The Situation May Not Be As Bad As It Seems

Are taxpayers subsidizing MTV’s Jersey Shore?

That’s what some of my friends are saying. 

I usually agree with InTheLobby and Declan O’Scanlon, but in the case of the New Jersey Economic Development Authority granting a $420,000 tax credit to MTV for the 2009 production of Jersey Shore, I’m not so sure.

I’m not fan of the show.  I never watched it.  The promotions and buzz about it are enough for me to know that I’d rather see a Law and Order re-run.   Yet, there is no denying that the show has generated quite a bit of economic activity.  That’s what tax credits are supposed to do.

Tax credits are not subsidies in the sense that the government is writing a check.  They are promised tax reductions given to induce investment that will, hopefully, generate economic activity and more overall tax revenue than the amount of the credit.   Since Governor Christie has taken office, New Jersey has granted much larger tax credits to spur investment in Atlantic City and the Meadowlands.

Is the Jersey Shore tax credit a good deal for New Jersey?  I don’t know.  The Treasury Department would have to calculate the increased tax revenue that resulted from the show.   It would take $6,000,000 in increased sales of hair gel, contraceptives and alcohol to generate $420,000 in sales tax to “break even” on the tax credit.  I don’t buy hair gel or contraceptives.  I don’t watch the show, so it hasn’t driven me to drink more.  We’d have to rely on Treasury data to judge if increase sales taxes paid for the tax credit.

But we’d also have to include increased income taxes in the analysis.  How much do Snooki, the Situation and the rest of the cast pay to New Jersey in income taxes? What about the rest of the crew?  What about the increased income, and taxes for Seaside Heights businesses and their employees?

Is MTV paying any taxes to New Jersey as a result of the show at all?  If they hadn’t produced the show, they certainly would not have paid any taxes.  If the tax credit induced them to produce the show, that is what it was designed to do.

“I can’t believe we are paying for fake tanning for ‘Snooki’ and ‘The Situation’, and I am not even sure $420,000 covers that,” said Assemblyman Declan O’Scanlon (R-Monmouth). “This is a great investment for the taxpayers, as if they can make a show called ‘Jersey Shore’ anywhere else.”

Declan obviously doesn’t watch the show either.  They can make a show called ‘Jersey Shore’ in Italy.

Boardwalk Empire, the HBO hit series about the history of Atlantic City is not shot in New Jersey.  The beach scenes are shot in Coney Island, New York.

The Jersey Shore tax credit made headlines because State Senator Joe Vitale and the Italian American ONE Voice Coalition’s moral sensibilities are offended by how Italian Americans are depicted on the show.  They called for Governor Christie to veto the tax credit.  Christie doesn’t have the authority to veto the tax credit.  Vitale should have known that.  He probably did know that and just wanted to get his name in the papers.  What he did instead was generate more free publicity for the show he says offends him.

Vitale and ONE VOICE might have better luck in the courts. Earlier this week the Appeals Court set public moral sensibilities as a standard for what is legal in New Jersey.  If Vitale can convince a judge that the public’s moral sensibilities are offended by Jersey Shore, maybe he can get the show shut down, or get it moved, along with all the economic activity it is generating, to Italy or New York.

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Neptune Nudniks: Pass the American Jobs Act. Now.

The Asbury Park Press Editorial Board opined to its declining readership that President Obama’s American Jobs Act should be passed now.

The problem with that is that is that the bill  hasn’t been written yet.  Obama launched his reelection campaign in earnest Thursday night in an address to a joint session of congress that proposed a 1/2 trillion in spending.  He said it would be paid for, but didn’t say how.

Congressman Dennis Kucinich, hardly a Tea Party radical “determined to dismantle government and its vital programs piece by piece”  said he would have to see the bill before deciding whether to vote for or against it.

I never would have thought that I’d be writing that Kucinich exhibits more sanity than my hometown newspaper.

