O’Scanlon: “I’m holding my breath waiting for S&P to revise their report.”
Wall Street rating agency, Standard and Poor’s, released an analysis of Governor Christie’s Fiscal Year 2013 budget yesterday that concurred with the reaction that many on both sides of the aisle have had since Christie addressed the legislature on Monday; Where are these revenue numbers coming from?
NEW YORK (Standard & Poor’s) Feb. 24, 2012–New Jersey Gov. Chris Christie
released his proposed $32.15 billion budget for fiscal 2013 on Feb. 21. The
budget remains structurally unbalanced, is built on what Standard & Poor’s
Ratings Services regards as optimistic economic projections to close the
budget gap, and increases New Jersey’s (AA-/Stable) reliance on nonrecurring
revenues.
Christie’s budget projects revenue growth of 7.3% to $31.86 billion. Based upon the state’s projections, revenue would have increased 9%, if not for Christie’s proposed income tax reduction. While S&P concurs that revenue could increase significantly in a strong economy given New Jersey’s high income and progressive income tax structure, the agency doesn’t see a strong economy on the horizon in New Jersey until 2015.
“Due to New Jersey’s high incomes and the state’s progressive income tax
structure, we believe revenues could rebound significantly in a strong
economy,” said Mr. Sugden-Castillo. “However, in our view, the economic
assumptions that underpin the state’s revenue forecast appear to be optimistic based on current and projected economic conditions at the state and national levels,” he added. Through the first half of fiscal 2012, New Jersey revenues grew 3.2% from fiscal 2011, but are still falling 3.2% below budgeted amounts. According to IHS Global Insight Inc., the state will register 1.3% growth in 2012- 16th among all states. Unemployment in the state was 9% as of December 2011. IHS Global Insight projects employment will not return to pre-recession levels until 2015 and projects unemployment to remain above 8% through 2014.
Assemblyman Declan O’Scalon, the Republican Budget Officer in the lower house, said that S&P’s report is so flawed that it resembles a political hit piece more than an objective credit analysis.
“S&P, and other critics, are relying on the year to date short fall in our current revenues compared to budget in order to give their criticism of our new budget credibility,” said O’Scanlon, “They are all ignoring the well known fact that the lion’s share of state revenue comes in during the first quarter of the calendar year.”
O’Scanlon said that New Jersey’s revenue receipts will be right on budget at the end of February and that S&P should have known that.
“I’m holding my breath waiting for S&P to revise their report,” said O’Scanlon, “For two years, the Christie administration’s revenue projections have been spot on. I’m confident they will be this year too.”
Regarding the reliance of non-recurring revenues O’Scanlon said, “13% of Jon Corzine’s last budget relied on so-called one shot gimmicks. The Christie administration reduced that to 4% in the current budget and it’s only 5% in the proposed budget. There are always going to be non-recurring items. We (the Republicans) have brought them down to prudent levels. S&P should be praising that part of our budget, not criticising it.”
S&P also criticized the Christie administration for underfunding the state pension system:
Slightly more than half of the increase ($587 million) in
total spending is tied to pension funding cost increases. Total funding for
defined benefit pensions grows to $1.1 billion in fiscal 2013 from $484
million in fiscal 2012. Defined Benefit Pension funding accounts for 3.33%of
spending in the proposed budget. Despite this significant increase, New Jersey
is only funding 28.6%, or 2/7ths, of its statutorily determined actuarial
recommended contribution, which is different from ARC as defined by GASB.
According to the state, the ARC as calculated by GASB is normally higher than
the statutorily determined actuarial recommended contribution. The
underfunding of the ARC results in continued pressure on its pension system.
“To treat what the Christie administration has done with the pension system as news and a negative ignores recent history and raises suspicions of political motivation on the part of S&P,” O’Scanlon charged, “The Governor’s proposed budget makes the largest pension contribution in New Jersey history and is right on track with the pension reforms and benefit reforms passed last year.”
O’Scanlon defended the 3.7% increase in spending under the proposed budget. “What should be cut? The increased spending on education and municipal aid holds down property taxes. The other increases are for pensions and higher education, which has been neglected for decades. Our educated and sophisticated workforce is our most important asset.”
John Sugden-Castillo, S&P’s primary credit analyst for the report, has not responded to an email asking for comment.
By Assemblyman Declan O’Scanlon, Republican Budget Officer
It’s a simple question loaded with political appeal: “With so many people hurting, and income disparities rising, shouldn’t we ask New Jersey’s millionaires to a ‘fair share’ in taxes?”
