Governor Christie has launched a historic budget for New Jersey. With any great undertaking there is always room for improvement and thus the subject for this month’s newsletter. We are under economic siege and any great battle is won when we citizens come together and share sacrifice. Following are a few suggestions to fine tune the goal of resurrecting the dilapidated state that is the economy of New Jersey.
New Jersey is not just broke, we are dead broke. The state’s stated unemployment rate is 10.1 percent but that does not begin to reflect the economic suffering that is occurring in New Jersey. An additional 10 percent of the workforce reflects citizens who have either given up, or have chosen to remain in their job that has been downsized to part time from full time or those who can’t find full time employment and settle for part time status.
Further the unemployment rate does not reflect employees who have taken 10, 20 and 30 percent pay reductions in order to remain employed. Business revenue has dropped dramatically, and thousands of businesses that once were profitable are now struggling to survive.
This coming year’s budget contains an $11 billion deficit. There are no reserves to steal from, no more one shot source of federal government stimulus or tax amnesty programs to plunder.
I have a very straightforward approach to balance the budget. Cut spending 20% across the board (or $6 billion), eliminate the numerous authorities which serve only as patronage pits ($1–$3 billion), and form a State bank to pay off the state’s debt ($6 billion in debt service savings).
If this crisis is not addressed immediately and fixed, the result will be massive layoffs and cutbacks in all of the necessary services we have come to enjoy and expect. Teachers, policemen, firemen and every other essential service are all threatened.
One area targeted for elimination should be school superintendents. New York City with a population of 8 million people has one school superintendent, New Jersey has a population of 9 million, yet we have 611 school superintendents. These positions are the tip of an iceberg of fiscal waste so great that it makes the iceberg that the Titanic hit look like a popsicle.
Over the next three years we should phase out 585 school superintendents leaving one per county. The estimated savings is $250 million from this act. The problem is we do not have three years; we barely have three months.
The first step after the governor and legislature immediately reduce their pay 20%, will be to recommend that all state employees also take a 20 percent pay reduction, effective July 1. Unfortunately, these pay reductions will not be sufficient to eliminate the deficit.
Therefore, all local governments need to reduce the wages of employees by 20 percent, including those working in education. Anyone who receives a paycheck that is funded by taxpayer money will be asked to take a 20 percent pay reduction. That means teachers, administrators, policemen, firemen, anyone who draws a check from taxpayer money will need to take a pay cut.
By taking these wage sacrifices, the state will be able to avert massive firings and continue the fine level of civil and educational service New Jerseyans have come to expect. Now, this pay reduction cannot be imposed at the local level. However, the governor could use the leverage of withholding future funding increases for those towns who chose not to participate in the state wide sacrifice.
Further, all state delivered benefits will also be reduced by 20 percent. Simply anyone who receives benefits or compensation from taxpayer funds will need to take less. These cuts are not a judgment about the compensation one earns or the value of benefits delivered. They simply reflect all the State of New Jersey can afford to pay. The smoke has blown away and the mirrors are cracked.
Bringing our house under sound fiscal management is a first step, but it will not be enough to entice businesses to stay, or to attract new businesses to set up shop in New Jersey. The regulations imposed on anyone trying to operate in this state are what has caused so many to flee.
There is no better example than the COAH (Council On Affordable Housing) regulations passed to help create more affordable housing. A Carnegie Mellon University study on the impact of the COAH rules found that since 2005, when the latest regulations were passed, our state’s housing starts declined more than 300 percent when compared to neighboring New York, and fell 20 percent compared to Pennsylvania.
These declines mean that millions and millions of dollars in business revenue, wages, and state income were lost due to inept and counter productive government regulations. The result of the COAH regulations was to add citizens to those eligible for low income housing recipients.
These regulations, that have created a tide of businesses fleeing New Jersey, need to be aggressively eliminated.
Finally, the New Jersey needs to form a State Bank for the purpose paying off whopping $51 billion debt while eliminating the mammoth $6 billion in annual debt payments.
While there are regulatory issues to work out concerning the types of capital needed to capitalize a State Bank, the crucial point is that such a bank would enable us to pay off our mammoth debt.
The working people of New Jersey have been and continue to make sacrifices in this economic downturn. The solutions offered are what businesses and families are doing to survive, it is long overdue that our government initiate those same sacrifices.
1) Everyone Gets a Pay Cut — All employees who derive their income from taxpayer money need to take a 20 percent pay cut.
2) Consolidate School Superintendent Positions — Eliminate 585 school superintendent positions to one per county saving $250 million.
3) Consolidate Authorities — They are nothing more than patronage pits.
4) Form a State Bank — Capitalize bank to pay off State’s $51 billion debt and thereby eliminate $6 billion in annual debt service.
Brian Greenberg and Associates is a Marlton, NJ CPA firm providing tax and financial planning services. We specialize in helping small business owners retire on their own terms. Follow this link for more on how we can help you.
Brian C. Greenberg & Assocs
1 Eves Drive, Suite 111
Marlton, NJ 08053
856-596-7800