filled positions, from 6,178 to 6,620. The department budget detail states (page D-36) "The Budget Estimate for fiscal 2007 reflects the number of positions funded and will be allocated by program class upon approval of a revised Child Welfare Reform Plan."

The story this document tells is staggering. The Department of Children and Families obviously does not intend to follow the governor's stated intention (BIB, page B-3) for

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.

As evidenced by the budgeted personnel comment above, there is no plan (yet) to create a more efficient system of providing protective services for children. This is simply a plan to spend more of our tax dollars as quickly as possible.

Tags: Jersey, Taxes, Budget

NJ Budget - A Libertarian Point of View

I just ran across this post by Dr. Murray Sabrin, in which he presents the text of his testimony on the budget before the state Senate Budget and Appropriations Committee. He's got some interesting ideas about how to fix the state's budget problems.

On education funding:

• Amend the Constitution to abolish the “thorough and efficient” education clause, giving the Legislature control over school spending
• Amend the Constitution preventing the Supreme Court from ordering the Legislature or the executive branch to spend money for any purpose

About the only way to get the Supreme Court out of the school funding business is to explicitly invalidate Abbott and prevent it from coming back.

• Equalize state education aid. Every school district would get the same state aid per student as every other school district

This one I really like. The only truly fair way for the state to fund education is by linking the money to the students, rather than the schools or districts. Of course, it introduces other problems like inflation of attendance records.

• Implement education tax credits for individuals, families and businesses

Tie this to the previous item. Give the individual student or his parents gets a voucher that can be spent at any school in the state. [My, I'm starting to sound like a Libertarian, aren't I?]

On financial management:

• The state should implement forensic accountants Rosenfarb Winters recommendations regarding the Abbott Districts, which would save at least $282 million

Kinda cryptic reference, but I like the idea of saving 9-figure numbers.

• Institute zero based budgeting—all state agencies must justify every dollar it spends

We do this today, except the justification is usually "That's what we spent last year, you got a problem with that?"

On specific taxes:

• Reduce the sales tax by one cent every year for three years

Like it, but I'd go for six rather than three years.

• Reduce the personal income tax and the Corporate Business Tax

This is good, as long as we reduce the marginal rates to stimulate growth, rather than creating some phony scheme that eliminates taxpayers from the rolls. Unfortunately, the Governor has proposed option B.

• Eliminate the income tax on pensions

I don't know that this is such a good thing (see above re: eliminating taxpayers from the rolls)

• Raise the gas tax 20 cents per gallon only for road and bridge projects

More than doubling the gas tax (or any other tax) is a Bad Idea™.

On redistribution schemes:

• Eliminate property tax rebates, saving $1.5 billion per year

Great idea, as long as it's enacted along with the linkage of funds to students.

• Eliminate all state grants to nonprofits

Makes sense to me. I don't want my money funding West Jepepian Cultural Studies or other such nonsense. Many nonprofits do good work, but they all employ professional fundraisers and should not be reliant on state grants. Fee for service paid to nonprofits, however, would probably be a more efficient use of state tax dollars.

• End municipal grants

I don't think that I would completely eliminate them, but I would like to see tighter controls and elimination of favoritism toward committee chair pet projects. Transparency would be nice here.

On specific spending items:

• Begin the transition making the state colleges, Rutgers University, and the University of Medical and Dentistry of New Jersey financially independent

Considering the facts that Rutgers charges $237 per undergraduate credit hour in state ($484 out of state), has 28,000 students enrolled, and requires 120 credit-hours of course work to graduate, one would think they could generate a viable business model without state funding. By my back-of-the-envelope calculations, they take in somewhere around $200 million annually from tuition alone, assuming an 80/20 split between in-state and out and 4-5 years to graduate.

• Kill the Transportation Fund bond issue

All for this one, as well. The debt liabilities in the TTF need to be taken out of hide, like they should have been when they were incurred.

On fixing the business climate:

• End state government grants, loans, subsidies for businesses
• Abolish unnecessary business regulations

Absolutely. The state has no business in business. Set a low tax rate, keep it stable, get out of the way and watch things take off.

On general government reforms:

• Eliminate dual office holding

How the heck did we end up with this albatross, anyway?

• Eliminate pensions for part-time government employees

I spend at least an hour a year on paperwork for the benefit of the state, and in return I get a check. Is that enough to qualify me as a state employee for pension purposes?

• Eliminate pensions of legislators

I'm absolutely in favor of doing away with the permanent politician. Killing these pensions would remove a significant incentive for those in office to stay in office.