OK. What’s a “fair” share?If the current share of state income tax paid by the top 1% of New Jersey’s taxpayers — about 37 percent — isn’t high enough, what is?Would 80 percent be fair?90 percent?Taxpayers earning $1 million pay an effective tax rate this is about four times what taxpayers earning $100,000 pay.When and how will we know when we’ve achieved “fairness”?
Unfortunately, intense partisanship feeding on visceral emotions has made it virtually impossible to have a rational conversation about taxes in America.As a senior member of the State Assembly’s Budget Committee, I think those of us in positions of leadership have a responsibility to do more than stoke emotions, and instead adopt tax policies that generate the revenue needed to support the State’s budget priorities on a fair and sustainable basis.
Piling taxes on the “rich” may be great politics, but it’s lousy public policy.New Jersey already has a “progressive” income tax system which, thanks to high-income households receiving a greater proportion of their income from investments and capital gains, has made our revenue base highly volatile.Additionally increasing our relative reliance on high-income taxpayers will increase volatility, making it more difficult to engage in prudent long-term financial planning.
Most experts believe increased volatility is a problem because fiscal stability is a condition precedent to sound policymaking.Wild fluctuations in revenues fuel an inefficient boom-and-bust approach to budget-making that mismanages popular expectations. The impact of emergent budget cuts on New Jersey residents is regressive – those at middle and lower income levels experience the pain of budget cuts disproportionately since they more often benefit from state programs.
Some editorialists have suggested Governor Cuomo’s recent decision to embrace higher rates for high income New Yorkers should serve as an example for New Jersey.Perhaps they should read the fine print.New York’s “tax increase” is no such thing.New York’s current high rate is 8.97%, the same as New Jersey’s.Instead of letting the rate go down to 6.85%, as scheduled, Cuomo is saying he’ll let the rate fall to 8.82% for taxpayers at $2 million or more, but let the rate fall to 6.85% for taxpayers between $300,000 and $2 million.Everyone in New York will get a tax cut, but folks above $2 million will get less of a tax cut than they had expected.If that’s the standard of “fairness,” maybe the editorialists are right and we should follow New York’s example!Here’s the critical point: the top marginal rate in New York will soon fall below the top rate in New Jersey; that’s not good news for our competitive position.
New Jersey Treasury’s Chief Economist’s review of national IRS data confirmed a statistical connection between tax increases enacted under former Governor McGreevy and an increase of affluent taxpayers who moved out of, or never moved into, New Jersey.The Chief Economist also conducted a survey confirming a significant proportion of tax advisors had discussed moving out of New Jersey with their relatively affluent clients.Contrary to the often inaccurate summaries in the popular press, the study and the separate survey were modest in scope and merely confirmed what we already know: yes, Virginia, taxes matter.
Are they the only competitive consideration? Absolutely not. Infrastructure, regulations, climate, educational levels and other factors play a major role.But there’s no denying taxes figure into investment and location decisions.
Instead of asking “what’s fair?” we should be asking “what’s in our long-term self-interest?”I suggest it’s in New Jersey’s self-interest to pursue policies that support sustainable and growing revenue collections over time.Although New Jersey cannot expect to compete globally on the basis of low taxes alone, we should avoid negative “outlier” status and with it the kind of reputation that once prevented New Jersey from getting into the starting blocks when companies and leaders make site selections.
New Jersey Democrats are suddenly taking an interest in the 13th legislative district according to a normally reliable source familiar with the state wide campaign.
Word is that U.S. Senator Bob Menendezis feeling a bit vulnerable with his weak showing in the FDU poll released this morning and with the possibility that Governor Chris Christie could be the Presidential candidate next year when needs Obama coattails to get reelected. He wants the Monmouth Democrats to rough up Senator Joe Kyrillos and make him spend some money.
Assembly Majority Leader Joe Cryan want to take a run at Declan O’Scanlon, if not to beat him this time, to at least weaken him for a future contest against Marlboro Mayor Jon Hornick. Cryan will be in the district raising money twice in the next two weeks.
Unless I’ve been fed misinformation, which usually doesn’t start until the last two weeks of the campaign, expect 2 or 3 negative mailers on behalf of the 13th district Democrats.
In seven weeks New Jersey voters will have the opportunity to elect an entirely new state legislature.
Patrick Murray’s Monmouth University/Neptune Nudniks poll conducted in August indicates that New Jersey voters disapprove of their legislature by a 48%-35% margin. Democrats disapprove by 45%-38%. Independents, the majority, disapprove by a whopping 50%-28%. Surprisingly, Republicans approve of the legislature by a 45%-41% margin. Public workers disapprove by 55%-26%.
