Governor Christie Declares "New Jersey on Edge of Bankruptcy"

New Jersey is in a state of fiscal emergency. Expect to see more states follow suit. Please consider Christie to freeze $1.6 billion in NJ spending.

Gov. Christie today declared that New Jersey had veered to the edge of bankruptcy and ordered a broad array of state cuts in an effort to make up a $2.2 billion deficit in the current budget amid falling revenues.

Christie froze aid to more than 500 school districts and public colleges and universities, ordered the end to several state programs and the Office of Public Advocate, and seized unspent money across state government.

"Today, we come to terms with the fact that we cannot spend money on everything we want,'' Christie told a special joint session of the legislature. "The days of Alice in Wonderland budgeting in Trenton are over.''

The state's sales tax revenues are 5.5 percent below projections, corporate business tax receipts are down 8 percent, both below what had been planned under former Gov. Jon Corzine's administration, Christie said.

Christie also announced the state would not contribute $100 million toward pensions costs and signaled that he would push for massive pension restructuring.

Christie highlighted the benefits for unnamed individual teachers as an example: a retired teacher who contributed $62,000 in total toward her pension who would be expected to receive $1.4 million in pension payments and $215,000 in medical benefits over the rest of her life.

"Is it fair for all of us and our children to have to pay for this excess?'' Christie said.

Christie said the state would have to pay $7 billion a year to make up unfunded pension and medical liabilities. ""We don't have that money. You know it and I know it,'' Christie said.

Hello Alice, Wonderland Accounting Is Over

Hello New Jersey. "Wonderland" accounting is over. Hello public teachers and unions, you better be prepared for the results.

Here is a snip of the Text of Governor Christie's Speech on the State Budget. Please read the snip, but I also encourage you to read the entire speech.

Today, we must make a pact with each other to end this reckless conduct with the people’s government. Today, we come to terms with the fact that we cannot spend money on everything we want. Today, the days of Alice in Wonderland budgeting in Trenton end.

Today, we are going to act swiftly to fix problems long ignored. Today, I begin to do what I promised the people of New Jersey I would do. Today, I begin to give them the change they voted for in November.

The state cannot this year spend another $100 million contributing to a pension system that is desperately in need of reform. I am encouraged by the bi-partisan bills filed in the Senate this week to begin pension and benefit reform.

These bills must just mark the beginning, not the end, of our conversation and actions on pension and benefit reform. Because make no mistake about it, pensions and benefits are the major driver of our spending increases at all levels of government—state, county, municipal and school board. Also, don’t believe our citizens don’t know it and demand, finally, from their government real action and meaningful reform. The special interests have already begun to scream their favorite word, which, coincidentally, is my nine year old son’s favorite word when we are making him do something he knows is right but does not want to do—“unfair.”
Let’s tell our citizens the truth—today—right now—about what failing to do strong reforms costs them.

One state retiree, 49 years old, paid, over the course of his entire career, a total of $124,000 towards his retirement pension and health benefits. What will we pay him? $3.3 million in pension payments over his life and nearly $500,000 for health care benefits -- a total of $3.8m on a $120,000 investment. Is that fair?

A retired teacher paid $62,000 towards her pension and nothing, yes nothing, for full family medical, dental and vision coverage over her entire career. What will we pay her? $1.4 million in pension benefits and another $215,000 in health care benefit premiums over her lifetime. Is it “fair” for all of us and our children to have to pay for this excess?

The total unfunded pension and medical benefit costs are $90 billion. We would have to pay $7 billion per year to make them current. We don’t have that money—you know it and I know it. What has been done to our citizens by offering a pension system we cannot afford and health benefits that are 41% more expensive than the average fortune 500 company’s costs is the truly unfair part of this equation.

The only principled path in light of these mountainous challenges is this—take these reform bills, make them even stronger and put them on my desk before I return here on March sixteenth for my budget address. And on this you have my pledge—unlike in the past, when you stood up and did what was right, this governor will not pull the rug out from underneath you—I will sign strong reform bills.

But until that reform is enacted, we cannot in good conscience fund a system that is out of control, bankrupting our state and its people, and making promises it cannot meet in the long term.

The biggest category of reductions will likely be the most controversial.

School aid is a large proportion of New Jersey’s budget – especially of the amount which has not yet been spent in FY 2010. So we cannot put our budget in balance without putting some school aid in reserve.

The total amount of aid to be withheld is $475 million. I know this solution will not be popular. More than 500 school districts will be affected, and more than 100 districts will lose all state aid for the remainder of the year.

But action is required. It is late in the fiscal year. The irresponsible budgeting of the past, coupled with failed tax policies which lie like a heavy, wet blanket suffocating tax revenues and job growth, have required these extraordinary steps. Despite this bold action, remember, we have not taken one dime from classroom instruction, not

Number One Priority of Unions is Whining

The teachers will whine, and so will the public transportation workers. All unions ever do is whine. They will whine about fairness. They will whine they are shouldering the blame. They will march and protest and whine more.

Whining is the number one priority of unions.

Public Unions are Public Enemy Number One

The reality is public unions are public enemy number one. Christie did not go far enough. He should have stated a goal of totally abolishing the unions.

Nonetheless, Christie's speech makes me want to stand up and salute. Someone finally had the courage to lay the blame for state fiscal crises smack where blames belongs, on public unions and political hacks willing to buy union votes.

Christie's proposal is just a start. The job is not over until every public union in the country is abolished along with their overbloated pension plans.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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