Corzine lays out wrenching budget

TRENTON - In a somber budget address yesterday, Gov. Corzine returned several times to the image of a New Jersey family sitting around the kitchen table, pencils and calculators in hand, struggling to balance the household budget.

Just as families must make difficult choices about how to spend limited resources during a recession, Corzine said, the state also must make painful decisions.

"Tough times require that we make the right choices, and that we do the right thing for the common good," he said during a 35-minute speech before the Legislature. "By making the right decisions now, New Jersey can and will emerge from this national economic crisis stronger, sooner, and more prosperous."

Corzine proposed a $29.8 billion budget for the fiscal year that begins July 1, down from the $32.9 billion budget he signed last year and more than $1 billion less than the first budget he proposed, in March 2006.

The governor - a Democrat seeking reelection in November - is calling for state workers to accept furloughs and to give up a contracted 3.5 percent wage increase this year to avoid up to 7,000 layoffs.

He proposed raising taxes on liquor, wine, and cigarettes. And, for a year, he would raise by 0.75 percent the income tax of the 1 percent of New Jerseyans who earn more than $500,000.

Businesses would be hit with higher payroll taxes because the state's unemployment trust fund has dipped to a level that, by law, triggers an automatic tax increase. The increase is expected to cost businesses about $350 million, though the final figure won't be known until the end of the month.

Corzine proposed scaling back the popular property-tax rebate program for all but senior citizens, the disabled, and those earning less than $50,000, to save an estimated $517 million. Another proposal would mean that for one year, homeowners younger than 65 could not take a property-tax deduction on their income taxes, adding $400 million to state revenues.

Corzine tried to preserve funding for his top priorities: children, senior citizens, and protecting the most vulnerable in society. Direct aid to schools would grow by $300 million under Corzine's proposal, including $25 million to expand preschools. The budget also would maintain funding for food banks, charity care, and worker retraining.

Corzine said the state would address a $7.2 billion gap between revenue and projected spending, including increases mandated by statutes, contracts, and the courts, by reducing spending by more than $4 billion and raising taxes by $916 million.

An additional $2 billion will come to the state from the federal stimulus package, much of it directed toward education. Among the savings, Corzine has proposed depositing $895 million less into employee pension funds than the state intended to contribute in the current fiscal year, before mid-period budget adjustments resulted in trims.

The governor's address begins a months-long negotiation between his office and the Legislature, which must sign off on the budget. The state constitution requires a budget to be approved by July 1.

Fellow Democrats, who control both houses of the Legislature, rallied around the governor yesterday while Republicans, most of whom failed to clap even once during his speech, immediately attacked the proposal.

"From top to bottom, we need to make sure our limited funding is going where it is needed most. I think the governor did a good job of prioritizing," Senate President Richard J. Codey (D., Essex) said.

"Now we have to hope and pray that the economy does not continue to throw us more curveballs," Codey added.

Assembly Speaker Joseph J. Roberts Jr., of Camden County, said the budget proposed by Corzine would help position the state for economic recovery.

"You will not see vast changes to this budget," Roberts predicted. "The bottom line is going to be the bottom line. This is the toughest budget I have ever seen, and I think the governor deserves a lot of credit for saying we can only afford basics this year."

Republicans blamed Corzine for what they said was years of overspending. Higher taxes, they said, are not the answer.

"This is the wrong time to increase people's taxes in the state of New Jersey," said Senate Minority Leader Tom Kean Jr., of Union County. "People are hurting in this economy. . . . People are trying to keep living in this state."

Among the taxes Corzine proposed are an extension of a surcharge on the corporate business tax that was set to expire this year and a tax on lottery earnings above $10,000. The budget also would redirect $116 million from funds dedicated to specific purposes, such as the state disability benefit fund and motor-vehicle fees.

Assembly Republican Leader Alex DeCroce said the budget represented a "total abandonment" of middle-income residents.

"This budget will dismantle what's left of the middle class in New Jersey," said DeCroce, of Morris County. "People are losing their jobs, their homes, and their savings, and all this budget does is guarantee them more pain."

Corzine, who is trailing in a number of polls behind Christopher J. Christie, the former U.S. attorney and a Republican contender for governor, did his best in the speech to make his case for a second term.

The former Goldman Sachs executive, elected in part for his apparent financial acumen, argued that under his leadership, New Jersey had improved education and expanded health care for children and families. Including the proposed budget, Corzine said, his administration will have provided nearly $7 billion in direct property-tax relief - more than any governor before him.

Corzine said he had made tough choices such as eliminating the pork-barrel spending known in New Jersey as "Christmas tree grants," paying more into state pension funds than the past several administrations combined, and no longer raiding the unemployment trust fund as an easy source of cash.

"I may not have always done what was popular in the moment," he said. "But you can be damn sure I have always done what I thought was right."

Around the country, most states are struggling to balance their budgets. In Pennsylvania, Gov. Rendell has proposed new or increased taxes on cigarettes, smokeless tobacco, and natural-gas reserves and suggested allowing counties to increase sales taxes by up to 1 percentage point.

In New York, Gov. David Paterson has proposed 137 new or increased taxes and fees, on top of $9 billion in spending cuts.