WSJ: Corzine Hits a Speed Bump

New Jersey isn’t usually considered exciting news. But it wouldn’t have hurt the national media to pay a bit more attention to what happened recently when Democratic Gov. Jon Corzine tried to sell the public on the largest borrowing scheme in American history.

Mr. Corzine’s motive was the looming disaster in the state’s public-employee retirement costs. As in other states, New Jersey politicians for years have promised government employees lavish retirement packages but failed to put aside money to fund them. The unfunded liabilities are far in excess of a trillion dollars nationally.

New Jersey faces one of the worst crises. The state pension plans cover not just state employees, but also teachers and law-enforcement personnel at the county and local levels. When the former CEO of Goldman Sachs was elected governor in 2005, he seemed uniquely qualified to address the problem, thanks to his grasp of finance.

Unfortunately, he also had a grasp of politics. And the politics of the Democratic Party require that benefits for public employees be expanded, not reduced. Ever since the New Deal, Democrats have embraced a trickle-down theory on public-employee benefits. The public employees get gold-plated benefits first, and this creates pressure on private employers to eventually match those benefits for their workers. As union leader Carla Katz told me, the Democrats embrace “the progressive theory that unless you create a substantial wage and benefits package that reflects good jobs and the ability to have a middle-class life style, there will be a perpetual race to the bottom.”

Ms. Katz is the New Jersey state president of Communications Workers of America, which represents thousands of state employees. She’s also the ex-girlfriend of the governor. Eyebrows were raised when her ex-squeeze addressed a Trenton, N.J., rally of about 10,000 public workers in 2006 and yelled, “We will fight for a fair contract!”

We? Apparently, no one told the governor he was in management. And at the time, management was being pressed to make the sort of changes that could have cut the pension burden, such as raising the retirement age and putting new hires into the public version of 401(k) plans.

Mr. Corzine rejected those reforms. That left him looking for money to make up unfunded liabilities of an estimated $25 billion for the pension fund and $58 billion for post-retirement medical benefits. Politicians in other states had sold their toll roads and gotten billions. And as toll roads go, New Jersey’s are among the busiest in the country. Mr. Corzine put up the idea of a sale as a trial balloon. The unions shot it down. But the governor came back with another trial balloon, this one based on a bond sale the size of the Hindenburg.

CLICK HERE to read the entire Wall Street Journal article

 

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Corzine’s Public Benefit Corp all but dead thanks to “A Different Road”

Corzine says the state is nearly broke: Wisniewski challenges that statement head-on:

“New Jersey maintains an “AA-‘ bond rating on Wall Street. “Goldman Sachs, who everybody would acknowledge is a world-class financial operation on Wall Street, shares exactly the same financial rating as the State of New Jersey,” Wisniewski said. Corzine used to run Goldman Sachs.

Corzine’s Public Benefit Corp is likely all but dead thanks to Assembly Transportation Committee chairman John Wisniewski’s recommended plan.

Although the 18 cents gas tax hike may not be the ultimate answer, it does have a much more reasonable moderate Toll increase schedule and he does have the Trenton Legislators buzzing about it. The problem as I see it however, is that IT DOES NOT ADDRESS THE ROOT CAUSE. In other words, there’s nothing in the plan that calls for CUTTING spending (only freezing). Some Republican legislators, (preferably a newly elected official(s) like Scanlon/Casagrande/Beck?) need to submit another alternative that may incorporate “a modest” gas tax with across the board cuts.

Wisniewski’s plan would not cut state debt, which is a key element of Corzine’s proposal to raise tolls by roughly 800 percent by 2022 and by inflation from then on. Corzine has said reducing debt could save the state $1 billion a year in interest payments over the next decade.

But Wisniewski said his plan would more fairly spread the costs among all motorists.

“An 800-percent toll increase was going to fund transportation. I find that unacceptable,” Wisniewski said.

He said Corzine’s proposal would unfairly hit seven counties, including Middlesex, Monmouth and Ocean, that rely on the state’s toll roads while asking much less of the rest of the state. Wisniewski’s alternative would roughly double tolls by 2018 and would direct the money raised back to projects on the toll roads.

Corzine’s proposal would halve the state’s $32 billion debt, at least temporarily, and fund up to 75 years of transportation projects.

