TRENTON, New Jersey, May 9, 2015 − The state of New Jersey is fully expecting a May surprise, and I am not sure I can say that I am surprised. The good thing about this surprise is that it’s the gift that keeps on giving. It accomplishes this by making the current year’s budget surplus trickle over into next year’s windfall.
The FY2016 budget boasts a 27% increase in opening surplus from the previous year. It spends less than the FY2005 budget, which appropriated $28 billion in state assets and $9.1 billion in federal assets by a total of $4.2 billion.
Currently, one of New Jersey’s looming deficit issues is its pension system. The usual solution of raising taxes is not going to solve that one. The reason: raising rates does not ensure that people will pay or that they can pay.
Democrats ran headlong into this issue for many successive years, proclaiming one cure-all bonding gimmick [Lance v. McGreevy] after another, even going so far as to sell the New Jersey Turnpike. Or at least attempted to do so. I am not sure what other assets they would have lost if Chris Christie hadn’t finally stepped in, cutting total spending and keeping a lid on taxes.
Now the state is collecting more tax revenue than anticipated and spending less than before Christie took office. As a reminder of this, note that $4.2 billion mentioned above is almost double the current pension deficit payment.
A quick reading of the tea leaves demonstrates Christie’s ability to exploit the power of a strong central government backed by a keen conservative policy agenda to steer the state toward a more secure fiscal structure in the future.
New Jersey is a small state, and its state revenue accumulates faster when future expectations are optimistic. Such optimism typically occurs when a favorable economic climate becomes more pronounced. Further, the state government will always remain funded because it has the statutory ability to levy taxes.
In general, however, government does not generate a service or product for profit. While the service or services they provide can be invaluable on some level, the profit-driving structure or mechanism of the private sector produces far better outcomes at all levels.
From housing to education, the intense competition inherent in private industry simply provides better quality at less cost. That goes all the way up the price chain. You still get a better deal all around, even when considering a high end price structure.
Examples: The state can fund rehabilitation projects in Camden. It can offer voucher programs for kids in poorly performing school districts. It can even move people to and from their jobs at a subsidized price.
But while all these benefits are good to great, taxpaying citizens want to see a genuine return on their investment. If they have to calculate the escalating cost of these services without the ability to increase their own current income levels, their individual prospects are viewed as being dismal.
Any rational person calculates his or her survival with some regularity, depending on a number of variables, generally those focused on basic human needs. Furthermore, the science of anthropology teaches us that from time immemorial, people will move from region to region to avoid famine. In the same vein, they will migrate to areas that have a stable social climate and better economic welfare for the average citizen.
Providing both is what the GOP is all about.
It is not against the law to make an effort to avoid an unjust taxing scheme. No matter what the law says, there are very few situations in which the government can tax an individual, be it a person or a corporation, without permitting them some form of recourse.
That citizen propensity to seek better outcomes is not measurable, but it does exist. It may take one individual 2 years to relocate to a new state. For others, it may take just a simple phone call to their accountant and the submission of a change of address form to their post office.
That said, there is still good news for New Jersey while Christie is Governor. On a personal note, my property taxes have gone down under his administration. I rarely check on the number, because my taxes are rolled into my mortgage. But I had the need to examine local tax rates recently, and they went down in Winslow Township from $29 million to about $28 million. That means more money in my pocket, my savings account, or both.
That it also means is that I may eat out a bit more, or maybe take a few more trips to Starbucks than before. What matters most, however, even as my own situation improves, is that government is still functioning and providing services.
Municipalities now share services and find other creative ways of cutting costs, since their pocket book − essentially my pocket book − is becoming focused on my future economic needs instead of being spent on a hopeless cycle of estimating the costs piecemeal and accordingly raising the year-over-year (YOY) budget endlessly, which has recently been proved unnecessary.
Current New Jersey State Treasurer in the Christie administration, Andrew P. Sidamon-Eristoff, is in a uniquely familiar position this year as he has been in previous budgets. His mandate to cut taxes is resulting in more scrutiny on the reasoning behind the constant pressure in the state to raise revenues.
In fact, if raising tax rates at a time the Federal Reserve is still liquidating still happened to be a good idea, the United States would not still be the number one economy in the world.
Constantly raising taxes is simply not prudent. No economist would willingly recommend it. Even New Jersey’s State Senate President, Democrat Steve Sweeney, knows that. Or at least, he should know that. He is arguing over a funding deficit that is less than 10 percent of the total asset, 2.75% to be exact. The Federal funds rate currently stands a 0 .13%. The current interest climate is so low that you can actually profit from running a deficit.
This demonstrates that if you loosen the fiscal reigns on American commerce and ingenuity, both commerce and individuals will thrive. As one consequence, no matter what the polls may say today, New Jersey taxpayers today are no longer putting their trust the kind of people who invested with Jon Corzine and Bernard Madoff.