NJ Fiscal Folly

Thursday, April 27, 2006

All Vision, No Execution

The latest creature to emerge from Dr Corzine's laboratory is the NJ Commission on Government Efficiency and Reform. As the Gov describes its mission, "I look forward to reviewing the commission’s proposals to re-engineer state government and maximize the quality of services New Jersey citizens are receiving."

Give me a f*****g break.

The last thing we need is more task force proposals.

Prior to his inauguration, Corzine set up 19 policy groups. Since the inauguration, he has created at least 2 more (including the one above). Corzine has already received a multitude of specific recommendations across the board. A small forest has been cut down to compile all the ideas. We don't need any more proposals at this point. We need to see some action. Corzine needs to quit stalling. He's supposed to be the head of the executive branch, not the think tank branch.

I'm not asking for miracles. There's plenty to choose from. Corzine has had five months to identify high priority initiatives. Pick a few and get going. It's time to start executing.

When Down Is Really Up

Ken Adams has a good post about how Gov Corzine's alleged state government headcount reductions are in fact just another budget gimmick. As Ken points out, Corzine claims a reduction of 1000+ staff positions, but total headcount will actually increase by more than 1300.

Read Ken's entire analysis.

Wednesday, April 26, 2006

Campaign Contributions Disclosure

Today I discovered a pretty good web site that tracks federal campaign contributions data for US congressmen (and candidates). The site provides useful summaries rather than raw data, and includes interesting information on Sen Lautenberg, Sen Menendez, and all NJ representatives.

Since I was on a roll, I then looked for similar information for NJ legislators. The NJ Election Law Enforcement Commission is supposed to collect this data and provide it to the public. The NJELEC web site appears to be pretty well organized but it's a little tricky to use.

First of all, you have to download some specialized software in order to view certain documents. Most of the information is presented as raw data scattered over multiple reports rather than summarized in any kind of useful format. There's no way to tell if the data is reasonable or complete. The NJELEC should follow the example of the federal data web site above to make the NJ information more accessible. In general, the site is OK but could be better.

Tuesday, April 25, 2006

The Mighty Carnack Returns

I periodically skim Gov Corzine's press releases, and recently came across this one, "Corzine Announces Panel on Human Services Reform".

Take a look at the members of the new council ("round up the usual suspects"). Notice the absence of any beady eyed financial types to inject the occasional dose of reality.

Now here's Carnack's prediction. After months of intensive study, the council will recommend that NJ should increase spending on "human services", including almost every interest group represented on the council.

Who said vaudeville was dead?

Monday, April 24, 2006

Democrats' Dilemma?

David Rebovich has a new post that's worth a visit. In general, I think he's too easy on the Democrats' responsibility for our current mess, and too optimistic about Corzine, but judge for yourself.

"In the face of a big budget deficit, Governor Corzine has decided to deemphasize his party's historic commitment to an activist government and to the notion of entitlement and instead focus on fiscal integrity and the state's long-term economic well-being. To achieve both of these goals, several key elements in the Democratic Party coalition are being asked to sacrifice..."

Sunday, April 23, 2006

Your Tax Dollars At Work

The NJ Assembly Republicans have put together a list of some of the many ways NJ taxes are wasted. Check it out.

Friday, April 21, 2006

Legislators' Financial Disclosure

The Center For Public Integrity, a journalism organization based in Washington, DC, has just released state rankings for financial disclosure by state legislators. New Jersey received a grade of C, but ranked 10th out of 47 states that require legislators to provide such disclosure.

As described in the CPI press release, "a 43-question survey measured public access to information essential to monitoring whether legislators stand to gain financially from actions they take in office. It graded states on how much they disclose about legislators' employment, personal business activities, clients, investments, real property holdings and leadership positions in organizations. It also studied disclosure statements' accessibility, disclosure law enforcement and rules defining who must file disclosure forms and how often. Survey answers were assigned a numerical value adding up to a possible 100 points; high scores acknowledged high levels of disclosure, public access and accountability."

