Democratic Assemblyman Gary S. Schaer and Republican Assemblyman Anthony M. Bucco pointed out the good (transportation funding and repeal of the estate tax) and the bad (the pension deficit and skyrocketing health care costs) in New Jersey's upcoming state budget. Their breakdown came during the May 16 New Jersey Chamber of Commerce Roundtable Breakfast at the National Conference Center in East Windsor.
The men acknowledged the benefits of a bipartisan approach, and cited successes such as the new funding for highway, bridge and mass transportation projects via the Transportation Trust Fund, the phase-out of the estate tax and the small cut in the sales tax.
"The Transportation Trust Fund bill was the best we could craft recognizing the necessity of compromise between the Legislature and the Governor," Schaer said. "It gives us space to breathe for the next eight years. The road construction projects alone will put money into the economy."
Repeal of the Estate Tax
Schaer added that the repeal of the estate tax, long sought by the N.J. Chamber of Commerce, is "very positive in the long run" for making New Jersey more business friendly. However, he was less optimistic about the sales tax cut, which he believes is too small to effect most people's wallets while large enough to put a hole in the state budget.
Bucco said it is crucial that the Legislature and the next governor are on board with the estate tax, which is scheduled to be eliminated in phases over the next two budget years. "It would be a mistake to reverse the phase out," he said.
New Jersey has been one of only two states in the nation with both an estate tax and an inheritance tax, and that double taxation is a reason why many executives have left New Jersey before they retire; and why they have thought twice before moving or expanding their companies here, N.J. Chamber of Commerce President Tom Bracken has said.
Public Employee Pension and Health Care Costs
When it came to the bad part of the upcoming budget, both men immediately focused on the biggest fiscal challenges - funding the ever-increasing cost of pensions and health insurance for public employees and retirees.
The $1 billion increase in the state's proposed $35.5 billion budget is solely going toward health insurance and pensions, Schaer said. "This is not a surprise," he added. "We are not factoring (these structural increases) into the equation. The real world works on data, and we (in Trenton) are working on assumptions and hopes."
Schaer likened the pension and health benefits issue to "a vehicle going 80- to 90-miles-per-hour toward a brick wall with no breaks."
And the next Legislature and the next governor will inherit the issue.
A Time for Transformation
"There are extraordinarily difficult times ahead," Schaer said. "We are in a crisis."
Of the $35.5 billion in the proposed state budget, Bucco said a total of $29 billion goes to just four areas: school funding; public employee pension and health benefits; health and human services for the needy; and debt service. "There is not a lot left for other things, and we haven't even talked about payroll," Bucco said.
Bucco noted that the state has made strides, including a 2 percent cap on property tax increases; a reduction in red tape; and business incentives through the Economic Opportunity Act.
But, he added, it is time for Trenton to transform. "Unless we do something to rework how New Jersey operates, it not going to get better," Bucco said. "We need bipartisanship to get it done."
Thank you to AT&T and WithumSmith+Brown for sponsoring the event.
For photos from the event, click on an image below:
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