Corzine seeking more cuts in budget

TRENTON - Gov. Corzine is proposing cutting $812 million from New Jersey's budget in response to estimates that the state's financial shortfall has leaped from $1.2 billion to $2.1 billion.

The governor plans to raid the rainy-day fund, use unspent money from the previous year's budget, freeze salaries of government workers, and use other measures, he said yesterday. He also is counting on at least $300 million in new federal aid.

Corzine had cut state spending by about $600 million from the previous budget, leaving a budget of $32.9 billion for the fiscal year that began July 1. Areas hit hardest by those cuts included money for towns, hospital aid for the uninsured, and property-tax and tenant rebates.

Revenue figures in October pointed to a shortfall of $1.2 billion, but November and December figures proved even gloomier. Revenues are now projected to come in $1.7 billion, or 5.2 percent less than initially seen. Revenues are down 5 percent or more in all categories except for the lottery, which has remained on track.

At a news conference, Corzine, a former Goldman Sachs Group Inc. executive elected in large part for his financial acumen, described the economic crisis as the worst the country has experienced since the 1930s.

"This is as uncertain a time . . . as I've ever seen," he said. He warned that even more cuts could be coming.

In Pennsylvania, Gov. Rendell has announced several rounds of budget cuts and has proposed tapping the rainy-day fund, diverting money from the sale of oil and gas drilling rights, and using federal aid to make up for a revenue deficit.

The state Revenue Department yesterday released figures showing Pennsylvania's general fund taking in 6.8 percent less than expected for the fiscal year that ends June 30. Projected for the entire year, that would leave a $2 billion deficit in Pennsylvania's $28.3 billion budget.

Corzine said he briefed New Jersey's legislative leaders about his plan yesterday and would release more details Monday. Some ideas will require legislative approval.

The governor proposes freezing salaries for managers and nonunion labor for 18 months, which would save $16 million for the current fiscal year and $135 million for the next year.

He also hopes to freeze salaries for all other employees for 18 months, which would yield about $150 million in savings, he said. Corzine said he hoped to avoid furloughs and layoffs with such measures, although he has not ruled those options out. A salary freeze for union employees would require labor negotiations.

Cuts may include $90 million in discretionary spending, $15 million in municipal aid, $75 million in educational aid for kindergarten-through-12th-grade schools, and $160 million in the state's pension contributions.

The $2.1 billion shortfall includes $1.7 billion in lower revenues, $275 million in additional spending for programs such as Medicaid, whose costs grow with a souring economy, and $135 million from increased debt-service payments.

In addition to the $812 million in spending cuts, Corzine is proposing:

Shifting $500 million from $650 million intended for reducing long-term debt.

Spending $275 million from the state's projected $600 million rainy-day fund.

Spending the $208 million in unspent funds from the previous fiscal year.

Spending an estimated $300 million from the federal stimulus package to the states.

"We're living through historic events, and we need everyone to rally together and share the pain," said Assembly Budget Committee Chairman Louis D. Greenwald (D., Camden). "It's about riding out this storm. No one is going to shoulder all of it, but we need everybody to pitch in."

Republican legislative leaders criticized Corzine's plan, saying spending far exceeds recurring revenues.

"Instead of waiting to see what bailout the federal taxpayers will deliver to New Jersey, Gov. Corzine should be addressing the fiscal deficit we are facing," Senate Republican Leader Thomas H. Kean Jr. and Assembly Republican Leader Alex DeCroce said in a joint statement.

Also yesterday, Corzine participated in a conference call with Democratic governors from four other states. The five issued a proposal requesting a $1 trillion bailout from the federal government, including $250 billion for education and $150 billion in tax cuts for the middle class.

President-elect Barack Obama's aides and congressional leaders have been talking about a package roughly half the size of the two-year plan proposed by the governors of Massachusetts, New York, Ohio and Wisconsin along with Corzine.