New Jersey Budget After Christie

Incoming governor Phil Murphy started making the rounds of talk shows where he gets five minutes to give his spiel on economic growth and discuss legalizing marijuana for recreational use.
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While back in the real world:

Richard F. Keevey, former New Jersey budget director and comptroller, had a helpful piece in njspotlight on budget issues facing the next governor.

There is $1.2 billion less revenue available in 2019 than the current year. Specifically, $650 million in one-time revenue items are in the current budget — the two largest being $300 million in legal settlements principally related to environmental claims and $321 million for the sale of public broadcasting assets. And the continued phase-out of the estate tax, a decrease in the sales tax rate, and exclusions/deductions in the income tax will result in $520 million less revenue from these sources.

The remaining revenue base will yield an additional $1 billion — at best. Not sufficient to cover the lost revenue and address normal program growth. How to address this “squeeze” will be a challenge.

And, according to the final installment of of Mike Lilley’s Legal Corruption Series, the state facing this squeeze also happens to be dying in large part due to issue # 1:
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31 responses to this post.

  1. Posted by Tough Love on November 15, 2017 at 11:33 am

    We’ll know soon enough where this administration and it’s impacts on taxpayers will go soon enough.

    If Murphy donesn’t extend the 2% cap on Police wage arbitration awards, he’s just another Union ass-kissing nightmare for NJ’s Taxpayers.

    Reply

    • Posted by Anonymous 8 on November 15, 2017 at 2:08 pm

      PM’s danger to municipalities isn’t only by blocking the arbitration cap, it’s in its likely willingness to sign a bill giving the police & firefighters control over their own pensions.

      This proposal is described as something that would just give the Police & Firefighters control over their pension investment strategies, but it also gives them control over benefit levels, including the ability to restore COLAs. Contained in the bill is a provision that gives the Police & Firefighter pensions the ability to order localities to increase their pension contributions, up to docking state aid.

      Even if the funds aren’t badly invested, the increase in generosity would require bigger payments from localities. Since pensions are outside of the 2.0% cap, such a law would certainly require towns to increase taxes above 2.0% and/or allow the crowding out of other local obligations.

      The legislature (very speedily) passed a Police & Fire pension control bill last spring but Christie vetoed it. There is a high chance that the legislature will pass this bill again in 2018 and that Murphy will sign it.

      This is a very good editorial about the Police & Fire control bill and what risks it presents to taxpayers.

      http://www.njspotlight.com/stories/17/03/20/opinion-heads-they-win-tails-you-lose/

      Reply

      • Posted by Tough Love on November 15, 2017 at 2:18 pm

        You are 100% correct, and I too have pointed that out.

        Just imagine yourself as a run-of-the mill employee in a large Corporation with a DB pension Plan, and all of a sudden, the CEO says that going forward, the workers can increase their own pensions (with the Corporation paying for it).

        You would assuredly stop dead-in-your-tracks in disbelief. Well, doing just THAT is included in the proposal to turn over “management” of the Police pension Plan to their Unions.

        And NJ’s in-the-Union’s-pocket Legislators see no problem with this ??????

        Reply

  2. Posted by bpaterson on November 15, 2017 at 12:13 pm

    a eulogy: its a shame, the fairly imminent death of our state may be on the horizon. Only recourse is the nutty legalization of mary jane, which from other states actions we can at least learn something to be wary of while doing this. And from the same fabric as corzine, the selling of assets such as the turnpike will soon be on the agenda, maybe casinos up north Nj. The same scenario is being played out as 10-12 years ago, the millionaires tax will end up hitting those making $150k and corruption will be again rampant since the new governor will be told he is indebted to the special interests that elected him. And COAH and hi-density will be fully embraced bringing with it another 2 million residents, congestion and infrastructure problems. So we leave the up cycle where we had the best governor in the last 25 years try to do something good for the citizenry (along with himself to a degree) and now return to plumb the depths and maybe a lower low than 15 years ago (I hope not). Stick a fork in it.

    Reply

    • Posted by Tough Love on November 15, 2017 at 1:39 pm

      Well said, but keep it up and you’ll wind up on SMH’s shitlist. After all, NOTHING (absolutely NOTHING) is more important than fully “honoring” the pension & benefits promised Public Sector workers, no matter how excessive, unnecessary, unfair to taxpayers or unaffordable.