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Slots Would Boost Tourism and Save Horse Racing, Open Space

The news that Perretti Farms, New Jersey’s largest horse breeder located in the 609 area of Monmouth County, is winding down its operations and closing in two years is an indication that future of New Jersey’s horse racing industry is bleak.  

Perretti is not alone.  HorseClicks.com has over 100 New Jersey horse properties for sale at bargain prices. What kind of developments will end up on those farms?  Will the only open space left in New Jersey be government owned or subsidized open space?

Governor Chris Christie was right to end state subsidies of the horse racing industry and to privatize the operations of the Meadowlands and Monmouth Park .  However, to hamstring those operations by continuing the ban of slot machines at tracks is short sighted and will likely lead to the failure of the industry.  The failure of the industry will literally change the landscape of New Jersey.

Christie wants to protect Atlantic City and its monopoly on gambling.  But Christie’s authority does not extend to Pennsylvania, New York , Delaware and Connecticut.   Slots in New Jersey’s track’s won’t take business away from Atlantic City.   Slots at our tracks will keep gambling dollars in New Jersey and attract out of state dollars to our state.

Advocates of the horse racing industry have long called for slots at the Meadowlands.  I say open up the competition even more and allow slots at all New Jersey tracks, what’s left of them.

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U.S. Justice Department Investigating Standard & Poor’s

The New York Times is reporting that the Justice Department is investigating Standard and Poor’s role in the melt down of the economy due to the AAA ratings the agency bestowed on sub-prime mortgage backed securities. 

Justice wants to know if the rating agency’s analysts wanted to downgrade the mortages only to be overruled by S&P business managers who collected handsome fees for favorable ratings.

The investigation is said to have started before S & P downgraded U.S Treasury Debt.  Of course it did.  However the news of the investigation coming out now is purely polticial retribution on the part of the Obama administrations Justice Department looking to discredit the agency.

Justice should also investigate Fannie, Freddie and Frank.  As in Barney Frank.  But it won’t.

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Fitch Downgrades New Jersey’s Debt

On the heels of Ambercrombie paying “The Situation” not to wear their clothes, Fitch has downgraded New Jersey’s credit rating.

From the credit rating agency:

Fitch Ratings-New York-17 August 2011: Fitch Ratings downgrades the State of New Jersey’s outstanding general obligation (GO) bonds to ‘AA-‘ from ‘AA’.

Fitch also downgrades to ‘AA-‘ from ‘AA’ the rating on the Garden State Preservation Trust’s open space revenue bonds.

Additionally, Fitch downgrades to ‘A+’ from ‘AA-‘ the ratings on the state’s appropriation-backed debt and other related debt, which is detailed at the end of this release.

The Rating Outlook for all affected bonds is revised to Stable from Negative.

KEY RATING DRIVERS

–The downgrade of the state’s GO rating to ‘AA-‘ from ‘AA’ reflects the mounting budgetary pressure presented by significant and growing funding needs for the state’s unfunded pension and employee benefit liabilities, particularly in the context of a weak economic recovery, a high debt burden, limited financial flexibility, and persistent structural imbalance.

–Despite recent, significant action to contain future growth in the state’s accumulated pension liability, continued funding level deterioration is projected through the medium term as full funding of the actuarially required contributions is phased in, resulting in sizeable increases in annually required contributions. Fitch believes that meeting the requisite increases in pension contributions will be challenging and is likely to conflict with other long term challenges, such as property tax relief, school funding, and infrastructure needs.

–Management has proactively responded to past revenue weakness, and growth in state spending has been contained. Nevertheless, the state’s budget remains structurally imbalanced inclusive of unfunded pension contributions. Reserve balances are expected to remain narrow, offering limited flexibility to absorb unforeseen needs.

–New Jersey benefits from a wealthy populace and a broad and diverse economy. The state’s recent economic performance has been weak and the state is expected to lag the nation in recovering from the recent recession.