Based solely on those poll results, one might expect that we’d be in the middle of a spirited campaign with Democrats and public workers rallying to throw the Republicans out of office. Obviously that is not the case. Democrats control the legislature that their base and Independents disapprove of strongly.
Due to Dr. Alan Rosenthal’s decision that New Jersey voters are better off being continuously represented by legislators they don’t know, there are only a handful of competitive legislative races. The Democrats will continue to control the legislature for the next two years. Probably the next ten years.
13th Legislative District
This district keeps the Bayshore towns of Aberdeen, Hazlet, Holmdel, Keansburg, Keyport, Middletown, and Union Beach from the old 13th, adds Atlantic Higlands, Highlands, Monmouth Beach, Rumson and Sea Bright from the old 11th and Fair Haven, Little Silver, Oceanport, Marlboro from the old 12th.
The Republican incumbents are Senator Joe Kyrillos and Assembly Members Amy Handlin and Declan O’Scanlon. O’Scanlon previously represented the old 12th.
On paper this should be a competitive district. Democrats actually have a voter registration edge. According to Labels and Lists Inc there are 34,193 registered Democrats, 33,758 registered Republicans and 74,492 unaffiliated (Independent) voters in the district.
Despite the slight registration edge for Democrats, the district generally votes Republican. John McCain won the district in 2008, Chris Christie beat Jon Corzine here by a wide margin, and Anna Little beat Frank Pallone here in 2010.
Of the 16 municipalities in the 13th, 9 of the are comfortably controlled by Republicans. 6 are competitive towns with a local governing body that shifts from R to D on occasion. Aberdeen is the only reliably Democratic town on the municpal level.
With 31% of the registered voters in the district, Middletown dominates. Even though their registration edge is less than 2000 voters, Republicans dominate Middletown. Middletown voters love their hometown office holders, Joe Kyrillos and Amy Handlin who they have elected time after time over the last two decades plus; Kyrillos served two terms in the Assembly from 1988 through 1991 and has been a Senator since 1992. Handlin was a Monmouth County Freeholder from 1990 through 2006 when she entered the Assembly.
Roughly 73% of the district is new for O’Scanlon. Yet, that 27% from his old district, Fair Haven, Little Silver, Oceanport and Marlboro knows O’Scanlon well. They elected him to two terms in the Assembly after he lost to Michael Panter by only 73 votes in 2005.
The Democrats are running two former Hazlet mayors and a former Middletown township committee member.
Christopher Cullen is the former Hazlet Mayor challenging Kyrillos for Senate. Cullen, who served one term on the Hazlet Township Committee, won the nomination for Senate as a write-in candidate in the primary after failing to submit his petitions after being tabbed at the nominating convention in the spring. He is the director of facilities maintenance and custodial services at MAST High School. He is a member of Operating Engineers Local 68 and was previously a member of the teamsters.
Hazlet’s Community Center is named for Cullen’s father, James J. Cullen, who served the community for many years as a Republican office holder.
Both Democratic Assembly candidates won their first municipal elections in the wake of Operation Bid Rig. Lavan was elected to the Hazlet Township Committee in 2005 and served through 2010 when he lost his reelection bid. Like Cullen, his union roots are deep. He has been a member of the International Longshoreman’s Association for 46 years. He is making his support of unions, and the Right to Work legislation that Handlin and O’Scanlon have sponsored, the center piece of his campaign.
Short, a former Republican and a West Point graduate was the first Democrat elected to the Middletown Township Committee in 2006 in the wake of Bid Rig. He was swept out of office with Jon Corzine in 2009 as Chris Christie and the GOP swept Middletownoverwhelmingly. Short was ambivalent about seeking a second term, but ultimately ignored MMM’s advise that he take the plaque.
Based on the early inactivity of the campaign, I was wondering if the feisty Constitution Party slate of Steve Boracchia for Senate, Bill Lawton and Frank Cottone might actually garner more votes than the Democrats in this race. However, a volunteer from the Democratic campaign reached out to me to optimistic declare that the Democrats will produce a shocking victory on election day. The volunteer said that Cullen, Lavan and Short are going in 20 different directions knocking on doors and that they are marshalling their scare resources for a last minute sprint into office.
While the 13th districts candidates don’t have the state Democratic support that the 11th district candidates have enjoyed….a paid staff and high profile fund raisers hosted by Newark Mayor Cory Booker and Senate President Stephen Sweeney…the volunteer said that the campaign is expecting an influx of union money and that Assembly Majority Leader Joe Cryan is coming to the district next week to raise money for the slate.