It's not surprising that Sabrin's ideas haven't gotten more attention, given that he was 51st on a list of 74 people testifying April 3rd, and has been a less-than-successful candidate for multiple statewide offices (Governor 97, Senate 00). I'll leave you with Sabrin's thoughts on the true source of our problem, with which I wholeheartedly agree.

The culture of entitlement and redistribution of income is so ingrained in the collective psyche of policymakers and many segments of the public, that few individuals can conceive of a society based on low taxes, less spending, less regulation, and limited government. Instead, too many of our citizens believe government’s prime responsibility is to be the social worker, the healthcare provider and the source of income for many of our families.
Policymakers must embrace economist Ludwig von Mises’s insight: “The government and its chiefs do not have the powers of the mythical Santa Claus. They cannot spend except by taking out of the pockets of some people for the benefit of others.”

Tags: New Jersey, Taxes, Budget

The Latest on New Jersey's Budget

Tags: Jersey, Taxes

More on the New Jersey Budget

Enlighten New Jersey spends a little blog real estate to remind us that "There Are No Cuts In Governor Corzine's Budget."

Governor Jon Corzine and his supporters claim his proposed $30.9 state budget for 2007 is a fair and reasonable plan while acknowledging spending will climb 9.2% over last year’s budget of $28.3 billion. No matter how you try to spin it, Corzine’s budget will increase state spending by $2.6 billion.

Corzine has explained $1.63 billion of the increase with his proposed $1.1 billion payment to the state worker pension fund and his request for a $530 million increase in property tax rebates. So where is the remaining billion dollars in additional spending going? It’s being spent on the Governor’s priorities.

Conveniently, the Governor's Budget in Brief provides a detailed list of different budget line items that have either increased or decreased. Enlighten pointed out a few highlights, but some summary data would also be useful to emphasize the magnitude of the problem.

State Operations - $268,887,000 increase

• 16 line items increased, totaling $690,608,000
• 39 line items decreased, totaling $421,731,000

Two of the decreases, totalling $125 million, allegedly shift costs to the federal government. Given that New Jersey typically gets back 57 cents on every dollar sent to the feds, I am highly skeptical about the opportunity here.
Eighteen, for $108 million, come from "efficiencies" in each of the departments. There is no detail, as far as I can tell, about how the governor plans to make the bureaucracy more efficient. To gain efficiency in a business sense (our governor is a businessman, after all), we either have to produce more government services for the same cost, or produce the same government services for a lower cost. Enlighten points out that the state employs 154,700 people. 80,900 are full-time employees, which means that each full-time employee must produce an extra $1,340 worth of services to achieve $108 million in "efficiencies." At $40 / hour, that's 33.5 hours of extra work for each employee, or the equivalent of of 1,355 man-years of work. Think the unions will stand for that?
Four items worth $95 million aren't really spending decreases, because they reduce fund balances (Prescription Fund, Division of Pensions/Pension Fund, Governor's Contingency Funds, and Contingency Funds). This exactly the kind of budget trick the governor told us he wouldn't use.
Four line items, totalling $28 million, appear to be related to staffing reductions, including the governor's salary. It was so kind of him to sacrifice his $250,000 salary in the face of a $4,500,000,000 hole -- we're 0.0055% of the way there now!
Finally, there's a one-time savings similar to the campaign funding Enlighten pointed out -- we are "saving" $600,000 by not funding the Governor's transition as we did last year.

Grants-in-Aid - $885,514,000 increase

• 36 items increased, totaling $1,708,960,000
• 76 items decreased, totaling $823,446,000

The governor finds more creative ways to give away our money. I suppose I should be encouraged by the $250,000 reduction to Weehawken Arts. The largest Grants-in Aid "reduction" is $215,000,000 attributed to the Hospital Provider Assessment. This is really a half of a new, $430,000,000 tax (Budget in Brief, page 6). Calling it a cost reduction is nothing more than a big fat lie.

State Aid - $1,007,679,000 increase

• 15 items increased, totaling $1,165,754,000
  
• 19 items decreased, totaling $158,075,000

The big increase, $744,117,000 to the Teacher's Pension and Annuity Fund, dwarfs all of the savings combined. Even excluding this pension funding, the increases are still more than 2.5 times the decreases. This is a "hard choices" budget? Hardly.

The bottom line, again from Enlighten New Jersey's post:

So it goes throughout Corzine's budget – a small cut here and a large increase somewhere else in his budget plan In the end, Governor Corzine has funded his priorities and his priorities are costing the state’s taxpayers an additional $2.6 billion.

