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Schundler and McGreevey play a balancing act
Originally appeared in the Star Ledger on 10/18/01
With the economy slowing and state tax revenues falling, the candidates for governor are defending their promises for new spending -- while each claims the other guy's plans would bust the budget.
Republican Bret Schundler says he can give tax breaks for private schooling, provide matching funds for retirement savings, eliminate tolls on the Garden State Parkway and increase spending for police, the arts and special education -- all while promising not to raise taxes.
Democrat Jim McGreevey says he sees no need to raise taxes to bankroll his plans to bring more health clinics and reading coaches to needy schools, pump money into cancer research and expand affordable housing programs, develop an anti-terrorism task force and buy back bonds to reduce the state's debt load.
So, how are they going to pay for these proposals when the state's revenues are falling rapidly, threatening to wipe out a $1 billion surplus?
Schundler is counting in part on an economic rebound, while McGreevey says many of his proposals won't cost an extra dime. Both say they will cut wasteful spending.
And each man warns that his opponents' ideas will lead to fiscal chaos.
Schundler insists McGreevey will raise taxes if elected.
"If you're a taxpayer, meet your new worst enemy," campaign manager Bill Pascoe said.
McGreevey's camp contends that Schundler is making promises the state can't keep.
"Desperate tactics by a desperate candidate," said state Sen. Joseph Roberts (D-Camden), chairman of the Democratic State Committee.
Each candidate has put a price tag on his own tax and spending proposals -- and on his opponent's. Not surprisingly, the assessments vary widely:
Schundler says his plan would cost $3.4 billion over four years; McGreevey says Schundler's first year alone would cost $3 billion.
McGreevey says his plan would cost $388 million a year; Schundler argues it would cost more like $1.5 billion.
In fact, it is virtually impossible to determine the exact cost of a program until it is implemented, or at least put in the form of legislation with help from state fiscal experts.
But strip away all the forecasting and conjecture and one thing remains clear: Whoever becomes governor in January will carry a slew of campaign promises into tough financial times.
"When you couple the downward trend in the economy with the possible disappearance of the budget surplus, it's not going to be a pretty picture," said Henry Coleman, who heads the Rutgers University Center for Government Services.
Signs have emerged in recent days that New Jersey may soon join a growing list of states facing large budget shortfalls in a shaky post-Sept. 11 economy. State officials say tax revenues in September were $82 million below expectations, raising concerns of a budget crisis once the new governor takes office. One estimate has the state facing a budget shortfall of up to $1.5 billion by June 30.
The problem for McGreevey and Schundler, Coleman said, is that neither has firsthand knowledge of the current state of New Jersey's finances -- a handicap he likened to "making policy in a vacuum."
In reality, Coleman added, it will be tough for the next governor to increase spending without raising taxes.
"If you're going to have trouble sustaining what you're doing already, it's going to be very difficult to pursue new initiatives."
Nonetheless, both candidates are proposing a bevy of new programs.
Schundler believes the state is heading into a "brief recession" that will be over by July 1, the start of the next governor's first budget year -- as long as the government avoids raising taxes. By then, he figures, tax revenues will be on the rebound, and he will be able to go ahead with his spending plans.
According to his campaign's latest estimates, his plan would cost $3.4 billion after four years. But he argues that revenues would increase by $5.5 billion by the end of his term.
McGreevey, who until this week avoided putting a price tag to his campaign proposals, said they would cost $388 million per year. However, McGreevey says $100 million of that, for a new Paid Family Leave Law, would come out of the unemployment insurance fund, not the state budget; his cancer program will be funded by New Jersey's portion of the national tobacco settlement; and his anti-terrorism task force would not require new spending.
The Democrat also said he expects $78 million in new revenue. The largest chunk, $55 million, would come from eliminating the NJ Saver property tax rebate for 95,000 taxpayers who earn more than $200,000 per year.
While taking pains to explain how their own programs can be paid for, each campaign puts the worst possible spin on its rival's proposals.
Roberts held a news conference Tuesday to lambaste Schundler's spending plans as irresponsible.
"He owes the people of New Jersey an explanation or an apology," Roberts said.
The Republicans, meanwhile, say the one promise McGreevey has not made is to pledge that he won't raise taxes.
"He's writing checks on our bank accounts," said Pascoe, "and there's only going to be one way he can make good on them -- with a massive tax increase."
Staff writer Josh Margolin contributed to this report.
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