The Governor`s Budget Plans

Faced with a $5 billion budget deficit for Fiscal Year 2004, Governor James E. McGreevey outlined a $23.7 billion budget proposal that invests in New Jersey’s children and their education while ensuring that the State lives within its means.

“The budget I present to you today stays true to our core values, demands sacrifices from everyone, and refuses to spend money we do not have. As hard as our decisions have been, there are things we will not do. We are not raising the corporate business tax. We are not raising the sales tax. And we are not raising the income tax…

“As much as we must cut, there is one place where we draw the line and say despite the gravity of the situation, we must make additional major investments. There is no more important investment than our children, their education and their future. We have made the tough choices and the hard cuts elsewhere so we can invest in New Jersey’s public school kids.”

The Governor announced that his proposed budget will provide municipalities with a $200 million increase in state education aid--$100 million towards debt payments for new school construction and $100 million to communities for public education. This $200 million investment in public schools is in addition to the $8 billion allocated in the budget for school aid.

Also, the Governor announced that in spite of funding cuts to colleges and universities, funding for tuition assistance grants will be increased so that any student who received a grant last year will still receive one this year.

The Governor also outlined a plan to overhaul the Division of Youth and Family Services (DYFS), furthering his commitment to improve the troubled agency.

“We have a fundamental obligation to protect those who cannot protect themselves,” said McGreevey. “DYFS is undergoing a structural overhaul to provide more accountability and a renewed focus on its core mission of child protection.”

The Governor also announced that he is demanding accountability from workers, instituting a new decision-making process, and providing DYFS with the necessary funds and resources to do its job.

This includes $5 million so New Jersey can use the State Automated Child Welfare Information System to track children, $14.3 million “Children First” initiative to hire additional DYFS caseworkers, supervisors, and case practice specialists, and $1.4 million to hire family law attorneys in the Attorney General’s office to focus strictly on DYFS and child safety.

In addition to education investments and child welfare reforms, the Governor also made the following announcements in his budget address:
* $18 million towards cancer care and research
* $2 million down payment on AIDS education and prevention programs
* Statewide review of business regulation to make New Jersey more attractive for companies
* Legislation that will bring all the powers for urban redevelopment activities from the NJ Redevelopment Authority and the Housing and Mortgage Finance Agency into one agency
* Streamline the brownfields redevelopment functions that are split between four agencies into the Economic Development Authority.

Making government live within its means:
“This budget has not been easy and it has tested every value that I hold dear. It contains cuts that I abhor and eliminates programs that I support. I have made cuts in every department and to every constituency group. I have done my best to protect the most vulnerable in our society, but this budget will undoubtedly cause difficulties for many citizens.

“Let me be clear. I didn’t run for office to make these kinds of cuts and cause people pain. I take no pride in having to announce these measures. But I also have to be responsible and make sure that we put this state on sound financial footing.”

Cuts throughout state government will be necessary to balance the budget, including a 10 percent cut in the Governor’s Office budget, postponement of the $2.5 million Public Advocate proposal, and no operating subsidy to the Sports and Exposition Authority. In addition, layoffs, downsizing, and attrition will be used to reduce the State payroll by 1,000 workers.

In total, the budget eliminates over 109 programs to save nearly $300 million and cuts 19 programs by 50 percent for an additional $15 million savings. This includes: $100 million in aid to higher education, $38 million by eliminating the Business Employment Incentive Program, $15 million science and technology grants, $53 million in health grants and programs, $32 million in special block grant programs, as well as the entire elimination of state arts programs.

The $200 million increase in school aid will be funded through savings in the NJ Saver rebate program by eliminating eligibility for families earning over $100,000.

In addition to spending cuts, new revenue sources were needed to meet financial obligations including: securitizing $1.3 billion from the remainder of the tobacco settlement, raising the tobacco tax by $.40 cents to raise $80 million, creating a $1 a month fee on cell phones to produce $35 million in homeland security funds, establishing a 7 percent hotel tax to generate $120 million for state, county and local governments, increasing taxes on casino profits and creating a new tax on complimentary hotel rooms.

“The perfect storm” for a $5 billion deficit:
“By any definition, a $5 billion deficit is a crisis, formed by the confluence of three forces that came together to create the fiscal equivalent of the perfect storm. Unlike the movie, this perfect storm is not the product of a random collision of natural forces, but rather the collision of a national economic downturn, 10 years of fiscal irresponsibility, and a federal government that has turned its back on states all across the nation.”

The Governor outlined three key reasons why New Jersey is facing a $5 billion deficit in the FY 2004 budget. First, the Governor emphasized that 46 states nationwide are facing a combined budget deficit of $75 billion—the worst national financial conditions since World War II. In addition, New Jersey was especially hard hit by September 11th and the downturn in the stock market.

Second, the Governor explained that decisions over the past decade to borrow and spend at unprecedented levels undermined sound fiscal policies. Tax cuts left the State with nearly $15 billion less in revenue since 1994, the state budget increased 55 percent of the past eight years, and the State borrowed $2.8 billion.

Third, the Governor indicated that the federal government has failed to meet its financial commitment to the State by denying federal healthcare waivers to New Jersey that other states have already received, as well as $220 million in aid for the PAAD program. In addition, New Jersey has yet to receive hundreds of millions of dollars in assistance for homeland security responsibilities that have been met.

“We have done right by our seniors. It is time for the federal government to do right by New Jersey. We have met our commitments. It is time for the federal government to live up to theirs. Washington must realize that for a real national economic recovery to take hold it must begin in the states. From healthcare to homeland security, the federal government must become a responsible fiscal partner.”

For the text of the Governor's speech, as it was prepared, click here.

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Author: Press Release-Micah Rasmussen