      Reply

      • Posted by S Moderation on November 15, 2017 at 3:50 pm

        On his Facebook page, Jack Dean said that I, and others, did not believe there was/is a pension crisis. I don’t know where he got that idea, or where you get yours. Of course there is a crisis, not just in public pensions but in private pensions and individual retirement savings.

        “Promised” pensions and benefits will be cut, there is no doubt. Possibly even for SMH.

        This from Mary Pat Campbell…

        “Meanwhile, retirements are up 16 percent so far this year among state and local workers, pension officials were told Monday.

        By the way, y’all, being retired will not protect you from benefit cuts. Ask the Detroit retirees.”

        She is speaking of Kentucky, but the last sentence applies everywhere.

        The disagreement is about the cause, and cure for the pension crises.

        Reply

        • Posted by Tough Love on November 15, 2017 at 6:13 pm

          Quoting SM-Whatever…………. “Of course there is a crisis, not just in public pensions but in private pensions and individual retirement savings.”

          I didn’t say that you do not believe that there is a pension crisis for Public Sector pensions, only that you apparently believe that …………. “NOTHING (absolutely NOTHING) is more important than fully “honoring” the pension & benefits promised Public Sector workers, no matter how excessive, unnecessary, unfair to taxpayers or unaffordable.

          And as far as a Private Sector pension crisis …………… Private Sector single-employer Corporate-sponsored Plans have an average funding ratio in the low 80s% using very conservative Govt-proscribed valuation assumptions & methodology. If “valued” using the assumptions & methodology commonly used by Public Sector Plans, that low 80s% would be about 110%. But PUBLIC Sector Plans don’t have an average funding ratio of 110% or 100% or 90% or 80% or 70%. It’s in the 60s% …… a bit above HALF as well funded as those Private Sector Plans.

          Reply

          • Posted by S Moderation on November 15, 2017 at 6:32 pm

            “NOTHING (absolutely NOTHING) is more important than fully “honoring” the pension & benefits promised Public Sector workers, no matter how excessive, unnecessary, unfair to taxpayers or unaffordable.

            Never said that either. I did say many times that it is irresponsible to encourage not paying legally required contributions solely on the basis that one “believes” pensions are grossly excessive…yadda, yadda, yadda. or “believes” that was caused by collusion, etc., etc., etc.

            Tell it to the judge.

            Pensions and benefits will not be fully honored in many cases, because there is not enough money, and it is too late to correct that.

            SMH

          • Posted by Tough Love on November 15, 2017 at 6:45 pm

            SAME thing …………. and only “legally required” because the same Union/Politician cabal that colluded to get these absurdly generous pensions granted, did the same to get them “legally protected”.

          • Posted by S Moderation on November 15, 2017 at 7:32 pm

            More opinion…

          • Posted by Tough Love on November 16, 2017 at 10:30 pm

            Yo SM-Whatever,

            Just spotted this….

            “The funded status of the 100 largest US corporate pension plans rose by $7 billion in October to 84.7%, from 84.3% at the end of September, according to the latest Pension Funding Index (PFI) from consulting and actuarial firm Milliman.”

            Source…..

            https://www.ai-cio.com/news/corporate-pensions-funded-level-rises-32-billion-two-months/

            ************************

            Yup, if valued using the SAME assumptions and methodology as that required of America’s Private Sector Plans, Public Sector Plans are just north of HALF (yes HALF) as well funded.

            And if they were Private Sector Plans, with such POOR funding ratios MOST would be barred by Treasury/IRS Regulations from granting any further accruals.

    • Posted by boscoe on November 15, 2017 at 2:14 pm

      “…the best governor in the last 25 years trying to do something good for the citizenry….” Well, that makes you one of the 14% who believes that.

      Reply

      • Posted by Tough Love on November 15, 2017 at 2:22 pm

        He made LOTS of bad choices and his arrogance worked against him, but when it comes to trying to control the thieving NJ Public Sector Unions, he accomplished more than all of NJ’s past governors put together….. and saved (in REAL money …. not “accounting” and not “timing”) NJ’s Taxpayers Billions of dollars.

        Reply

      • Whatever NJ wants to say of Christie, he put a hold on raising real estate taxes for 8 years with the 2% cap. The end of COLAs also provided the road to extend a little longer. He was an ass no doubt but at least our property taxes were held off if only a little and most people’s real estate taxes still went through the roof while home prices declined

        Reply

  3. Posted by steve on November 15, 2017 at 2:30 pm

    California of the east coast—in six months our astute voters will be so high they will care less then they do now ( if that is possible )—-they think we have a drug problem now !!?

