April 10, 2006


The Mob That Whacked Jersey: How rapacious government withered the Garden State (Steven Malanga, Spring 2006, City Journal)

[T]oday Jersey is a cautionary example of how to cripple a thriving state. Increasingly muscular public-sector unions have won billions in outlandish benefits and wages from compliant officeholders. A powerful public education cartel has driven school spending skyward, making Jersey among the nation’s biggest education spenders, even as student achievement lags. Inept, often corrupt, politicians have squandered yet more billions wrung from suburban taxpayers, supposedly to uplift the poor in the state’s troubled cities, which have nevertheless continued to crumble despite the record spending. To fund this extravagance, the state has relentlessly raised taxes on both residents and businesses, while localities have jacked up property taxes furiously. Jersey’s cost advantage over its free-spending neighbors has vanished: it is now among the nation’s most heavily taxed places. And despite the extra levies, new governor Jon Corzine faces a $4.5 billion deficit and a stagnant economy during a national boom.

Unless Garden State leaders can stand up to entrenched interests—and the signs aren’t promising—the state may find itself permanently relegated to second-class economic status. New Jersey “could become the next California, with budget problems too big to solve without a lot of pain,” warns former Jersey City mayor Bret Schundler. “The old way of raising taxes to solve budget problems has been tried, and it’s done nothing but make things worse.” [...]

The latest installment of this ruinously expensive mess is a court-ordered state effort to rebuild dysfunctional urban school systems. In a series of decisions beginning in the 1990s, the New Jersey Supreme Court has forced the state to boost spending dramatically in city schools. Going beyond fiscal equity cases in other states, which demand that prosperous suburban residents contribute more to poor urban school systems, the Jersey supremes mandated that each district be able to spend as much as the state’s richest jurisdictions—up to $18,000 per pupil. The court also required the state to establish universal preschool and to embark on a $2 billion school building program.

Once the courts decreed this modern-day exercise in taxation without representation, union-backed pols piled on. In 2001, the state legislature inflated the school construction program to a budget-busting $8.6 billion—a gift not only to the education lobby but also to the construction unions and other tax eaters. To evade voter approval (which the state constitution requires) for the lavish spending, the legislature created a largely unaccountable bond-issuing authority, a constitutional dodge that Jersey’s courts blessed. The patronage-ridden authority proved so corrupt that it quickly spent all its borrowed money, while completing only half of its building projects, leaving taxpayers under court order to pour in yet more funds.

By the 2003–04 school year, state taxpayers, in a colossal income transfer, were handing over a jaw-dropping $4 billion annually to support education spending in Jersey cities. Taxpayers from elsewhere in the state footed fully 90 percent of Camden’s education bill, while the city itself contributed a mere 2 percent, says the school reform group EducateNJ. In Trenton, state taxpayers paid 82 percent of the education bill; local sources ponied up just 8 percent.

Yet even as Garden State taxpayers have showered nearly $30 billion on city schools over the last decade, neither the courts nor the officials overseeing the urban school districts have demanded fundamental reform of the school bureaucracies, let alone innovative solutions like vouchers. [...]

It’s hard to overstate the might that public-sector unions—the teachers’ union, above all—now wield in New Jersey. With 62 percent of its state and local workers organized, New Jersey has the second-highest level of public-sector unionization in the country, behind only New York, according to unionstats.com.

The unions have wielded their clout to win among the richest benefits and highest pay of government workers anywhere. Teachers earn an average of $56,000 a year, with some of the highest salaries going to teachers in the state-financed urban districts. Not only are health and pension benefits for state workers—including the possibility of retiring at 55 with cost-of-living pension adjustments for life—plusher than the private-sector norm; on average, they’re 10 to 15 percent above what other state governments grant workers. Last year, pension and health benefits cost the state $2.5 billion, or 9 percent of the total budget. By 2008, the tab will grow to nearly $5 billion, and by 2010, $6.7 billion—21 percent of the projected state budget.

The unions ferociously protect their spoils. The New Jersey Education Association was the prime mover of a $300,000 ad campaign opposing a thus-far-unsuccessful effort by taxpayer groups to call a constitutional convention to fix Jersey’s tax woes. Two years ago, facing taxpayer pressure, the state legislature took up a bill to limit annual school spending hikes to 2.5 percent, or the rate of inflation, whichever was less. The teachers’ union leaned on legislators and got the word “less” changed to “greater,” inverting the bill’s intent. The Communications Workers of America, representing government employees, strongly backed a recent $1 billion increase in taxes on Jersey businesses, running radio ads demanding that firms pay their “fair share.”