–New Jersey’s debt position remains high, and the state’s long term pension and employee benefits obligations are very significant.

SECURITY

The bonds represent general obligations of the state, with faith and credit pledged.

CREDIT PROFILE

The downgrade of New Jersey’s GO bond rating to ‘AA-‘ from ‘AA’ reflects the mounting budgetary pressure presented by significant and growing funding needs for the state’s unfunded pension and employee benefit liabilities, particularly in the context of a weak economic recovery, a high debt burden, limited financial flexibility, and persistent structural imbalance. The credit rating, at the current level reflects its high wealth levels and broad economy, offset by a high debt burden and a multitude of spending pressures, including continuing capital needs, as well as significant unfunded pension and employee benefits obligations. Despite the recent passage of pension and benefits reform legislation, which will restrain future growth in the state’s accumulated liabilities, continued pension funding level deterioration is projected through the medium term as full funding of the actuarially required contributions is several years off, resulting in sizeable increases in annually required contributions. Fitch believes that meeting the requisite increases in pension contributions will be challenging and is likely to conflict with other long term challenges, such as property tax relief, school funding, and infrastructure needs.

The fiscal 2011 budget as adopted last year addressed a $10.9 billion current-law funding gap without broad based tax increases and with significant spending reductions, though a large portion of the gap was closed by forgoing the state’s $3.1 billion pension contributions, a source of budget relief the state has repeatedly relied on in recent years. The budget assumed overall revenue growth of 1.5%, despite the sunset of a temporary personal income tax increase, while appropriations across all funds declined by 1.7%. Revenue expectations for fiscal 2011 were revised upward in February and again in May, primarily due to stronger personal income tax performance. Net of proposed supplemental appropriations, prepayment of fiscal 2012 school construction fund debt service, and lapses, the state projects an ending balance of $696 million, providing limited financial flexibility representing just over 2% of fiscal 2011 revenues.

Budgeted appropriations for fiscal 2012 are 1.2% above the estimated fiscal 2011 level, though this percentage will increase slightly once a supplemental appropriation for local aid is passed. While spending across most departments is reduced, local education aid grows by $832 million, inclusive of additional court mandated funding for certain urban districts, and increased funds for property tax relief and pay-go transportation capital funding are incorporated. Projected revenue growth of $1.1 billion (4% above revised 2011 levels) and an increase in the prior year surplus expectation provide an offset to the loss of federal stimulus support ($879 million for fiscal 2011) and revenue forgone due to $185 million in tax relief. The use of one-time measures, inclusive of balance draws and expected debt restructuring, is down from the prior year, though this figure excludes the statutorily reduced pension contribution appropriated at only one-seventh of the actuarially required contribution for fiscal 2012. While it is encouraging that the state has been holding down spending growth, structural balance has not been achieved and the continued deferral of funding for the state’s significant long-term liabilities will negatively impact pension funded ratios and pressure future budgets. The state’s financial cushion at year end is expected to remain narrow at approximately $640 million.

State employment growth during most of the last decade lagged the national experience and remains weak. New Jersey’s non-farm employment levels declined by 0.7% in 2008 and by 3.9% in 2009, levels consistent with national declines, though the 2010 decline of 1% was slightly higher than the 0.8% contraction seen nationally. New Jersey’s employment remains weak, with June 2011 employment was 0.4% below June 2010 levels, comparing negatively to a U.S. gain of 0.9% for the same period. State unemployment of 9.5% for June 2011 is above the national level of 9.2% for the same month. New Jersey’s wealth levels are high, with 2010 per capita personal income of $50,781 equaling 125% of the national level, ranking third among the states. Personal income growth in 2008 totaled only 68% of the national level, and the 2009 decline was sharper than that experienced nationally. For 2010, the state’s personal income growth of 2.6% lagged the 3% growth experienced nationwide.

