By Assemblyman Declan O’Scanlon
Politicians like to talk about budgetary issues and challenges in pieces -ignoring the big-picture, and inconvenient, collateral effects of their proposed solutions. Even the public, and well-meaning editorial boards, fall prey to this segmentation mentality hoping there is an answer that doesn’t eviscerate their particular sacred cow. Throw in the fact that there is a general belief in a magic bullet that will fix our budget problems and you have a dangerous mix of ignorance and irrational expectation. It is time to clear that up. Governor Christie is right when he says our budget problems are serious. The solutions are going to be painful.
First, let’s understand that the causes of the problem are rooted in the actions, over the last 20 years, of legislators and governors – Republicans and Democrats – who were either well-meaning, but ultimately ill-informed, or those who consciously opted for political expediency knowing their actions would ultimately bankrupt the state. The former motivation is sad, the latter reprehensible.
Making certain assumptions about things we can and can’t fund, our structural deficit is around $6.75 billion – inclusive of $1.6 billion in transportation investment per year but exclusive of things we’d love to do like cut property taxes.
So how do we plug the $6.75 billion hole – what is the magic bullet? There is none. My fellow conservatives who simply say “cut 20% across the board and you’re done!” are fooling themselves. Almost 1/3rd of our budget – around $10 billion – is essentially locked in by federal rules or constitutional mandates or obligations. We can’t default on our debt for instance and we have to pay social security etc. So right there you go from a 20% cut across the board to a 30% cut on the remainder. But that’s not practical for a big chunk of the remainder as well.
If we cap school aid at $12,000 per student we could save around $700 million. That likely would mean closing some school districts and sending those students elsewhere. I can hear the hue and cry now. But we have to focus on areas where it could be argued we are spending too much. Schools that cost us more than $20k a kid per year – and still provide a lousy education – swallow hundreds of $millions. If we make fundamental change there we can save big $ – and serve those kids better!
Another area where we spend much more money than other states – and is a big percentage of our budget – is pensions and health benefits. I know – I hear the pronouncements “we have to keep our promises.” But in reality almost every dollar we spend has been “promised” to some important cause or constituency. Pension obligations should be around 7% of a state budget. Our obligation is 15% of ours (would have risen to approximately 25% before the 2011 reforms). We spend almost $8 billion in pension and health benefits. Let’s say we all can figure out a way to trim those by 10% – that’s $800 million in savings.
So…we have come up with $1.5 billion in savings. We will still need to come up with another $5.25 billion but we only have around $13 billion from which to cut. That’s a 40% cut to operations that are already running on fumes. You going to cut home health aides who are already overworked, haven’t had a raise in years and make $12 bucks an hour? How about massive cuts to higher education (NJ already falls well below national average) or aid to municipalities – which would drive up property taxes?
My friends on the other side of the aisle argue that we should raise taxes to plug the gap, and regularly rule out additional cuts to school funding and pensions and benefits. Problem there is that we are already one of the highest taxed states in the nation. And we aren’t talking about small tax increases on small segments of the population. The so-called “millionaires tax” in its most optimistic form would only raise around $800 million – and would risk driving away some of our largest taxpayers – leaving the rest of us remaining to pick up the future obligations. If one is going to make an argument against the cuts I mention above he must be honest and admit that he is instead opting for massive tax increases on everyone – not just the “rich.” Want to plug a $6.75 billion hole with income taxes – it would take a 50% increase – on every taxpayer!
So you see folks, there is no magic bullet. This ain’t going to be at all easy. But we have no choice. Only after we understand and accept the overarching problem can we move forward with a dynamic, balanced mix of solutions.
Declan O’Scanlon (R-13) is the Assembly Republican Budget Officer