All the union- and court-driven spending and misspending has burdened New Jersey citizens and firms with heavy taxes and led to a multi-billion-dollar redistribution of income from suburban counties to the state’s urban core—and from private to public employees.

Ideally the new Democratic governor would do a Nixon-to-China and lead the battle against the public employee unions. Politics though is seldom about the ideal.

Posted by Orrin Judd at April 10, 2006 8:50 AM

Just as people in the western states today complain about Californians moving out of state and then bringing both their bad habits and their failed ideas about governing with them, New Jersey went from a state that benefitted from not having New York's high taxes and bloated government to be a carbon copy of the Empire State, except with a lower sales tax to attract shoppers.

But unlike California, which benefits from size and ownership of 800 miles of Pacific coastline -- if you're moving out of state but want to stay in the general area, it's either 350 miles from the SoCal urban center to Vegas or Phoenix -- New Jersey is a small enough state that if taxes and other costs get particulalry onerous, people have the option of either Connecticut, eastern Pennsylvania or even the middle Hudson Valley/Catskills region of New York to live in. New Jersey did well for over 50 years by being not New York (or not Philadelphia). If things become the same or worse there and you still have to live or run a business in the region, why bother with the copy when it's just as easy to suffer through the originals.

Posted by: John at April 10, 2006 9:28 AM

If Detroit were a state, it'd be New Jersey.

Liberalism is a gulag.

Posted by: Palmcroft at April 10, 2006 9:39 AM

As John says, NJ is an unusual state, in that one of the mainstays of its economy is supplying labor to NYC. That makes the state less sensitive to bungling and looting by its own administrators, as long as New York's economy stays strong.

Also, the strong housing market plays a part.
As long as people feel more wealthy, they'll put up with increasing taxes.

Once that market stagnates, or even declines, and people start feeling that they're getting poorer every year, then there will be a revolt.

It'll be a big issue in the '09 gubernatorial campaign.

Posted by: Michael Herdegen [TypeKey Profile Page] at April 10, 2006 10:47 AM

Yes, it is a gulag, and it's my view that we are too confident if we believe that "they can't win."

On any given day, for every article that points to our version of the "end of history" there is another that shows us leading toward theirs (IMO, a combination of Brave New World and Cambodia's killing fields for those who don't toe the line)

This post talks about moving to other states. What happens when there is no where else to move? What happens when the ultimate means of self defense has been outlawed?

Posted by: Bruno at April 10, 2006 10:51 AM

Latinos will fill the gaps in places like NJ and drag the state back to the Right.

Posted by: oj at April 10, 2006 10:55 AM

Why would Corzine fight the public employee unions when he can have affairs with their leaders instead?

Posted by: pj at April 10, 2006 11:24 AM

I commute to work in NYC, and therefore very little of my income tax goes to NJ. Just wondering if the author or anyone knows of any study on just how much NJ "loses" this way. Naturally, NJ picks up on PA residents working in NJ, but it's probably not even close to the money "lost" to NYC and Phil. Just annoys me that most of my taxes go to NY/NYC which provides me with services for only part of the day.

Posted by: a. moral at April 10, 2006 8:21 PM

Despite all of this documented Dem incompetence the GOP can't make any headway in the state. Perhaps Kean Jr will break the trend in the fall.

Posted by: AWW at April 10, 2006 8:28 PM

I'm a dental student from NJ, (studying in MD at the moment) and I used think I'd like to go back there to practice, but the way things are going I don't think that's very likely. And Malanga is dead on about the corruption. It's not merely that they waste it union whateverver they want or giving jobs to their friends (although that's bad enough). Huge amounts of the money is simply stolen outright. I don't know how many timese I saw articles saying things like such and such school district (or whatever other government agency it might be) in trouble because it finds $10 ora $100 million missing. Not spent poorly, not hidden away somewhere due to the complexity of the accounting system (or really the idiocy of those using it), but simply gone. And they always say 'well, as you can see the books are a complete mess no wonder no wonder no one can figure out where the money went,' but that's not true. If it was simply a matter of bad accounting procedures a real accountant could figure out what happened to the money. What really happens is that everybody involved simply puts some of the money into their own bank accounts and leaves the records a mess to make it difficult to figure out what they did. And forget about crusading reporters. In all the time I lived in NJ none of the papers would ever say that there was anything more than a little influence for campaign donations going on. My dad tells me that the newspapers have finally caught on somewhat since there's practically a new multimillion dollar scandal every week. The way things are going our next governor will probably campaign on subsidizing bribes for poor inner city people (sexual favors also accepted).

Posted by: Dave at April 11, 2006 7:08 PM