Gov. Corzine pushes Legislation to borrow yet more… $2.5B for school construction. (I guess losing $6B is not enough)

NJ101.5 Radio – Millenium Radio

Governor Jon Corzine insists that requiring voter approval prior to State borrowing is crucial if New Jersey wants to right its fiscal ship. The concept was even one part of Corzine’s doomed four-part toll hike plan, but the Governor is still adamant about the borrowing aspect. This has some wondering why Corzine wants to borrow $2.5 billion for school construction without first asking the voters.

Yesterday in Newark, Corzine pushed legislation to let the state borrow $2.5 billion to restart school construction (the reason that the $6 billion School Construction Corp was created). The move is being questioned by Democrats and Republicans. The program stems from a state Supreme Court order directing that new schools be built in some of the state’s poorest districts. The Governor has informed the high court he would push lawmakers to approve an additional $2.5 billion by June 30 to restart the program, but legislators have yet to schedule action on any bills.

“The program sets aside funding from the (State) income tax to support the bonds,” says Corzine. “Not to just issue bonds with no means of paying for them.” He warns the voters could turn down the borrowing plan, “and then it will either be a choice of whether you raise taxes or crowd out something else in the budget.”

In a March budget hearing, State Senator Gerry Cardinale asked acting State Treasurer Dave Rousseau, “How do you justify what seems to be a split personality with respect to this issue in that it’s bad, but we’re going to do it once more?”

“We were under a court mandate to go back to the court in January with a plan to come up with $2.5 billion worth of money for school construction,” answered Rousseau. “What the Governor has said is for that $2.5 billion that he has talked about that he will pledge to dedicate a portion of the (State) income tax which is already used for property tax relief, to help pay those bonds.”

Cardinale says, “I think it might be wise in this instance to ignore the court throwing us into a position where we are either going to bankrupt the State or we’re going to bankrupt our residents.”

The Senate Budget and Appropriations Committee has already unanimously approved legislation that would expand State voter approval requirements for issuing public debt. The resolution would place a question on this November’s ballot that would amend the State Constitution to prohibit the State Legislature from enacting any law that authorizes any State agency or independent authority to borrow money that will be paid back with an annual appropriation unless that borrowing is approved by the voters. The full Senate has yet to act on the proposal.

State Senator Leonard Lance is one of the sponsors. He says, “The reason we’re in the fiscal mess we’re in in New Jersey is that for the last ten years we have borrowed unconscionably billions and billions of dollars without voter approval and we have to cut it out……We have dug a tremendous hole in New Jersey by borrowing without voter approval and the way to get out of that hole is to stop digging.”

“Unchecked state borrowing is what has gotten us into our financial crisis in the first place,” says co-sponsor, State Senator Ray Lesniak. “We’ve relied far too much on budget gimmicks and pushed off our financial obligations to future generations. Loopholes that allow State agencies to borrow without voter approval need to be closed if we are going to move forward.”

State Senator Barbara Buono, a Democrat like Corzine is another co-sponsor. She says, “This is an essential step in restoring New Jersey’s long-term financial health……It’s time to cut up the credit cards and borrow only for those projects that have broad public support.” Bouno says she’s “bewildered” by Corzine’s Wednesday event, “It seems violative of the spirit and the intent of the
proposed change.”

Under the resolution, voter approval would not be required if the debt is undertaken by an independent non-State agency and repaid by a third party or if the source of revenue used to repay the debt is required to be appropriated by the State Constitution.

The State Supreme Court has ruled the State must fund the building of schools in the so-called Abbott districts. The Governor says, “I think that we potentially have a constitutional conflict coming that could delay this process an extraordinarily long period of time.”

“The Supreme Court has permitted in the past borrowing without voter approval for school construction, but it certainly has never required that we fund new schools that way,” says Lance. He adds, “We could have a pay-as-you-go system, several hundred million dollars a year for a decade or so. That is preferable to me than borrowing and certainly borrowing without voter approval.”

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