Assemblyman Declan O’Scanlon will be our guest for the full hour today on the LaRossa and Gallagher: Real Jersey Guys On The Radio Show. The show, sponsored by Repatriot Radio, will air on WIFI AM 1460 and here on the Internet from 5PM-6PM.
O’Scanlon will be discussing JCP&L, their response to Hurricane Irene and how the government will be addressing that response now that the power has been turned on, after a long week, for the electric utility’s customers. He will also be addressing the recent dispute with Morris Bailey and the NJSEA that threatens the long term viability of Monmouth Park. The track was in O’Scanlon’s 12th legislative district and is now in his new 13th legislative district.
During the second half hour of the show we will open a conversation into the question: “What is an appropriate conservative response to social problems?” or “How do we contribute to those less fortunate than ourselves and reduce the size of government?”
O’Scanlon was instrumental in having charitable organizations donate food to many communities during the power outages that followed Hurricane Irene, without spending government money. In addition to his policy and political leadership, he is a quiet leader in many charitable endeavors.
O’Scanlon is reluctant to talk publicly about his charitable works. He has agreed to do so in the hopes increasing the awareness and action among conservatives.
“So many people just don’t get it,” said O’Scanlon of his fellow political leaders, “Otherwise brilliant people seem to have a ‘Let them eat cake’ way of thinking.”
You are welcome to participate in our conversation with O’Scanlon by calling into the show at 609-447-0236.
TRENTON – The political theater being carried out by Trenton Democrats over their unconstitutional budget is disingenuous and must end.Assemblyman Declan O’Scanlon released the following statement demanding Trenton Democrats start being honest about their budget and to stop misleading New Jerseyans:
“Trenton Democrats’ sickening display of political posturing has to immediately end. Democrats know that their budget did not provide funding for their election year spending spree yet they continue to play on the emotions of our residents.
“New Jersey women still have access to comprehensive health care services in every county and under Governor Christie support for Family Health Services has increased by more than $30 million. By using blatant distortions and lies about program funding, they are misleading the public about what services will and will not be available to them. This is a dangerous new low. This shocking display proves that the current Democratic leadership lacks the soul necessary to govern.”
Yesterday there were four real Jersey guys on the radio from 5PM-6PM for what might have been the last LaRossa and Gallagher Radio Show on WIFIAM1460.
I’m not knocking THE Jersey Guys, Casey, Rossi and Bob Ingle on Fridays, formerly of 101.5 FM. I enjoyed their show and listened to it whenever I was on the road in the afternoon. My favorite all time show was Casey screaming, “YOU’RE LOSING VOTES RIGHT NOW” at gubernatorial candidate Chris Christie during the 2009 primary campaign while Christie was trying to finesse an answer to a particularly blunt question.
I think 101.5 was nuts to cancel the show that they themselves promoted as the most successful afternoon radio show in the country. I doubt the petition to get the show back on the air will make any difference, but if you want to be part of it, you can do so here.
As good as the show was, my friend Tommy DeSeno is right. As talented as they are, Casey, Rossi and Ingle are not really Jersey guys. Casey’s from California, Rossi from Brooklyn and Ingle from Georgia. They’re not Jersey guys like the four natives who were on the radio yesterday afternoon, my partner Senator Dick LaRossa born in Trenton on July 1 (Happy Birthday Dick!), Assemblyman Declan O’Scanlon, Fair Haven Mayor Mike Halfacre, and yours truly.
Straight Talk On The Pension and Health Care Reforms
While our show was not nearly as funny as THE Jersey Guys, it was the most informative and honest report of the pension and benefits reform package anywhere to date, if I do say so myself.
My hat is off to Declan O’Scanlon for coming back on the show for second week in a row knowing that I was not buying the hype of the “landmark” nature of the reforms and for answering our questions frankly.
O’Scanlon is high on the impact the reforms are making compared to what would have happened if the status quo continued. However, with only a little dancing, he did acknowledge that without significant economic growth, New Jersey will be in deep doo doo as the taxpayers increase their state pension contributions by $500 million each year over the next seven years. That doesn’t include the municipal pension contributions that come from property taxes.
Botton line…there is a very real possibility that the pension reforms in particular will lead to large tax increases on the state and local levels and/or draconian spending cuts. O’Scanlon did not dispute that. He argued things would be much worse had the administration and legislature done nothing.
During the second half hour Halfacre was upbeat about 1) the fact that the deal could have been done at all given the historical nature of things in Trenton, and 2) the savings Fair Haven taxpayers will realize from the health care end of the reforms.
The highlight of the show was Halfacre’s explanation of how he and the Fair Haven Council have been able to lower property taxes three years in a row and counting: 1) Saying no, 2) Pissing people off, 3) Standing firm when the pissed off people are yelling at you, 4) Doing all of that and getting reelected.