New Jersey’s debt levels are high and ongoing capital demands for school construction and transportation projects remain large. The debt burden as of June 30, 2011 equaled 8% of 2010 personal income. Excluding bonds issued for pension funding, outstanding debt as of June 30, 2011 totaled 7.5% of 2010 personal income. State residents approved in November 2008 a constitutional amendment that requires voter approval for future debt authorizations that do not carry a dedicated repayment source, which limits growth in debt levels. As of June 30, 2010, the state’s portion of pension liabilities, adjusted to reflect recent pension reforms, was 65% funded on an aggregate basis, an improvement from 56% before the reforms were implemented. System-wide funding levels for the PERS and TPAF systems, using Fitch’s more conservative 7% discount rate assumption are weak at 61% and 59%, respectively. While pension and employee health benefit reforms have been implemented and are expected to slow the growth in liabilities, the state’s plan to phase in full funding of its annually required pension contributions over a seven-year period in will likely reduce funding levels in the near term and add stress to the state’s operating budget.

As noted above, Fitch downgrades the ratings to ‘A+’ from ‘AA-‘ and revised the Outlook to Stable from Negative on state appropriation-backed debt through issued through the following authorities:

New Jersey Transportation Trust Fund Authority
New Jersey Economic Development Authority
New Jersey Health Care Facilities Financing Authority
New Jersey Educational Facilities Authority
New Jersey Sports and Exposition Authority
New Jersey Building Authority

Additionally, Fitch downgrades the following ratings to ‘A+’ from ‘AA-‘ and revises the Rating Outlook to Stable from Negative on the following:

State of New Jersey certificates of participation.

The program ratings assigned to New Jersey Municipal Qualified Bonds and bonds secured by the New Jersey School Bond Reserve (New Jersey School Credit Enhancement Program).

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APP Turns On Obama

By Art Gallagher

The newspaper formerly known as The Asbury Park Press (their print edition masthead now reads “THE PRESS”) has irrefutably revealed itself as a far left extremist publication.  In an editorial published on their website last evening, Obama caving in to GOP demands, the Neptune Nudniks have moved on to the left of the New York Times, the old Huffington Post, Daily Kos and Middletown Mike.

The Press called the President “weak,” “hardly a leader,” and said his speech Monday night was “too little, too late.” They said his speech “was not tough so much as it was petulance.”  As Dan Jacobson would say, hilarious, though hysterical would be more accurate.

“Left wing extreme, Art?” you might say, “that sounds like right wing rhetoric I might read on MoreMonmouthMusings.”  You’d be correct, except the nudniks are complaining that Obama “has alienated his base, gone back on what he held as rock-solid principles,” while drawing a “line in the sand” that is inside the Republican Tea Party right’s tent.  APP is now short for apparatchik.

The Press did get one important thing right in their rantitorial.  They correctly identified Obama’s reelection concerns and the only issue that is holding up a deal that would raise the debt ceiling, reduce the deficit and prevent a default.  Senate Majority Leader Harry Reid, also not left enough for the apparatchiks, and Speaker John Boehner have already agreed on a plan that would raise the debt ceiling, reduce spending and not raise taxes.  Obama killed the deal because it only lasted for a year.  He doesn’t want to go through this again next summer only a few months before the Presidential election.

If Obama thought his economic policies and philosphy were popular with the American people, he would welcome having such a debate next year.  Instead, he’s willing to put the full faith and credit of the United States of America at risk rather than debate “redistribution of wealth”  and massive government expansion months before the American people decide whether or not to give him another four years. 

It is no accident that most of ObamaCare kicks in after the election.  This is more of the same.  Obama wants his lease on 1600 Pennsylvania Ave renewed before the American people realize what he has done to them.

The “Tea Party Republican” members of congress are controlling the debt ceiling debate because Obama is letting them control the debate.  If Reid and Obama agreed to Boehner’s proposal, Nancy Pelosi would deliver enough Democratic votes in the House to pass Boehner’s plan with moderate Republican support, thereby neutralizing the “Tea Party” Republicans who are uncompromising.