    Reply

  4. Posted by S Moderation on November 15, 2017 at 3:25 pm

    Police officers are good for forty plus years?

    Where did that come from?

    SMH

    Reply

  5. Posted by George on November 15, 2017 at 3:56 pm

    Marijuana taxes: Can you tax Canibus like Tobacco and Alchohol?

    Maybe not. The problem is Tobacco and Alchohol are fermented and highly processed products. So if you wanted to avoid tax by growing and fermenting your own, you need to start a very long, tedious, involved process which will not likely produce a top quality product. Canibus, on the other hand, is more like the herb basil. Most people can fairly quickly grow and if they choose to dry a perfectly good basil. Taxing basil would be a problem, or they would do it. If Murphy actually introduces legalization legislation let us see how many canibus plants an individual is allowed to own, and if there are complicated rules about how many can be flowering at any one time (I believe 6 in CA, 3 flowering).

    Another issue not discussed is the smell. I can see all sorts of altercations over who can smoke what and where.

    A quibble: Since Marijuana is going legit, I suggest going back to calling it by its proper name, Canibus.

    This is why people pay cigarette tax instead of growing their own:
    https://www.leafonly.com/tobacco-harvesting-curing-fermenting.php

    Reply

  6. Posted by Anonymous 8 on November 15, 2017 at 5:00 pm

    There are a lot of reasons NJ’s economy has stagnated, but not “investing in public education” isn’t one of them.

    NJ’s education spending is the third highest in the country and is the second highest as a percentage of GDP.

    There is a component of education NJ has underinvested in and that’s higher ed, where our spending is average at best or below average.

    Putting more money into school aid won’t necessarily lower property taxes because BOEs can spend that money, not use it for tax offsets. Even when BOEs want to lower taxes, simply having more money reduces the practical ability BOEs have to restrain salary increases for employees too, so the effect of a tax offset will only last until the next teacher contract is negotiated and the BOE has to grant larger raises.

    There are only a few towns in NJ where additional state aid would impact property taxes. These towns need and deserve more state aid, but to say that funding SFRA will lead to broad reduction or mitigation of property taxes is untrue.

    Joe Scarborough was right to point out that Massachusetts “has had things come down,” but Murphy changed the subject to say that they have “high costs.” Unfortunately I don’t think Murphy realizes there is a difference.

    Yes, Mass has “high costs,” but their tax rates are average, with a 5.1% flat income tax and average property taxes below $4000 a household. Massachusetts’ taxes are actually the second lowest in the Northeast, after Pennsylvania.

    Massachusetts has high-costs because it is a premium business environment, with the country’s most educated workers and a very high quality-of-life and non-corrupt government. Few businesses would regard paying high costs for Massachusetts as the same as paying high costs (which are taxes here) for New Jersey.

    Reply

    • Posted by dentss dunnigan on November 15, 2017 at 5:41 pm

      I’m quite familiar with Mass I summer up in Falmouth which is almost like the Jersey shore .I’ve looked into Buying a year round home the taxes are 1/4 of what I pay and the interesting thing is they have had a property tax cap of 2.5% since 1996 . The weather is about between 5 to 10 degrees cooler if you’re along the shore you get very little snow .Their public schools are usually around #7 or 8 in the nation but a lot of kids stay in state because of the great colleges ..when it’s time that will be my number #1 spot . It’s sad that a guy born and raised can’t stay in the state he loves ..but our politicians have ruined this state .

      Reply

    • Posted by George on November 15, 2017 at 8:13 pm

      How does Mass charge less taxes while providing more services, and ha ing a better funded pension?

      Reply

      • Massachusetts spends a lot less on education.

        Massachusetts’ spending in 2015-16 was $17,471 per student. NJ’s was $20,925, which was #3 in the US.

        The major reason Massachusetts spends so much less than NJ is that it has a higher student:teacher ratio. Salaries for teachers are similar.

        I think Prop 2.5 in the early 1980s is the major reason this spending difference came about, plus having 16 straight years of Republican governors.

        NJ spends $680 million per year on PreK, which is 2% of our budget.

        Massachusetts’ state govt spends $0.

        Massachusetts’ pensions aren’t in great shape and Mass is ranked as a very high-debt state, but there is no comparison between Mass and NJ when it comes to debt.