New Jersey scored 76 points out of 100. The highest ranked state, Washington, scored 93.5 points. According to CPI, NJ did fairly well in some categories, but lost 20 points for insufficient details in the legislators' filings.

If anything, the CPI rating seems generous. If you go to the actual NJ legislator filings, you'll see that the financial data and other details provided are pretty sparse. For example, look at the filings by Wayne Bryant or Sharpe James. Furthermore, the information is not very current.

Nevertheless, the CPI rating is useful. Like the state tax rankings by The Tax Foundation, the CPI financial disclosure rankings provide an outside assessment of a NJ weakness that's hard to discredit or ignore.

Wednesday, April 19, 2006

Yet Another Dumb Idea

Two NJ Democratic legislators will try to determine whether some version of the new Massachusetts "universal health insurance plan" could work in New Jersey.

Here's the short answer.  No.

The plan won't even work in Massachusetts.

Arnold Kling wrote a scathing critique of the new Massachusetts law, including the following comments:

"The elected leaders of Massachusetts have come up with a novel solution for the vexing problem of having to pay for health care: abolish the laws of arithmetic. Their new plan is a perfect illustration of what happens when politicians approach a problem unconstrained by reality......"

"The plan includes tax incentives and penalties for employers and individuals to get everyone covered by a health-care policy. It also promises affordable health insurance for people with modest incomes, under a program yet to be negotiated between the state and private insurance companies......"

"The question is this: What insurance company will provide coverage with $0 deductible, at an annual premium of $295, for someone whose health care costs average $6,000 a year? The numbers imply losses of over $5,700, not counting administrative costs. To subsidize zero-deductible health insurance, state taxpayers might have to pay out about $6,000 per recipient......"

"Only when the size of the necessary tax increase becomes clear will Massachusetts's leaders learn the laws of arithmetic."

In general, if the insurance premiums are very low relative to potential benefits, enrollment will explode. If the deductibles and co-pays are very low or zero, usage will explode. Both the average yearly cost and the annual state subsidy will increase. If enrollment and usage both increase simultaneously, you'll create a financial disaster.

NJ has roughly 1.3 million people without health insurance. Let's be conservative and assume 25% participation by these potential "customers", at an average annual state subsidy of $3,000 apiece. The total estimated cost for NJ taxpayers would be at least $975 million per year. 50% participation with a $6,000 subsidy would cost $3.9 billion per year.

There's no way in hell that NJ can afford such a program.

Tuesday, April 18, 2006

NJ Budget Cut Suggestions

You can go to this NJ Assembly site to see some of the many budget cut suggestions already submitted by NJ taxpayers.

You can go to this site to submit additional budget recommendations.

Gov Corzine also has a budget suggestion site too.

Friday, April 14, 2006

Just A Thought

It's no great secret that the NJ budget is stuffed with all kinds of special interest grants, such as $100,000 for the Inner City Coordinating Council of the Gay and Lesbian Construction Organizers' BLT Educational Alliance (just kidding).

NJ could save hundreds of millions of dollars if we stop this nonsense, but the legislators are afraid to cut off their supporters. However, suppose we did in fact eliminate these payoffs across the board. Everyone gets cut off at the same time.

What are the odds that the current recipients would actually switch parties? Will the Democrats' traditional voting blocs start supporting the Republicans? Will any Republican recipients suddenly decide that Democratic policies are now more attractive?

I think both parties are afraid of a threat that doesn't exist. We should call the bluff.

Thursday, April 13, 2006

Long Overdue

Reported in today's Record:

"Governor Corzine will hire outside auditors to investigate waste and fraud in four city school districts, including Paterson, state officials confirmed Wednesday. These cities are already under state supervision, but administration sources say the current auditors -- hired by the local school districts -- have not done a sufficient job in maintaining control and scrutiny of finances. These so-called Abbott districts receive extra state funding through a state Supreme Court order.

Teams of private sector "forensic" accountants will descend on three cities that are under direct state control: Paterson, Newark, and Jersey City. They will also examine the books of Camden."

These four cities are budgeted to receive $1.75 billion in school aid in FY 2007. Apparently it never occurred to anyone previously that professional management, financial integrity, and independent audits might be relevant prerequisites.