Obama would have to take a page out of Chris Christie’s book in order to make a deal like that.  And Christie says he’s not ready to be President.

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Governor Chris Christie Announces Education Allocation Plan Which Increases School Funding for Every District in New Jersey

Trenton, NJ – Furthering Governor Christie’s commitment to providing the resources and reform to improve education for every New Jersey child, the Christie Administration announced today the allocation plan for $850 million in new aid authorized for New Jersey schools in the Fiscal Year 2012 Budget. This commitment to education includes the Governor’s initial $250 million increase for all school districts, as well as an additional $450 million for the Abbott districts, and an additional $150 million for non-Abbott districts. With this new funding, total state aid to education will be higher in Fiscal Year 2012 than it was when Governor Christie took office.

“This year, New Jersey increased state aid to school districts by $850 million over last year, restoring every dollar of the cuts we were forced to make last year and increasing aid by an additional $30 million. We are keeping faith with our commitment to New Jersey’s children and families, spending more money per pupil on New Jersey’s students than almost any other state in the country,” said Governor Christie. “Now is the time to complement the dollars spent with real education reform to bring a focus on student learning, accountability and results.”

Today’s funding includes an additional $450 million for the 31 Abbott districts, which fully funds them under the School Funding Reform Act formula, and an additional $150 million for non-Abbott districts, doubling the increase that the Governor had already approved in February as part of his Fiscal Year 2012 Budget. This increase in education aid will provide important property tax relief to New Jerseyans as the state increases its support for local schools.

“Being able to provide additional education funding to districts this year further affirms this Administration’s commitment to ensuring each and every child in New Jersey receives a quality education,” said Acting Education Commissioner Chris Cerf. “It is now time to focus on aggressive education reform, concentrating on improving standards, assessments, and curriculum; strengthening the use of performance and accountability data; improving educator effectiveness; and investing in innovative models of educational delivery.”

Governor Christie is committed to making 2011 the year of education reform. He has put forward a Reform Agenda that brings necessary and long overdue changes to the public education system that focuses on accountability, makes teacher effectiveness and student achievement the driving forces behind public policies and practices, empowers parents with greater school choice, and expands high quality public charter schools in New Jersey to ensure that every child in our state has access to a quality education and achieves the results they deserve.

The county and school district allocation lists can be viewed at: http://www.state.nj.us/education/stateaid/1112/

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Government Workers and Retirees Facing Reality

By Art Gallagher

While the NJEA and CWA are pressuring the Democrats in the Legislature  to stop the pension and benefit reforms that Governor Christie and Senate President Sweeney have agreed to, the media is looking to create public sympathy for state retirees.

The Asbury Park Press has a piece this morning, Former NJ state workers ask: Now what?  The article by Jason Method of Gannett’s Statehouse bureau is an expose of the worries of a 85 year old retired DOT bus inspector who faces possible increased co-pays for his life saving medicine and the loss of cost of living adjustments under the Christie-Sweeney plan.  The three time cancer survivor who still remembers to worst bus accident he ever investigated and is taking care of his son who has been out of work for three years is worried. 

His son, who is probably in his 50’s or 60’s should be very worried.  If junior had followed in his father’s footsteps and taken a state job he wouldn’t be a burden on dear old Dad.

The millions of private sector workers and business owners who will pay the bill for the state workers retirement and health care before they pay for their own should also be very worried.   We’ve been worried for years.  Very worried for the last three years as we have cut back expenses and adjusted our expectations for the future based on the reality that the borrowing and speculation orgy that fuel economic “growth” over the last twenty years is over.

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Give Me My “Smash Mouth” Governor

By Art Gallagher

Since the “chopper gate” story hit the fan last week, The Record’s Charles Stile has been gleefully making the case that the media and partisan noise about Governor Christie’s use of the State Police helicopter has been so ferocious because of “smash mouth” style.  Stile, and other NJ media elites, have cited two recent polls, both taken before the chopper hullabaloo, that showed Christie’s approval ratings slipping as evidence that his style is wearing thin on New Jersey voters.

