New Jersey Chamber of Commerce
Statement for Support of Governor Corzine’s
Financial Restructuring and Debt Reduction Plan

The New Jersey Chamber of Commerce applauds the Corzine Administration for putting forth a bold and aggressive plan designed to reduce out-of-control state debt and create stable, long-term funding for much needed transportation projects. Addressing these two issues are key components to fostering future economic growth in the state. The Governor’s proposal represents a new way of thinking in Trenton and his out-of-the-box approach must be commended and seriously considered as an important first step. The Chamber Board of Directors understands that we are still in the early phases of a long-term process and our initial reaction, after reviewing the information available at this time, is to be supportive of the Governor’s initiatives. We are especially pleased that the Governor realizes the need to match stable revenue sources with controlled spending.

Specifically, we support the proposal to freeze spending at the current level, the proposal that spending will not be allowed to exceed current revenue, and the proposal that all future debt issued outside of a dedicated recurring revenue source must be approved by the voters. We also support the creation of an adequately funded Public Benefit Corporation, understanding that revenues will be irrevocably secured and unavailable for purposes other than those implicit in the mission of the PBC.

Inclusion of critical fiscal parameters designed to slow state spending growth is an essential element to the success of this plan. These components are necessary to prevent the state from ending up in the same precarious financial situation we find ourselves in now, in future years. Items such as a spending freeze, a limit on future spending to revenue growth, and voter approval of future debt, create a framework of fiscal responsibility desperately needed in New Jersey. Now is the time for bold leadership, leadership that will secure New Jersey’s economic viability for a generation. That kind of leadership requires that the plan forcefully address systemic expenditure problems within our state’s fiscal structure that have plagued Administration after Administration. We look forward to working with the Governor and the Legislature on these key components.

The Chamber hopes that critical expenditure reductions will be made even if they may not be politically appealing. These dramatic steps need to be taken to balance income stabilization with a reduced level of spending.

Some recommendations to strengthen the Governor’s plan include:

1. The creation of legislation and a Constitutional Amendment that will prohibit incremental spending levels from exceeding certified recurring revenues. In addition, we support the implementation of safeguards to ensure that future Administrations do not undo the good work proposed by this plan. Specifically we believe the funds in the PBC need to be secured and not available to fund expense increases.
   
   
2. While a substantial amount of investigation has been done in the area of state health benefits and pensions, we feel that more work is needed to identify systemic changes that must be made in order to avoid future fiscal crises. Specifically we believe genuine efforts need to be made to reform the state’s pension system.
   
   
   • Replace the defined-benefit pension plan for new hires with a defined contribution plan, eliminating the current defined benefit/401(k) combination currently in place.
   • Adopt age 65 retirement, which is standard in almost all pension programs

   Likewise, additional modifications to retiree health benefits should also be addressed:

   • Negotiate one contract on behalf of all workers. If the state is required to pay for the benefit, the state and the state only should negotiate the agreement.
   • Begin now to phase out lifetime healthcare benefits for retirees, as has been done successfully in the private sector.
     
     
3. In the same category of work product, the Legislature previously created two groups that could have a significant impact on the financial future of the state. The New Jersey Tax and Fiscal Policy Study Commission, and the Local Unit Alignment, Reorganization, and Consolidation Commission, should be fully populated with members and charged with an aggressive timetable to complete their assigned tasks.
   
   
4. Fully explore opportunities for creating efficiencies within the government. For example, eliminate or consolidate certain departments within state government. This will signal positive change which will help to attract and retain businesses in New Jersey, some of which are making decisions to locate outside the state.

Finally, it is time to explore other expense reductions, including a roll back of the property tax rebates and a delay in the implementation of the newly-expanded preschool program, until the state is on a firm financial footing. In general, implementation of new programs and the expansion of existing programs should be suspended until we have the resources to pursue them. We look forward to reviewing the Governor’s budget proposal in a few weeks.

January 29, 2008