The new governor is on a mission to make his state competitive again in attracting people and capital.
By JAMES FREEMAN
‘I said all during the campaign last year that I was going to govern as if I was a one-termer,” explains New Jersey Governor Chris Christie on a visit this week to the Journal’s editorial board. “And everybody felt that it was just stuff you say during a campaign to sound good. I think after the first 12 weeks, given the stuff I’ve done, they figure: ‘He’s just crazy enough to do it.’”
Call it crazy, or just call it sensible: Mr. Christie is on a mission to make New Jersey competitive once again in the contest to attract people and capital. During last fall’s campaign, while his opponent obliquely criticized Mr. Christie’s size, some Republicans worried that their candidate was squishy—that he wasn’t serious about cutting spending and reining in taxes. Turns out they were wrong.
Listen to Mr. Christie’s take on the state of his state: “We are, I think, the failed experiment in America—the best example of a failed experiment in America—on taxes and bigger government. Over the last eight years, New Jersey increased taxes and fees 115 times.” New Jersey’s residents now suffer under the nation’s highest tax burden. Yet the tax hikes haven’t come close to matching increases in spending. Mr. Christie recently introduced a $29.3 billion state budget to eliminate a projected $11 billion deficit for fiscal year 2011.
California and New York have attracted headlines for their budget woes. Yet, as Mr. Christie points out, “Their problems are much smaller than ours as a percentage. [Gov.] David Paterson’s talking about an $8.2 billion deficit in New York—I only wish.”
After taking office in January, Mr. Christie declared an official state of emergency. This allowed him to freeze $2.2 billion in spending that had already been authorized. Now he needs a Democratic legislature to turn his freeze into an actual cut and to enact the deeper reductions contained in his 2011 budget.
Terry Shoffner
It might well happen. Many Democrats recognize the state’s deep-seated fiscal woes. Mr. Christie has already signed into law a bipartisan plan that begins to reform the state’s generous benefit system for government workers. Facing unfunded liabilities of $90 billion in pension and medical plans, Mr. Christie worked with lawmakers to change retirement benefits for new workers and to require all new state employees to pay 1.5% of their medical insurance costs. Until now they were paying nothing.
He wants to go further. “We need to move forward to try to make some changes in the pension system for current employees,” he says. “There’s all kinds of problems in doing that, some legal. . . . You can’t take away vested benefits, but the argument of whether increases going forward are actually vested or not is an interesting legal issue that we’re going to attempt to challenge. . . .” He adds that the current retirement age for state employees, 62, “needs to be moved up further.”
As you can imagine, the Christie agenda is not wildly popular among presidents of government-employee unions. To put it more precisely, Mr. Christie is now in a political street fight with the head of the New Jersey Education Association, the teachers union that spent millions last year to defeat him.
NJEA President Barbara Keshishian visited his office this week to apologize for a recent email sent to thousands of teachers by a union official that included a mock prayer for the governor’s death. According to Mr. Christie, the conversation went something like this: He accepted her apology immediately but asked if the email sender would be fired for “doing something that monumentally stupid.” When the union chief questioned why the man should be fired, Mr. Christie promptly ended the meeting.
“I’m a product of public schools in New Jersey,” Mr. Christie explains, “and I have great admiration for people who commit their lives to teaching, but this isn’t about them. This is about a union president who makes $265,000 a year, and her executive director who makes $550,000 a year. This is about a union that has been used to getting its way every time. And they have intimidated governors for the last 30 years.”
While the state lost 121,000 jobs last year, education jobs in local school districts soared by more than 11,000. Over the past eight years, according to Mr. Christie, K-12 student enrollment has increased 3% while education jobs have risen by more than 16%. The governor believes cuts in aid to local schools in his budget could be entirely offset if existing teachers would forgo scheduled raises and agree to pay 1.5% of their medical insurance bill for one year, just as new state employees will be required to do every year.
A new Rasmussen poll found that 65% of New Jersey voters agree with him about a one-year pay freeze for teachers. But the teachers union wants to close the budget gap by raising the income tax rate on individuals and small businesses making over $400,000 per year to 10.75% from its current 8.97%.