Wednesday, April 12, 2006

A Legitimate Issue Regarding Abbott

The largest recipients of Abbott district school aid include Newark, Jersey City, Paterson, Elizabeth, Camden, Trenton, East Orange, Passaic, Union City, and Irvington.

Meanwhile, the NJ Department of Health and Senior Services reports the following birth statistics for 2003 (the latest available data; see pages 16-31):

Percent of Mothers Who Were Unmarried

Newark (68%)
Jersey City (43%)
Paterson (61%)
Elizabeth (53%)
Camden (80%)
Trenton (72%)
East Orange (68%)
Passaic (55%)
Union City (51%)
Irvington (63%)

Now it seems pretty obvious that the absence of a father or an unstable family life could affect a child's performance in school. As a parent and a taxpayer, I am willing to provide finite, targeted assistance to address this situation.

However, Abbott spending has become an unlimited, general subsidy for irresponsible behavior (and a bonanza for too many indirect beneficiaries). School is not a substitute for stable families or positive role models, and limitless school aid won't change this fact (no matter how many liberal judges wish upon a star).

Why should the rest of the state go bankrupt from Abbott spending when these communities are never held accountable for this conduct? Aren't we entitled to some glimmer of responsibility before we supply financial assistance?

NJ Public Sector Unions

I recently came across some relevant information.

Total employment in NJ is nearly 3.9 million (2005). Public sector employment accounts for almost 638,000 jobs, or 16% of the total.

68.2% of public sector employees are covered by union contracts (64.1% are actually union members). NJ has the second highest "percent covered" ranking in the US, after NY (72.0%). The national average for public sector employees is 40.5%.

Tuesday, April 11, 2006

Corzine And The Court

Paul Mulshine has a good column today about Corzine's Abbott court filing, which I discussed below.

Mulshine provides a key quotation from a WSJ opinion piece by David Schoenbrod, a NY law professor:

"When courts claim that they have power to make legislatures spend more to vindicate a constitutional right to basic education, they tamper with a basic tenet of our democracy -- no taxation without representation.........Voters are entitled to hold political officials accountable for the taxes they levy, the money they spend, and the education they produce."

Monday, April 10, 2006

Budget Bleg

I am not familiar with most NJ legislators outside my own district. When it comes to the budget, taxes, and related issues, who are some of the key players in the NJ Legislature?

Which members of the Senate and the Assembly are providing constructive ideas and adult leadership? Which members are simply blowhards and clowns? Are the budget committee leaders heavyweights or hacks?

The floor is open for nominations.

Sunday, April 09, 2006

Corzine's Court Ploy?

As reported in Saturday's Star Ledger, "Gov Jon Corzine yesterday said his administration would seek approval from the state Supreme Court to freeze overall funding to the 31 Abbott districts."

If I was an optimist, I might say that this is a good step, albeit a very small one, in the right direction.

If I was a cynic, I might offer the following observations.

First of all, a freeze isn't a reduction. Even if Corzine succeeds, the Abbott districts will still receive $4.25 billion, or 37% of all funds available for NJ property tax relief.

Second, consider an alternative scenario. Corzine's people deliberately submit a weak argument for a spending freeze, and the court rejects it. Corzine then declares that his hands are tied by the court (and, inevitably, taxes must be raised). He claims credit for making the effort, but never actually jeopardizes his supporters.

Good thing I'm not a cynic.

How To Cripple A Thriving State

Roberto, at DynamoBuzz, found a great article in The City Journal, "The Mob That Whacked Jersey".

Friday, April 07, 2006

The Practical Versus The Perfect

When you step back and take an overview of NJ's budget, it's obvious that many of the necessary structural changes will not occur quickly (if ever). This raises the question of what is actually practical in the short term.

Over at New Jersey For Change, Chanice raises the perennial topic of public employees who "bank" unused vacations and sick days, for eventual payoff upon retirement. It seems to me that this issue falls into a category of "corrupt and corrosive practices" that could in fact be fixed this year.