Under Wisniewski’s plan:

  • The gasoline tax would grow by 18 cents, with inflationary increases following to fund transportation projects.
  • On the Parkway, tolls would grow from 35 cents now to 75 cents in 2018. Corzine’s plan would raise the same toll, in four installments, to $2.70 by 2022.
  • The Turnpike would see three 25-percent toll hikes in place of Corzine’s four increases of 50 percent plus inflation. That means today’s $1.20 average trip would cost $2.35 in 2018 under the Wisniewski proposal, compared with the $9.85 by 2022 called for by Corzine.
  • A 50-cent Expressway toll would become $1 by 2014, compared with $4.05 by 2022 under Corzine’s plan.

Wisniewski also endorsed the same spending controls as Corzine, and even tighter restrictions on new borrowing.

“The governor is pleased that an active dialogue has emerged on how to put New Jersey on the path to fiscal responsibility while also recognizing the need to fund critical, long-term infrastructure improvements,” Corzine spokeswoman Lilo Stainton said.

Other lawmakers react

A Democrat whose support is key to Corzine’s plan, Sen. Raymond Lesniak, D-Union, applauded Wisniewski’s approach. Lesniak, who is sponsoring the Corzine proposal, said it will be much easier to convince toll-road drivers to support fee increases if they see the funding coming back to the highways they use.

“The governor trying to do everything all at once in one big bundle; that’s too complex to do it all in one way,” Lesniak said.

(That’s Trenton talk for: I’m not supporting Gov. Corzine’s plan any longer)

He said that once the state finds a source of transportation funding, a separate debate can begin on reducing debt.

But Senate Majority Leader Stephen Sweeney, D-Gloucester, said talk of a gas-tax hike is premature.

“Right now, there’s no reason to talk about a gas tax, there’s no reason to talk about toll increases until (Corzine) presents his budget,” Sweeney said.

Corzine is scheduled to lay out his plan Tuesday, and Sweeney, like other lawmakers, has called for reduced spending to alleviate the state’s financial problems.

Wisniewski disputed Corzine’s assertions that the state is nearly broke.

“Bankrupt really means that you’re insolvent, that you can’t pay your bills. That’s not a situation where New Jersey is at. We can pay our bills,” Wisniewski said.

He said New Jersey maintains an “AA-‘ bond rating on Wall Street, similar to most other states.

“Goldman Sachs, who everybody would acknowledge is a world-class financial operation on Wall Street, shares exactly the same financial rating as the State of New Jersey,” Wisniewski said. Corzine used to run Goldman Sachs.

New Jersey’s debt costs the state $2.6 billion in payments each year, and growing pension and health care liabilities cost another $2.2 billion a year, according to the administration. Corzine has said those payments severely restrict the state’s ability to pay for needed programs and repairs.

Public Benefit Corp: The Few, the Privileged, the “Corzine Cosa Nostra”

Is there any way on this planet that this governor has credibility? NO

Is there any reason to believe that there’s no shenanigans going on here? NO

Is there any reason to think that this governor has our best interest in mind when creating this piggy bank for “the few, the privileged, the Corzine Cosa Nostra”?  Again: NO

Do you trust him? NO

Will you vote for him should he attempt to ever run for any office again? NO

Will you vote for any legislator that goes along with him? ABSOLUTELY NO

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This is in today’s App: (highlights and comments are my own)

Gov. Corzine would bar the public from examining the inner workings of the toll-road corporation that he wants to create to raise $32 billion, even though it would employ thousands and spend billions of dollars, according to his proposed bill.

Under Corzine’s draft legislation for the toll-road monetization plan, the proposed Public Benefit Corp., which would operate more than 334 miles of state roadways and could increase tolls by as much as 800 percent in the next 14 years, would not be subject to the state’s Open Public Records Act. By failing to put the PBC under the open records law, it would omit from public scrutiny broad swaths of records from an organization that would have an initial toll revenue of about $900 million.

Not opening the PBC up to full public inspection would be “unconscionable,” said state Sen. Jennifer Beck, R-Monmouth, who opposes the monetization plan.

“I’m stunned. This entity would be in control of a significant public asset, and controlling multiple billions of dollars, and billions of billions over the next 99 years,” Beck said. “To me, it must be subject to (the Open Public Records Act), so there is transparency for the citizens.”

Under Corzine’s plan, the state would lease its three toll roads to the nonprofit corporation for up to 75 years, with a 24-year optional extension.

In exchange, and through a complex bond deal, the state would receive $32 billion to $38 billion that would be used to help the state cut its debt and provide more money for transportation needs, according to the plan.