Mr. Christie doesn’t think that state and local budget problems can be fixed without tackling education spending. That’s because the state has a hybrid system in which local property taxes fund schools and some of the money is redistributed by the state from affluent areas to poorer communities. According to Mr. Christie, New Jersey taxpayers are spending $22,000 per student in the Newark school system, yet less than a third of these students graduate, proving that more money isn’t the answer to better performance. He favors more student choice is, which is why he’s ramping up approvals for charter schools.
On another front, Mr. Christie is seeking a ballot measure this fall that would amend the state’s constitution to limit increases in local property taxes to 2.5% annually. To put this question before voters he needs to win over three-fifths of the state legislature and expects legislators to vote in May or June.
Will New Jersey send a message across the country that state government can be turned around without federal bailouts? “We’re such a long way away from a message,” Mr. Christie says, “because, you know, the message might be, ‘Look at that poor SOB. There he is lying dead on State Street in Trenton. It’s over. OK, everybody back to our corners and let’s go back to the normal game.’ . . . I hope, that if we’re successful, [the message] can be . . . that you can do this.”
Meanwhile, Mr. Christie has started spreading the news that the Garden State aims to compete once again for businesses, jobs and residents. He notes that for years the state offered a better tax environment than New York, which encouraged city dwellers to discover New Jersey’s beautiful suburbs. Mr. Christie says that he recently bumped into former New York Gov. George Pataki, who noted that he’d been shocked to learn that New Jersey now has an even higher burden than its tax-crazy neighbor. “See what happens when you’re not looking?” he said to Mr. Pataki. “Snuck right up on ya.”
The governor aims to move tax rates back to the glory days before 2004, when politicians lifted the top income tax rate to its current level of almost 9% from roughly 6%. Piled on top of the country’s highest property taxes, as well as sales and business income taxes, the increase brought the state to a tipping point where the affluent started to flee in droves. A Boston College study recently noted the outflow of wealthy people from the state in the period 2004-2008. The state has lately been in a vicious spiral of new taxes and fees to make up for the lost revenue, which in turn causes more high-income residents to leave, further reducing tax revenues.
With a 9.8% unemployment rate (significantly above neighboring New York), Mr. Christie has plenty of data to make his case that the state’s government has put too much of a burden on the private economy. He also is heartened by polls showing public frustration with the cost of the state’s lavish programs. “The ones who pay are going to stand up and say, ‘Enough already, I can’t do it!’”
He needs them to stand up now and support him. While voters seem ready for a new approach to governance, the new governor’s personal popularity has suffered a bit amid the acrimony. Mr. Christie says that the teachers union has spent $1.8 million in the last month on media advertising to defeat his budget plan. “That’s just the beginning. We’re in April. This budget isn’t going to pass until June 30.”
Still, allowing himself a bit of optimism, he envisions the impact if he succeeds. “What I hope it will do in the end is first and foremost fix New Jersey, and end this myth that you can’t take these people on,” he says. “I just hope it shows people who have similar ideas to mine that they can do it. You just have to stand up and grit your teeth and know your poll numbers are going to go down—and mine have—but you gotta grit it out because the alternative is unacceptable.” He also strongly believes that voters elected him specifically to fight this fight. “They’re fed up. They’ve had enough. In normal circumstances I wouldn’t win,” he says.
While debates over taxes and spending remain bitter, Mr. Christie has been pleased with an emerging consensus to address the state’s regulatory morass. He is now working on a bipartisan bill with Democrats in the state Senate to reduce red tape in Trenton. “We have Democrats who are very interested in wanting to lower regulation because they know . . . it’s a no-cost way of trying to spur business growth,” he says.
He’s tasked his lieutenant governor, Kim Guadagno, with reviewing 800 pages of regulations from the outgoing administration of Democratic Gov. Jon Corzine, regulations Mr. Christie froze upon taking office. On Monday, Ms. Guadagno will issue a report with recommendations on whether to let them go forward. She has already held 31 public meetings with business and government officials to discuss how to improve the state’s regulatory climate. “You’re not going to have to spend nearly as much money to start your business in New Jersey,” says the governor.
And if he is successful in the budget battle of Trenton, the state’s residents won’t have to spend nearly as much to live there.
Mr. Freeman is assistant editor of the Journal’s editorial page.
Printed in The Wall Street Journal, page A11