Such practices not necessarily the most costly activities, but they are highly visible, and demonstrate contempt for all NJ taxpayers. The continual disclosure of these activities is a constant reminder of how too many NJ politicians and public employees place self-interest above public responsibilities. These practices undermine government legitimacy and divert attention and resources from more critical issues.

Accordingly, here is my short list of "corrupt and corrosive practices" that should be ended, and can be ended, in 2006:

(1) The practice of "banking" unused vacations and sick days should be legally terminated for all state and local government jobs. Failing that, the payouts should be capped at some minimal level (eg, not more than 10 days equivalent).

(2) The practice of holding multiple, paying state and local government jobs should be legally terminated or severely limited. (If the practice is allowed to continue, financial disclosure requirements should be widespread, detailed, timely, and consolidated into a single, statewide database.) Aside from potential conflicts of interest, these multiple job arrangements simply confirm the image of political gluttony and privilege that NJ taxpayers find so offensive.

(3) Criminal penalties for corruption and fraud need to be toughened up and enforced. To be blunt, we need to send more white collar criminals to jail. At present, prosecution is infrequent, convictions are few, and penalties are light or nonexistent. The rewards for corruption and fraud currently exceed the risks. White collar crime will only decrease if prison is a credible threat.

(4) Certain pension system abuses should be eliminated, such as using multiple jobs to boost pension benefits, giving pension credits for minimal payment jobs, including professional service contractors and vendors in the system, and continuing pension eligibility for convicted officials.

This is a short list, and I welcome any additions. My criteria were fairly simple. First, whenever I read about one of these activities I get pissed. Not the mature approach, I know, but an honest reaction, probably shared by many other NJ residents. Second, these practices can be fixed this year. These are not multi-year projects. The problems are well defined and the solutions are straightforward.

If Gov Corzine and the NJ Legislature want to increase their credibility on the topics of financial management and integrity, how about starting here. There is a symbolic value in resolving these issues that far exceeds the financial dimension.

Wednesday, April 05, 2006

Hidden Tax Increases

Politicians love to raise taxes without leaving any fingerprints at the scene of the crime.

Gov Corzine's budget for FY 2007 includes $1.8 billion of "revenue solutions", mostly explicit tax increases (see page 55). However, this list does not include any reference to his $430 million hospital tax.

The hospital tax proposal has the apparent benefit of attracting $215 million in new Federal funds for NJ. However, Corzine also claims that since NJ hospitals will both pay and receive $430 million, there's no net cost. This may be true in the aggregate, but it omits the fact that his proposal will result in a net transfer of hospital tax revenues from suburban to urban hospitals. Based on available information, it's hard to quantify the net transfer, but my rough estimate is at least $200-250 million.

In total, NJ hospitals only make about $150 million per year, a 1% operating margin. There is no way the suburban hospitals can absorb the new tax. Therefore, a large portion of the hospital tax will ultimately shift to NJ taxpayers and NJ businesses, through higher fees and higher health insurance premiums. The tax increase is hidden but real. Corzine evades responsibility.

Update: My estimate was high. According to the NJ Hospital Association, 49 "losing" hospitals would transfer $116 million to 25 "winning" hospitals. My basic point remains unchanged.

Tuesday, April 04, 2006

The Trenton Trickster

Gov Corzine's budget proposal for FY 2007 also forecasts a $1.5 billion deficit for FY 2008 (see page 77). Let's assume for a minute that his revenue and expense projections for these two years are not unduly optimistic (stop laughing).

Can anyone show me any substantive structural reforms in this year's budget that will make a dent in the constant growth of state spending? Public employee pension reform? Public employee medical benefits? Abbott district spending? Medicaid and NJ FamilyCare? Greater transparency for politicians' pet projects? Greater accountability for financial integrity?

If not, can anyone doubt that this year's proposed state tax increases must be followed by another round of state tax increases next year? $1.8 billion of "revenue solutions" in FY 2007 will be followed by another $1.5 billion in FY 2008. Moreover, the continuing diversion of income taxes must surely lead to further local tax increases.

Corzine's budget is like a magic show, a flurry of artful gestures to hide the fakery of the performance.