Stile has noted correctly that the chopper noise has been so harsh, despite the facts that Christie’s use of helicopter has been far more frugal than that of his predecessors and that  his use of the chopper didn’t cost taxpayers anymore money than if he had traveled by SUV, because of Christie’s “in your face” plain spoken style.   Christie’s political opponents and their media lapdogs have been laying in wait for an opportunity bash him back.

Stile has joined The Star Ledger’s Tom Moran in arguing that Christie should be nicer and more polite while turning Trenton upside down.  Stile and Moran would have Christie’s compromising more and reforming less.

The irony here, from my point of view, is that over the last few months Christie has been nicer and more compromising.   He’s toned it down.   His opponents have subsequently stepped it up.

Maybe Christie’s poll numbers have slipped because he’s toned it down.  Last spring he was railing against the NJEA and urging voters to defeat school budgets where unions wouldn’t compromise.  Voters responded by defeating budgets in record numbers.  Christie’s polls were strong.  This spring Christie was silent on the school budgets.

Is there no more waste in our public schools?  Has the the problem of excessive compensation, pensions and benefits been solved?

Since the GOP lost the legislative redistricting battle, Christie and Senate President Steve Sweeney announced a compromise over Supreme Court nominee Anne Patterson’s nomination that had been held up for a year.  Part of the compromise included a promise by Sweeney that a hearing to fill the Court seat of former Justice John Wallace, which has been vacant for a year because Sweeney didn’t like that Christie did not reappoint Wallace, would take place next March.  By making that agreement Christie acknowledged that Sweeney would still be Senate President in March, meaning Republicans are not going to win control of the State Senate in the coming election.

That the Democrats will retain control of the Legislature after the November election is probably realistic calculus on Christie’s part.  He probably made a strategic decision that he can get more of his agenda accomplished by compromising than by fighting.  That might be the best decision, but it also means that New Jersey will only have incremental improvement to our dysfunctional governments, rather than real reform…turning Trenton upside down reform…for the rest of Christie’s term.

I’d rather have the confrontational governor we elected.  Even if it means stalemates and the shutting down of government, I’d rather Christie ridicule and embarrass the Trenton cesspool than compromise with it.  Christie has only been in office less than 18 months.  The cesspool has spent decades putting us into the mess we’re in.

As a matter of style, the chopper hullabaloo demonstrates that the media/establishment cesspool is not going to respond to a kinder, gentler Christie in kind.  As a matter of substance, today’s news that the Democrats are going to attempt to increase education spending more than the Supreme Court has ordered and increase income taxes, demonstrates that the cesspool will always try to maintain and protect the status quo that makes them fat at the taxpayers’ expense.

Christie came into office promising to govern as if he only had one term to get the job done and without consideration for whether or not he’d be re-elected.  Since then he has admittedly fallen in love with the job and become enamoured with national attention and presidential wooing his in your face style has brought to him.

Christie’s “in your face” style works.  His adjustments should be by adding humor and charm to his ridicule, like Reagan did, not by compromising and being more polite. 

If Christie has concluded that he has accomplished all he can in New Jersey with confrontation, he should get ready quickly and run for President.  New Jersey and the United States both face horrendously serious problems.  Compromise and tinkering around the edges of a broken system will not do.

We need Chris Chirstie’s unabashed leadership in New Jersey and in America.  As Christie advised the new Republican leadership in Washington, we need to put up or shut up.  

Shutting up is not an option.

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McDonald’s Accounts For Up To 30,000 Of 54,000 New Jobs In May

By Art Gallagher

McDonald’s may have accounted for over half of the job growth in the U.S. economy in May, according to a Morgan Stanley estimate.

One has to wonder what the jobs report would have been had McDonald’s not been granted an Obamacare waiver last October.

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