Why was Tuesday’s show perhaps the last LaRossa and Gallagher Show? Dick and I are thinking of changing the name of the show to The Jersey Guys or The Real Jersey Guys. We’re hoping Millennium Radio will issue and cease and desist letter or maybe even sue us so we can get lots of free publicity and beat out Deminski and Doyle on Tuesday afternoons.
Assembly Republican Budget Officer Declan O’Scanlon returns to the LaRossa and Gallagher Radio Show this afternoon at 5 PM. O’Scanlon will continue the conversation we started last week on the impact of the new pension and health care system for government employees and fill us in on the moving and shaking happening this week in Trenton with budget negotiations. The State must have a new budget by Thursday night at midnight.
During the second 1/2 hour of the show we will be joined by Fair Haven Mayor Mike Halfacre. Halfacre will be discussing the impact of the pension and health care reforms on municipalities.
The LaRossa and Gallagher Radio Show, sponsored by Repatriot Radio, features former State Senator Richard LaRossa and your favorite blogger. It is broadcast every Tuesday afternoon from 5PM to 6PM on WIFI AM 1460 and on the world wide web here.
Listeners are encouraged to call into the show with questions and comments. The call in number is 609-447-0236.
Yesterday afternoon on the LaRossa and Gallagher radio show I asked Assemblyman Declan O’Scanlon how the $790 million dollar hole in Governor Christie’s proposed budget would be filled. Christie’s budget assumed $300 million in savings during the coming fiscal year from healtcare reform. The legislation likely to be passed in the Assembly only yields a savings of $10 million this year. Last month the State Supreme Court ruled that the state must spend $500 million more than Christie budgeted on Abbott district school spending.
O’Scanlon pointed to increased revenue projections and to yet to be determined savings from the new healthcare deal, but acknowledged that he and the other legislators crafting the budget have tough choices to make between now and June 30 when the budget must be passed.
June 30 is the deadline for the state budget to be enacted. June 30th is also the expiration date of the current union contracts for 48,000 state workers. Once the pension and benefits reforms are passed by the Assembly tomorrow, there will be an intense sprint to meet those deadlines in one week.
Mark Magyar, a former deputy policy chief in the Whitman administration and the policy director for the 2009 Daggett for Governor campaign,writing at NJ Spotlight, raises the possibility that Governor Christie could impose a new contract on the state workers.
The 1968 public employee collective bargaining law gives the governor and mayors the power to impose contracts on non-uniformed employees. Christie would be the first governor to use that power.
Magyar says that negotiations with the unions started late and have been on hold while Christie and the legislature worked on the pension and health carereforms. Christie has proposed a 3.5% pay cut.
I’ve been scratching by head trying to figure out why Christie and the Republicans in the legislature have been celebrating the health care reforms that only yield $10 million, rather than $300 million, in savings while the Democrats are waging a civil war over the deal.
O’Scanlon says the health care deal agreed to is not Reform In Name Only, that they will produce real savings over time. That might be true. But it seems like another kick the can down the road.
If Christie exercises his executive power to reduce the cost of government now by imposing union contracts that recover the savings given up the the health care deal we would know that we got real reform. Not delayed reform. That would be turning Trenton upside down.
While pandering to his audience at a recent union rally, Democratic Party leader John Wisniewski said the state should raise the state’s income tax and otherwise “find a way” to pay all of its $3.5 billion pension obligation this year. He said, “It’s about keeping a promise.”
If that’s the case, why didn’t Assemblyman Wisniewski and his party make the annual required pension payments when Democrats controlled the Legislature and governor’s office for eight years?
The assemblyman has proposed raising the income tax on our state’s highest-income earners, also our job creators, as a “solution” to funding the $3.5 billion payment. Democrats admit such a tax hike would only garner $500 million.
Yet they have targeted that $500 million to fund $9 billion worth of programs, which also include property tax relief ($2.1 billion), schools ($1.6 billion), job incentives ($800 million), municipal aid ($445 million), preschool funding ($400 million), Medicaid ($300 million) and nursing homes ($70 million).
Seems Assemblyman Wisniewski is using the same type of warped mathematical calculations used to “balance” the state budget over the past decade — which has led us to the brink of fiscal ruin. Of course, if he can seriously explain how $500 million will fund $9 billion, I’m willing to listen. However, we need the answer by June 30, when a balanced budget is due.
I’m confident the various groups Democrats pander to are smart enough to see through this sham and demand the kind of serious reform that will benefit everyone in the long term. I know our taxpayers do.
