Monday, February 8, 2016

New Jersey was bad before recession

In any review of the nation's worst public-policy practices, New Jersey can usually expect a prominent mention - so much so that residents could be forgiven for ignoring such dubious honors.

New Jersey was bad before recession

Governor-elect Christopher J. Christie will have a lot on his plate with New Jersey´s economic problems. (ELIZABETH ROBERTSON / Staff Photographer)
Governor-elect Christopher J. Christie will have a lot on his plate with New Jersey's economic problems. (ELIZABETH ROBERTSON / Staff Photographer) ELIZABETH ROBERTSON / Staff Photographer


In any review of the nation’s worst public-policy practices, New Jersey can usually expect a prominent mention — so much so that residents could be forgiven for ignoring such dubious honors.
But the latest example, in a report by the Pew Center on the States, makes some illuminating points about the Garden State’s fiscal quagmire.
The report, “Beyond California: States in Fiscal Peril,” measures others against the Golden State as the gold standard for fiscal apocalypse. While California is “in a league of its own,” Pew ranked nine other states as playing at the triple-A level — just shy of the big leagues of budgetary disaster. It shouldn’t surprise anyone who’s been paying attention that New Jersey is among them.
All that passes for a bright side is that seven states were judged to be worse. Of course, that means 42 are looking better. (Pennsylvania was ranked among those farthest from California-style calamity.)
New Jersey’s weaknesses are troubling in that they have relatively little to do with the recession. Rather, decades of bad management of state finances are mostly to blame. The report quotes the Center for Budget and Policy Priorities’ Jon Shure, a longtime Trenton watcher, comparing the recession in New Jersey to “a tornado hitting a house that was already falling.”
Some of the states profiled have taken the recession’s hardest punches — soaring foreclosure rates in California and Florida, for example, or Michigan’s auto industry collapse. But New Jersey’s foreclosure rate and its rise in joblessness have been less severe than the nation’s.
The state did suffer disproportionately from Wall Street’s contraction, but financial industry woes weren’t enough to put New York or Connecticut on the list. Unlike the troubled states in the West and Midwest, New Jersey isn’t part of any regional cluster of concern.
Its problem, as Pew notes, is a structural imbalance between what it spends and what it collects. And there’s little room to raise more revenue: Taxes on property, income, businesses, and sales are all at or near the national ceiling.
Instead of fixing the imbalance, politicians from both parties have engaged in irresponsible borrowing for years, contributing to a per capita debt that’s almost unmatched nationwide. Paying the interest puts still further pressure on the budget.
If you’re a governor-elect named Chris, it might be particularly dispiriting to learn that Gov. Corzine has taken many difficult steps toward righting the state’s finances — and yet “barely made a dent,” Pew says. Corzine performed the remarkable feat of reducing state spending, eliminated fiscal gimmicks, limited borrowing, and pushed unsuccessfully to retire state debt with highway toll increases.
Probably the most tangible immediate result of all this was Chris Christie’s victory earlier this month. In some ways, Christie is well positioned to meet these daunting challenges. He was elected on vague promises to bring upheaval to Trenton, and that gives him considerable leeway to do so. He will need it.
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