N.J. uses earmarked money to plug budget holes

In 1997, New Jersey lawmakers voted to add a $1 charge to all motor-vehicle fines. The idea was to raise money for a popular cause: buying bulletproof vests and other body armor for police.

Last year, the program doled out $4.1 million to 545 state, county, and local law-enforcement agencies.

But in recent months, the Corzine administration has pulled $5 million - more than a year's worth of grants - from the program's $7.9 million reserves to help patch holes in the state's budget and avert further cuts in other areas.

Similarly, businesses pay $1 per employee into the Catastrophic Illness in Children Relief Fund, which helps parents facing extraordinary medical bills. Recently, $5 million of those fees were rerouted to other areas of spending, depleting most of the program's surplus.

In these cases and others, state leaders tied fee increases to sympathetic causes. But in the budget that ends this month and the one beginning July 1, hundreds of millions of dollars from "dedicated" funds are being put to other uses, drawing fire from some lawmakers and from groups that rely on the accounts.

"When you've made a commitment and there's a tax in place for funding certain vital functions in the state, and you take that away, I think you break a trust," said Sen. Jeff Van Drew, a Cape May County Democrat who said he would oppose a budget that included these types of fund diversions.

But as Corzine administration officials face a historic collapse in state revenues and make cuts in many areas, including health care and help for the disabled, they say the shifts prevent even uglier choices in fiscal years 2009 and 2010.

"We were able to avoid even more painful cuts," Treasury Department spokesman Tom Vincz said.

In the case of the body-armor and catastrophic-illness funds, Treasury spokesman Tom Bell said both programs still would have enough money to meet demands. In recent years, they collected more than they spent and had surpluses.

Diverting fees from their intended uses and draining reserves are traditional New Jersey practices employed by both Democrats and Republicans. Gov. Corzine drastically cut back such moves early in his term, but as the economy has declined, he has pulled money from some accounts to fill gaps in others.

Transfers in amounts ranging from $2 million to $75 million will be part of votes set for tomorrow.

Critics in both parties say the money shifts - often characterized as "raids" - helped create the state's financial morass. They deplete reserves that may be needed later and usually serve as short-term fixes that leave holes in later budgets.

The most glaring example is New Jersey's unemployment fund, which helps workers when they lose their jobs.

For years the program, supported by taxes on businesses and employees, was flush with cash. Lawmakers and governors tapped it for $4.7 billion, using the money for other spending. But when the economic crisis struck, the program was too depleted to meet rising unemployment claims.

Amid an already difficult budget year, Corzine had to find $380 million of state money to shore up the fund, the federal government poured in an additional $207 million in stimulus aid, and businesses are facing a $350 million tax hike to bolster the program.

"Now when we need [a surplus], we don't have it," Van Drew said.

While plugging the unemployment hole, Corzine is calling for pulling $125 million from the state's disability program, another oft-raided account funded by businesses and employees. It pays benefits when workers are out with injuries.

The administration could not provide an exact figure of how much money was being rerouted in the 2009 and 2010 fiscal years. Budget documents show at least $280 million of diversions, although some critics would put the number higher.

The transfer from the catastrophic illness fund will take money from a program that gave out $7.1 million to families facing massive medical bills in fiscal year 2008, helping them with awards ranging from $690 to $100,000.

Among other diversions: $4 million is coming out of a pot of money meant to help train emergency medical technicians that has been funded by a surcharge on moving violations. An additional $7 million is coming out of a recycling fund that is funded by a litter tax.

Builders pay into a program that offers improved warranties on new homes, but $17 million is being taken from the account. It still would have a surplus left over, according to Vincz.

Every time a driver registers a car in New Jersey, he or she pays an extra $4 on the premise that the money will help replace the state's aging Medevac helicopters and fund more state trooper classes. The $4 charge, one of a bevy of registration fees, was boosted in 2006 when lawmakers said the existing $1 charge didn't generate enough money.

Since then, however, not a single new helicopter has been purchased. About half of the $87 million drivers have paid in Medevac and trooper fees has been shifted to other areas.

Drivers are projected to pay $28 million in higher fees in the new year, but a part of the money again will be directed to other causes, including other police vehicles. A first payment on a new helicopter is planned in the coming year, but there is no money for a new trooper class.

Many dedications, including those for body armor, the illness fund, and others, were created long before Corzine took office. The carve-outs reflect previous officials' efforts to guarantee support for certain causes. If strictly followed, however, they constrain the options for Corzine and future leaders.

Administration officials have said they have tried to spread the budget pain. Nearly every area of government is being slashed.

"Why should Shore protection be held at a higher standard than the developmentally disabled or other programs?" Treasurer David Rousseau asked in March.

He was responding to criticism that money for beach replenishment, funded by realty-transfer taxes, would dip below the minimum required by law. The amounts for tourism, the arts, and cultural and historic programs also will drop below the amount promised when officials approved a hotel tax in 2003, although accounting maneuvers will mask the cut.

Assemblyman Joseph Malone (R., Burlington) said lawmakers have become "pathological liars."

"Give me your tax dollars today, and I'll promise to do something for you tomorrow, and that promise is never kept," Malone said.