        Reply

        • Posted by dentss dunnigan on November 16, 2017 at 9:40 am

          Actually you’re partially correct ,but the trick in Mass is choosing a good district to live in (https://patch.com/massachusetts/somerville/how-much-does-your-mass-school-district-spend-student) They don’t have the system we have here like the Abbots that allows politicians to steal suburbs school taxes from the pot .But the bigger plus for Mass is their politicians have seen to it to grow their economy through lower taxes plus the property tax cap of 2.5% they’ve had over 20 years ,some very good companies have left High states to relocate to mass because of their business friendly taxes ,especially tec ..If Mass lands Amazon I suspect their home values will increase while their taxes will decrease …

          Reply

          • Posted by Anonymous 8 on November 16, 2017 at 4:30 pm

            I would not be surprised if Amazon went to Boston too.

            If Amazon goes to Boston I expect that NJ liberals will take advantage of the public’s out-of-date stereotype about Massachusetts having high taxes and proclaim “taxes don’t matter!” and use it as a justification to raise NJ’s own taxes in order to increase “investment.”

            I hope that there is some journalist our there, or prominent elected Republican official, who can set the record straight that Massachusetts’ taxes are just average.

            Unfortunately Christie and Guadagno were just as likely as the Democrats to spread the falsity that Massachusetts’ taxes are still high.

            Anyway, if Amazon goes to Dallas… well, there’s nobody who thinks that Texas has high taxes. That development would be hard for liberals to explain.

        • Posted by George on November 16, 2017 at 11:56 am

          It is hard to tell what any government spends on, but Universal Pre K seems to exist in Mass.

          Universal Pre-Kindergarten Program
          http://www.eec.state.ma.us/kr_upk.aspx

          Mass tech success maybe cyclical. Mass concentrated early in Bio Tech while the NYC suburbs seem to stagnate.

          Upstate NY lost its relevance with digital imaging and shift away from mainframes, while upstate NY was building prisons and military stuff. The craziest thing I have seen in NY is converting the state university academic centers into sports centers. Check out what is happening to NY state industrial giant GE. Ouch. I wonder how the GE dividend cut will affect NJ?

          NJ seems to have placed its bet on finance and being pulled along by NYC, with a little casino gambling. The result was Bell Labs, the landline people never had the resources they needed to evolve. Does anyone hear from Princeton anymore? Princeton seems to be the lower tier of Ivy League these days, maybe even reduced to legacy Ivy League.

          If the fed does increase interest rates, that will cut off some of the economic juice to the NYC finance economy.

          Reply

          • George,

            I like your points about the NJ economy…

            I don’t think Massachusetts has much of anything for PreK. The pilot program you linked to is from 2010.

            I was going through the Mass budget to find this out and I think Baker $0’ed out the legislature’s PreK proposal.

            This 2016 article says Massachusetts only spent $6.3 million on PreK.

            https://www.bostonglobe.com/metro/2016/01/23/milton-preschool-illustrates-haphazard-state-funding/oJtqDHfUscbRJGGvTL2ExJ/story.html

            As mentioned before, NJ’s PreK spending is 2% of the budget and 10% of our K-12 opex aid. Our PreK spending is probably the highest in the country as a percentage of budget, although I’m not certain of that.

            There are many reasons for NJ’s tax and budget crisis, but spending for utopian initiatives like PreK is one of them.

          • Posted by Tough Love on November 16, 2017 at 4:46 pm

            Step back and think about where the “push” for all these “of questionable necessity” programs come from.

            Answer…. the Public Sector Unions.

            The more PROGRAMS, the more Union WORKERS, and the more Union DUES.

            NJ’s “problem” is WAY WAY WAY too many Public Sector workers, with (mostly) reasonable wages, but with ludicrously excessive pensions & benefits, and with NJ’s Taxpayers responsible for all but the 10% to 20% of Total Plan costs actually paid-for by the workers own pension contributions (INCLUDING all the investment earns thereon).

  7. Posted by Anonymous on November 15, 2017 at 7:46 pm

    In 2003, California recalled Gray Davis mainly because of the dot com bust and energy deregulation, which were both beyond his control. Schwarzenegger was happy to take credit for the rebound in 2004-05, which he also had very little to do with. (But not for the 2008-09 Great Recession.) Go figure.

    Some states will do better than others, but if the national (or global) economy is stagnant, we’re all screwed.

    Oh wait! I forgot! Blame it on the unions!

    Reply

  8. Way too many public workers, doing way too little and receiving way too much in all around compensation and promises….shorter work days, lots of vacation and sick time, little if any accountability or responsibility…….you get the point

    Reply

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