Corzine's early shot may mean fiscal war

With Halloween just around the corner, the governor of New Jersey is sending a shiver through the state.

He may not have been dressed the part, but Gov. Corzine paid a grim-reaper-like visit to members of his cabinet two weeks ago with a foreboding message that went something like this:

The state will be short more than $3 billion next year. Go cut your budgets.

Corzine's forecast - nearly $1 billion steeper than his treasury officials anticipated earlier this year - appears to be part of an emerging trend: New Jersey is one of at least seven states whose bean counters have begun to sense deficits for the coming year.

Rhode Island's Republican governor yesterday announced more than 1,000 layoffs to close a projected $200 million gap.

But the ominous order from the usually tight-lipped Corzine is widely viewed as a political move as much as one potentially caused by a sluggish national economy.

Observers say Corzine's message appears intended to prepare taxpayers and lawmakers for a fierce budget battle that will determine whether the onetime Wall Street heavyweight can, as promised, turn around his chronically troubled state.

"I think if the governor is serious - and I believe he is - this is his chance to make his mark," said Philip Kirschner, president of the New Jersey Business and Industry Association and a longtime Trenton lobbyist.

"This is it," Kirschner said. "This is his last shot."

It is a battle that, by most accounts, will likely end with higher taxes, massive spending cuts, or a combination.

And, observers say, Corzine will use talk of deficits to try to win public acceptance of his controversial but still conceptual plan to lease toll roads. That idea could generate revenue - and higher tolls - as part of an asset-refinancing deal with investment banks like the one Corzine used to lead in New York.

Lawmakers from both parties say privately that Corzine appears to have floated the budget-shortfall news to pave the way for selling the toll-road plan, known in financial quarters as asset monetization.

"I don't think the timing of the governor's announcement of this is so much political as I think it is public awareness - for the public at large to be prepared for difficult political decisions," said Assemblyman Louis Greenwald (D., Camden), who chairs the powerful Budget Committee.

He said Corzine's message might also have been directed at new legislators who will be elected next month - "that once you're elected, there are difficult decisions you have to make."

Early budget talk is common as summer comes to an end. Typically, it is accompanied by rote calls on agency leaders to cut their budgets - requests that are largely ignored.

And so Corzine's move has been met with a bit of skepticism.

"There becomes a part of us that thinks: Is it the boy who cried wolf?" said Jeff Tittel, director of the New Jersey chapter of the Sierra Club. "There's a part of us that wonders: Is it real?"

But the timing and substance of Corzine's order have raised eyebrows.

News of his meeting quickly made the rounds in selected news media, noteworthy given the administration's reputation for keeping its most important policy work quiet.

It was all the more peculiar given that Corzine has been conspicuously silent for months - fueling incessant criticism - about his plans for solving the state's financial woes.

"Even though I've heard it for the last four or five years," Tittel said, referring to talk of cost-cutting, "I think that this time there's going to be some serious cuts.

"I think layoffs and some really serious things will happen to show that he means business."

During Corzine's first year in office, in 2006, he and his team forced a one-week shutdown of state government before extracting budget concessions from the Legislature. The battle ended in a relative draw, observers say, but set the tone for fiscal prudence.

This year, Corzine and the Democratic-controlled Legislature drew fire from Republicans for not making enough cuts in an election year.

Corzine's shortfall forecast was greeted with equal scorn this week by Senate Minority Leader Leonard Lance (R., Hunterdon), who said Democrats had consistently ignored GOP calls for budget cuts.

"We have suggested that there be budget cuts over the last several budget cycles," Lance said, yet "the budget has increased 50 percent over the last six years under Democratic control of the governor's office and the Legislature."

State officials say the deficit is not due to sluggish revenue. Taxes are rolling in as expected despite the shaky national economy.

In California, officials are predicting a $5 billion operating-revenue shortfall, said Arturo Perez, fiscal analyst with the National Conference of State Legislatures.

Also sounding an alarm are Virginia, Michigan, Arizona and Florida, states where revenues are suffering because of the downturn in the housing market, said Scott Pattison, executive director of the National Association of State Budget Officers.