Tags: Jersey, Taxes, Budget

Smackdown

Chanice at New Jersey for Change really lays into Steven Pressman for his article calling for higher income taxes in New Jersey. She says to read the whole article, and you should, but here's his opening salvo to wet your whistle:

In 1993, when President Clinton took office, the U.S. economy faced an enormous budget deficit. His response was twofold. First, he increased income taxes on the wealthiest Americans. Second, he increased the tax on a gallon of gasoline. To help poorer families pay for the higher gas taxes, he increased the earned income tax credit — a tax break for low-income households where someone works.

The result of these actions was the longest economic expansion in U.S. history. Unemployment dropped to below 4 percent, a level rarely seen in this country. And perhaps most important of all, a massive government budget deficit became a huge budget surplus, which has since been squandered by President Bush.

I always love it when liberals engage in the fallacy of post hoc, ergo propter hoc. It's even more fun when they include no data to support their assertions. Here's what Pressman leaves out. According to data from the Bureau of Economic Analysis, real economic growth was accelerating throughout 1993, from 0.12% in the 1st quarter to 1.35% in the 4th. In the 8 quarters leading up to implementation of Clinton's marginal rate increase, average real growth was 0.82% per quarter. In the 8 quarters following (Q1 1994 to Q4 1995), average real growth was 0.76%. The rate increase did not create "the longest economic expansion in U.S. history," it slowed an expansion already underway. Here are some handy charts to illustrate. The first shows real GDP growth from the BEA data linked above, while the second is the percentage of the population employed according to the Household Survey, from the Bureau of Labor Statistics.





As shown in the national data, increasing marginal income tax rates tends to suppress, not encourage, real economic growth. Pressman asserts that higher tax rates cause economic growth, which is demonstrably false. The rest of his argument for curing New Jersey's budget ills, based on this fallacy, doesn't hold water.

The only way out of this mess is to grow spending at a slower rate than we grow revenue. Until the governor proposes (and the legislature enacts) a plan that will constrain the spending side of the equation, we will never win.

Tags: New Jersey, Taxes, Budget

The New Jersey Budget Problem

In an article headlined New Jersey lawmakers unlikely to get last-minute budget reprieve, Tom Hester Jr. of the Associated Press writes:

Much like prisoners awaiting execution, state lawmakers in recent years have spent budget deliberations waiting for last minute reprieves in the form of unanticipated tax collections.
Last year, for instance, an unforeseen $1 billion increase in tax revenue helped legislators balance the budget without having to ax most property tax rebates or approve $150 million in proposed new taxes.
But lawmakers are realizing that the reality of New Jersey's fiscal mess, coupled with the state's sluggish economy, offer little hope for a late spring windfall.
That means that _ just as Gov. Jon S. Corzine has suggested _ they may have to actually cut programs and increases taxes as the July 1 deadline to approve an approximately $31 billion budget nears.

As usual, the NJ state legislature is hoping for some way to spend more of our tax dollars. In the article, Democrat Lou Greenwald, chairman of the Assembly Budget Committee, discusses his plan to reduce spending:

"What our goal will be is to find more waste and better efficiencies"

Pretty strong, isn't it? I can't wait to see how the Assembly finds more efficient ways to waste our money.
Assembly Republicans aren't much better.

Assemblyman Joseph Malone, R-Burlington, wants to eliminate a state grant program that this fiscal year provided $3,000 grants for activities such as duck decoy carving, basket making and Indian music lessons.
"It may not be a lot of money, but it's symptomatic of the disregard that some people in state government have for the financial problems we have in the state of New Jersey," Malone said. "It's just incomprehensible."

I suppose it's progress to see an actual proposed cut, but couldn't they be a little more aggressive about it? I'd like to see some true reform, with a bold vision for change rather than sniping around the edges.
For example, they could cap state spending on education at some percentage of Gross State Product. Any excess funds collected through the income tax could be returned to the taxpayers through annual "rebates" or even - perish the thought - rate reductions. Even if they set it at today's level, if they would distribute the funds equitably amongst the school districts we would generate huge benefits for most New Jersey property tax payers.
Unfortunately, our New Jersey Republican Party doesn't have the intestinal fortitude to create, much less hold on to, any kind of vision.

Tags: New Jersey, Taxes, Budget, Pork

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

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 BlueJersey.net, 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).

State	Tax Climate Rank	Growth Rate	Growth Rank
Wyoming	1	3.3	40
S. Dakota	2	4.5	20
Alaska	3	3.4	38
Florida	4	5.9	5
Nevada	5	9.3	1
New Hampshire	6	5.4	9
Texas	7	4.6	17
Delaware	8	5.0	12
Montana	9	4.3	25
Oregon	10	4.5	19

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.