Whatever the Guv might tell an adoring media, the so-called Jersey Comeback looks much more like a Jersey Throwback than true reform.
As speculation builds around Chris Christie's role in the upcoming fall presidential campaign, New Jersey residents have been treated to what the governor calls his "Endless Summer Tax Relief Tour." Barnstorming the state, Christie has been slamming so-called "Corzine Democrats" in the legislature for refusing to enact his proposed income tax cut. It's part and parcel of his "Jersey Comeback" narrative, which the governor recites ad nauseum in front of admiring national audiences.
The Jersey Comeback story goes something like this: Having inherited a state on the brink of bankruptcy, Christie cut state spending; held the line on taxes; fixed the state's unfunded pension liability; and took on the vested interests that have so long made Trenton a den of dysfunction. In short, tough-guy Christie took a bat to the bad guys and saved hard-working taxpayers from economic ruin.
It's a great story, made more powerful by an unpopular foil (Jon Corzine) and a deferential national press corps. It also happens to be completely untrue. Christie certainly brings an unusual disposition to the governor's office. But in every other way, he has proven just as unwilling (or unable) as his predecessors to confront the structural barriers to meaningful reform. And that is the real tragedy of his governorship. First, let's dispense with a few myths.
Myth 1: Budget cuts. Christie claims to have cut spending. He has not. Jon Corzine's last budget came in at $28.84 billion (it was originally appropriated at $28.9 billion, but mid-cycle cuts made by both governors brought down spending by roughly $100 million). The 2013 budget, which Christie signed into law last month, is $31.7 billion. In fact, all three of Christie's budgets have been larger than Corzine's last one.
Myth 2: Tax cuts. Christie consistently claims that he held the line on taxes. But under Christie, the average net property tax bill has increased by 20 percent, largely because of the governor's deep cuts to the state's direct rebate program. At the same time, the state sales and income tax rates remain fixed at precisely the same levels as under Corzine.
Myth 3: Unfunded pension liabilities. Christie enacted important reforms that increased both the rate of employee contributions and the age at which government workers may collect their full pensions. But he imitated prior governors by drastically under-paying the state's actuarially required contribution (ARC) to the pension fund. Over four years, the Corzine administration underfunded the system by $6.4 billion. In just three years, Christie has underfunded it by roughly $8.2 billion. And he still has a year left to go. True, Christie enacted new legislation making it impossible for future governors to short the ARC. But that law doesn't come into full effect until the end of the next gubernatorial term. That's called kicking the can down the road.
To be clear, none of this makes Christie worse than most New Jersey governors. But if the governor's definition of a "Corzine Democrat" is someone who increases spending, raises taxes, and incurs long-term debt, then Christie is the biggest Corzine Democrat of them all.
The truth is of course more nuanced than that. Though he has skillfully cultivated a reputation for confronting tough problems, Christie has proven just as unwilling as his predecessors to unravel the thick web of local government that makes the state such a frustrating place to live.
New Jersey has 21 counties, 565 municipalities, 603 school districts, and countless other units of government, each with its own taxing and spending authority. Because the delivery of services is so decentralized, New Jersey residents pay a heavy property tax burden at the local level to fund a highly inefficient and redundant system.
As my former boss, Jon Corzine, used to explain the problem: New York City and New Jersey have roughly the same population. New York City has one police department; New Jersey has over 500. That's a lot of police chiefs and squad cars. That's why, in 2009, New Jersey had more police per 10,000 population than every state except Louisiana and Washington, D.C. That's why, in New Jersey, the average police salary is over $90,000 -- the highest rate of pay in the nation. In more than 100 towns, the median police salary is in the six figures.
Police are just one example, and it would be grossly unfair to lay the problem solely at their door. Local governments employ tens of thousands of non-uniformed employees and dole out contracts to lawyers, engineers, accountants, insurance brokers, and miscellaneous professionals. The costs add up quickly, and there is no economy of scale.
