Too many people - on the left and the right, politicians and editorial boards - act as if there is a politically expedient magic bullet that will painlessly fix New Jersey's budget problems. There isn't. Gov. Chris Christie is right when he says our budget problems are serious. The solutions are going to be painful.
First, let's understand that the this problem is rooted in 20 years of bad decisions, by governors and legislatures, by Democrats and Republicans. Some were careless, others were craven. But the bottom lines is that we are in deep trouble.
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, such as 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 say "cut 20 percent across the board and you're done" are fooling themselves. Almost one-third 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 or skip Social Security payments. So right there you go from a 20 percent cut across the board to a 30 percent 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 to districts spending less, and doing a better job. 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 more than $20,000 per pupil per year - and still provide a lousy education - swallow hundreds of millions of dollars. If we make fundamental change, we can save big money - and serve those kids better.
Pension obligations should be around 7 percent of a state budget; our obligation is 15 percent.
Another area where we spend much more than other states - and is a big percentage of our budget - is public employee pensions and health benefits. I know, I hear the pronouncements that "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 percent of a state budget; our obligation is 15 percent (and would have risen to approximately 25 percent before the 2011 reforms). We spend nearly $8 billion on pension and benefits. Let's say we can figure out a way to trim those by 10 percent. That's an $800 million savings.
So, now we have saved a hypothetical $1.5 billion. We will still need to cut another $5.25 billion, with only $13 billion from which to cut. That's a 40 percent cut to operations that are already running on fumes. Should we cut home health aides, who are already overworked, haven't had a raise in years and make $12 an hour? How about massive cuts to higher education spending (New Jersey already falls well below national average) or aid to municipalities, which would drive up property taxes?
My friends on the Democratic side of the aisle argue that we should raise taxes to plug the gap, and regularly rule out school funding reform and additional cuts to pensions and benefits. The 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 "millionaire's 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 to pick up 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 calling 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 percent increase on every taxpayer!
There is no magic bullet. This ain't going to be easy, but we have no choice. Only after we understand and accept the over-arching problem can we move forward with a dynamic, balanced mix of solutions.