The plan has generated strong opposition in public opinion polls and from all Republican members of the Legislature. U.S. Sen. Frank R. Lautenberg, D-N.J., and state Sen. John Adler, a Democrat running for Congress, also oppose the toll-hike plan.

Corzine, a Democrat, wants the Legislature, controlled by his party, to approve the plan this spring. The agency would control the New Jersey Turnpike, Garden State Parkway and Atlantic City Expressway.

The Open Public Records Act, or OPRA, was signed into law in 2001 following a campaign by Gannett New Jersey newspapers and other open government advocates to allow easy access to such routine documents as payroll lists and bills. Until the law was adopted, many agencies withheld such records from the public.

“The PBC is being formed under nonprofit law and would be treated as a conventional nonprofit, none of whom are subject to OPRA,” Tom Vincz, spokesman for the state Department of Treasury, said in an e-mail response to questions from Gannett.

He did not respond to questions about why the PBC would not be covered by OPRA, or if payrolls, bills and other items commonly accessible under the law would be available in the future.

Nonprofit organizations must provide limited public financial disclosure, such as the salaries of the top five employees and basic budget data, to the Internal Revenue Service once a year.

Under Corzine’s proposal, the PBC would have to produce reports to its oversight agency, including annual budgets, capital expansion and maintenance programs. Such documents would then be public under the public access law.

Vincz said that the PBC’s operating contract would also “create a long series of other reporting including maintenance reports and traffic data,” that would become public records once the oversight agency obtained them.

Under the bill, the PBC would be required to conduct independent audits of its financial statements, Vincz wrote.

Elizabeth Mason, president of the New Jersey Foundation for Open Government, said to excluded the PBC from the records law is the opposite of what the state should be doing.

“What is the rationale for the government to do this? What is the rationale for the government to hide this information from the public?” she asked.

(I keep saying it over, and over again… it’s called THE CORZINE COSA NOSTRA – that’s the reason)

Thomas J. Cafferty, general counsel for the New Jersey Press Association, a newspaper trade group, said that neither he nor the association has finished reviewing the proposed legislation.

But he said that just because the bill does not require the PBC to fall under OPRA doesn’t mean that the proposed bill can’t be changed in the Legislature. The courts could also require the PBC to disclose its records, “given the extent of the public involvement in this entity,” he said.

CARE TO COMMENT? Visit our Web site, www.app.com, and click on this story to join in the online conversation about this topic in Story Chat.

James W. Prado Roberts: (732) 643-4223; or jwr@app.com

…and therein lies Jon Corzines problem…

Two months after we the people rejected Corzine’s little $450 million in new borrowing for his stem-cell initiative, he stood before the state legislature and informed that the state was in a deep financial crisis – that NJ borrowed much more than it can pay back and something must be done…

SO: if in January, he “fesses up to the obvious”, why two months earlier is he pushing to borrow another $450 million???

Very interesting read from our friends at inthelobby.net

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After his successsful sneak attack on Pearl Habor, Japanese Admiral Isoroku Yamamoto is said to have lamented, “I fear all we have done is to awaken a sleeping giant and fill him with a terrible resolve.”

Fast-forward 66 years, and you have to wonder: Does Jon Corzine suspect that he may have done the same thing?

Call it what you will, but something is happening in the New Jersey electorate. It started in November, when voters who were smarter than their government rejected $450 million in new borrowing to pay for the operating costs of stem cell research centers that the state had already agreed to borrow $270 million to build.

Corzine, who sunk at least $100,000 of his own money into a pro-stem cell advertising campaign, was stunned when it didn’t pass, after pollsters and pundits and his own sensibilities had assured him it would.

Two months after that defeat, he stood before the state Legislature and solemnly exclaimed that New Jersey was in a deep financial crisis. The state had borrowed to the point of excess; debt service was eating up the budget, and something must be done.

His plan, as we all now know, was to turn control of the toll roads to a Public Benefit Corporation, which could sell bonds off the toll roads and raise tolls by 800 percent.

So here’s a question Corzine’s never answered: If he knew that the borrowing was eating the New Jersey budget alive in 2007 – as he surely did – why in the world was he out there promoting the sale of another $450 million in bonds?

And therein lies Jon Corzine’s problem.

He may not have connected the dots, but the public does. Corzine is no different than other politicians when it comes to spending our money on programs he thinks we should have — even if we can’t afford it.