This year residents will pay about $21 billion in state income, sales and corporate taxes. But they will also pay $25 billion in local property taxes, the proceeds of which are divided among their home counties, municipalities, and school districts. Christie's tax cut plan would award each resident a state tax credit against his state income taxes equal to 10 percent of his property tax bill (capped at $1,000). If you pay the state median property tax of $7,519, you get a credit on your New Jersey income taxes equal to $751.90.
The problem is that Christie is playing the same game of whack-a-mole as every New Jersey governor in recent history. The state devotes about 40 percent of its total budget to offsetting local property taxes, either directly (through rebates to homeowners) or indirectly (through cash transfers to school districts, counties and municipalities). Christie's plan would do nothing to reduce the aggregate property tax levy, but it would diminish the state's income tax collections. Less money in the state's coffers means less money to transfer to towns and school districts, and less money for property tax rebates. Your income tax bill just went down, but your property taxes went up to compensate for the loss of state aid. Corzine and Christie each placed caps on the rate that local governments can raise property taxes each year. But certain costs are exempt from the cap, blunting its effectiveness.
With no appetite for a real fight, Christie has squandered an opportunity to build the kind of platform on which presidential campaigns are launched.
The only way to reduce the tax burden in New Jersey is to crack open the system of home rule, centralize services at the county level, and phase out tens of thousands of redundant public sector jobs and contracts. Everybody knows it. Like his predecessors going back at least two decades, Christie has been unwilling to confront those with a vested interest in this highly inefficient system: mayors, county executives, and party bosses who control jobs and contracts; public employee unions, whose members have grown accustomed to generous salaries and benefits; and ordinary citizens, who grouse about property taxes but like the comfort and familiarity of home rule.
To be sure, Christie rarely shies away from a fight with public sector unions. But in raising the retirement age and the employee contribution to the pension fund, he is merely playing around the edges. The governor has cultivated close relationships with powerful Democratic political machines in Essex and Camden counties, and with equally robust Republican machines in Ocean and Monmouth counties. These machines exist because they control a surfeit of jobs and contracts. No governor has dared cut off the oxygen to this system. Christie is no exception.
With no appetite for a real fight, Christie has squandered an opportunity to build the kind of platform on which presidential campaigns are launched. In recent decades, as the population has aged and economic output has shifted from (taxed) goods to (untaxed) services, the effectiveness of income and sales taxes has eroded. Perennially strapped for cash, the state has shirked key investments in higher education and infrastructure, choosing instead to prioritize local property tax relief.
Our state has, in effect, become two states. The first is comprised of public employees and contractors who derive their income and retirement security from the state. The second consists of students who pay sky-high tuition at public universities; mass transit riders who shoulder fare increases but receive second-rate service in return; commuters who drive every day on decaying -- and often dangerous -- roads and bridges; and first-time homebuyers who sometimes pay more in property taxes than on their mortgage.
Democrats are strongly disincentivized from challenging the status quo. They count on public employee unions and contractors for a large part of their county and state party funding. In a recent op-ed, a prominent Democratic state senator and gubernatorial aspirant argued that property taxes have increased under Christie because the governor cut rebates and municipal aid. This position misses the point entirely but says much about the New Jersey Democratic party's self-imposed intellectual checkmate. In no small way, the status quo is undermining the progressive project. Democratic politicians are loath to admit this.
A strong Republican governor could have refocused the discussion. He could have compelled us to ask whether we need as much local government as we have, or whether we might prefer to pay less in taxes by centralizing and streamlining the delivery of vital government services. A strong Republican governor could have cornered Democrats into engaging in an honest debate about their own values. Does progressive government mean six-figure police salaries and a multiplicity of contracts for politically connected law firms, or more money for roads, bridges, clean energy, mass transit, and education?
Sadly, New Jersey isn't having that discussion. Governor Christie touts the Jersey Comeback. But in many ways, he's the original Jersey Throwback.
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