That point became even clearer after his administration admitted that they also plan to go out and bond for another $2.5 billion in school construction – even though the state had already wasted more than $6 billion with very few schools to show for it the first time around.

For all his talk about putting the borrowing to the public, he doesn’t mean it. How can he? Corzine has given every Trenton politician a “Get Out of Jail” card when it comes to borrowing. As long as they declare that the bond issue would be paid for by an existing tax stream, it doesn’t have to go before the voters.
And that will stop borrowing how?For all his talk, Corzine’s vaulted promise that all future borrowing would go before the voters isn’t worth the paper it’s printed on.

Trenton politicians – heck, all politicians – want what they want when they want it. Corzine wanted to be a player in stem cell research. He wants to build new schools. The state doesn’t have any money, but why let that stand in the way of his legacy?

Only one problem. The voters said no to stem cell research.

He won’t make that mistake again. That’s why he says the school construction doesn’t need to go to the voters. And why he won’t put his massive $38 billion toll hike scheme before the voters.

Technically, he says it’s because they’ll both have dedicated funding (taxes on school construction, toll hikes on the toll roads.) The reality, however, is much simpler.

He can’t trust us not to say no.

When he went into the belly of the beast this week – Monmouth and Ocean counties, two areas that will be hurt the most by the toll hike plan – Corzine was likely not expecting the level of anger he heard from the residents.

And he was probably stunned that they knew all about his inconsistencies: agreeing to raises for judges, despite the state being broke; shouting down his attempts to say that any cuts in the budget would result in hospitals closing; and generally demanding that the government cut itself, before he asks them for any more money.

We love how whenever the governor is questioned on why he is forcing the state’s burden on such a small segment of the population, he pipes up with how frequent commuters could get a discount of 20 to 25 percent.

As if turning an 800 percent toll hike into a 600 or 660 percent toll hike somehow makes it fair or acceptable.

The real reason that Corzine wants commuters and those who drive the toll roads to pay an 800 percent increase is purely political: it affects fewer people than an overall hike in the gas tax, combined with significant spending cuts, would.

Want proof? Check out this map developed for the Asbury Park Press by City University finance professor Jonathan Peters. It shows where the highest concentration of E-ZPass users live in New Jersey.

Three guesses what counties appear hardest hit – Monmouth, Ocean, and Middlesex. The bulk of the counties don’t have significant numbers of E-ZPass drivers, according to this map.

It’s the same reason he’s putting off the toll hikes until the year after he and the state Legislature stand for re-election.

But Corzine couldn’t be that cynical, could he?

What the governor underestimated – as he underestimated in the stem cell research vote – is that New Jerseyans aren’t stupid. Their rising property tax bills have ended whatever complacency they once had.

They love their state, but they either can’t afford to live here, or are afraid they won’t be able to in a few years.

There’s a reason why more people are leaving New Jersey than coming in.

The people of New Jersey recognize that the politicians who are running their state government don’t understand that the status quo no longer works. That government spending is not the answer to their problem; it is the source of their problem. That government’s efforts to protect the bureaucracy are harming their families.

They understand that an 800 percent toll hike will mean all New Jerseyans will pay more for food, clothing and goods. That businesses like shipping and warehouses and distribution may move to other states, and take their jobs with them.

They know that families in New Jersey are forced to make hard choices every day in order to make ends meet, and government should have to make those same hard choices – before they go to the people and ask them for more.

A larger government will not make the lives of New Jersey families any better. A larger paycheck, and fewer taxes – and tolls – will. New Jerseyans are willing to make some sacrifices in order to fix the fiscal mess, but they’re not willing to be the only ones –and they want the government to be cut down to size first. Otherwise, the people know that despite what Corzine says, the government will go on, spending money it just doesn’t have.

Corzine’s already doing it – his new school funding formula expands government by mandating preschool education for low-income students, without identifying how he’s going to pay for it.

Whatever hopes the governor had that he could rush this plan of his through the Legislature has fallen wayside to the anger of the public. Tomorrow, there will be a rally at noon at the Statehouse, sponsored by NJ101.5 radio, to show voter discontent. The only way Trenton will listen is if they fear the wrath of the voters. A large crowd will make them notice.

In 1941, it was bombs over Pearl Harbor that awakened the anger of America. In 2008 New Jersey, it may well be pigs flying over the Statehouse.

Either way, New Jersey is awake. Let’s see how many politicians in Trenton start paying attention.