N.j. Budget Calls For Higher Spending, Layoffs

Posted: July 01, 1991

TRENTON — Many homeowners will collect bigger Homestead Rebate checks and local governments will receive major increases in state aid, but up to 2,250 state employees will lose their jobs under a $14.7 billion budget approved by lawmakers last night.

The budget, signed by Gov. Florio six minutes before the midnight deadline, increases state spending by 18.5 percent for the fiscal year that begins today. That increase - the largest percentage increase since the income tax was enacted 14 years ago - is to be financed by increases approved last year in the sales and income taxes.

Although there are no new tax increases for fiscal 1992, lawmakers needed $1 billion in short-term gimmicks to balance the budget, including the sale of four miles of state highway to the New Jersey Turnpike.

The budget will increase overall spending by $2.3 billion, including a historic increase in money to local government and schools, and an expanded Homestead Rebate.

But it also will impose a degree of austerity upon the state bureaucracy in Trenton due to lagging tax revenues in a stagnant economy. In addition to layoffs and an 8 percent cut in funding for most state agencies, there will be a freeze on state college funding for the third year in a row. Other recipients of state aid will get no increase to keep pace with inflation, including 400,000 welfare recipients, who have not had an increase in grants since 1987.

Gov. Florio signed the budget at the governor's mansion in Princeton, using his veto power to make minor changes but leaving the package approved by the legislature essentially intact.

Florio said the state will return 64 cents of every tax dollar to local governments and property taxpayers, up from 58 cents two years ago.

"Because we made difficult decisions last year, we have constructed a balanced budget that will help bring New Jersey out of the national recession ahead of other states in the region," the governor said in a statement released by his office. "We have delivered on property tax relief for New Jersey residents. Instead of the dramatic annual increases in propery taxes we have seen in the past, property taxes are down or stable."

The budget was rushed to Florio by state police after 11 p.m., when the Democratic-controlled Assembly approved the package by a 43-37 party-line vote. The Senate had approved the budget, 22-18, four hours earlier. Gloucester County Sen. Raymond Zane was the lone Democrat to join the Republicans in opposition.

The voting was monitored by nearly 100 state employees wearing red T-shirts with the slogan: "Fund the contracts. Stop the layoffs."

The two top Democrats in the legislature - State Senate President John A. Lynch and Speaker Joseph V. Doria Jr. - have been quarreling over what

revenues estimates to put in the budget, which will ultimately decide how many workers will lose their jobs. Lynch had been advocating a more conservative fiscal approach, while Doria had portrayed himself as the ally of the unions.

They finally made a deal late Saturday night that essentially split the difference between their rival estimates - and cleared the way for up to 2,250 layoffs.

The budget as approved yesterday also:

* Repeals the so-called "toilet paper tax," the extension of the 7 percent sales tax to paper products. This only raises about $30 million, but rolls of toilet paper had become a potent symbol for the anti-tax movement that Democratic lawmakers were anxious to remove before this fall's election.

* Increases, unexpectedly, funding by $30 million for the old Distressed Cities program, which aids New Jersey's poorest cities. The program will now be a $165 million venture, a rapid rise for a program that did not exist a decade ago.

* Restores or increases funding for New Jersey Network, for AIDS prevention, for helicopter ambulances and for state police dispatchers.

* Delays the controversial closing of the Johnstone Center for the mentally retarded in Bordentown until 1993.

* Restores about $44 million more aid to state colleges than the amount originally recommended by Florio. Even so, colleges are in for a $21 million reduction in their aid. Moreover, under the final deal struck between Lynch and Doria, the budget will no longer require colleges to keep tuition increases under 5 percent.

In first making his budget proposal in January, Florio called for 4,300 layoffs, and said an additional 6,000 workers would be fired unless unions agreed to wage and benefit givebacks.

But after a six-month campaign of public relations and private lobbying, workers persuaded the legislature to fund their benefits and contracted wage increases and to reduce the loss of jobs.

About 1,100 workers already have been laid off and up to 2,250 additional layoffs may still be needed to save $90 million in personnel costs. But state and labor union leaders said the number of layoffs could be reduced through larger-than-anticipated numbers of early retirements or other savings, such as an expanded furlough program.

The budget already anticipated $6 million in savings from voluntary employee furloughs. Richard McGrath, spokesman for the Senate Democrats, said that sum could be saved if every state worker took off one day this fiscal year without pay.

Jan Pierce, head of a coalition of state workers' unions, hailed the contract as a "total victory."

"It funds the raises, it protects the contract. It preserves the institution of collective bargaining," Pierce said.

Republicans blasted the Democrats' budget, challenging the revenue projections and insisting that spending be cut further.

The GOP lawmakers said the measure was an irresponsible document that avoided tax increases only through budgetary gimmicks.

They also asserted that the budget, despite its no-tax packaging, actually would cost citizens money through "hidden taxes." They said, for instance, that the road sale - in which the New Jersey Turnpike would buy four miles of roads for $401 million - meant turnpike tolls would support state spending for the first time. They also said that the move to shift forward the due dates of utility taxes - a gimmick that nets $620 million - would drive up electric and gas bills because the utilities would have to borrow money and that cost would be passed on to consumers.

Sen. Henry P. McNamara (R., Bergen) said the state would have a "built- in" deficit of $1.5 billion because of the use of "one-shot" revenues, such as those from the road sale and utility measure, that will not be available in the future. "The problem is just being pushed out further," he said.

Sen. John Ewing (R., Somerset) said the popular Homestead Rebate should be delayed "until we see what revenues are like." Ewing's suggestion was ignored by his Democratic counterparts, who are hoping the rebate checks will aid their re-election this fall.

However, Democratic Sen. Weiss said the budget was conservative enough to safeguard the state's coveted triple-A bond rating while protecting funding for vital programs.

"Hopefully things will get better," Weiss said of the state's depressed

revenues. "What are we going to do, stop government?"

John Budzash, leader of Hands Across New Jersey, the grass-roots group that sprang up in opposition to last year's tax increases, said he did not believe there was any shortfall at all.

After extending the sales tax last year to heavy trucks and paper products, Democratic lawmakers now have repealed those measures, Budzash noted, even as

revenues fell below expectations.

While the furor this spring was over layoffs, the new budget will actually fund several programs at the heart of Florio's agenda since he became governor 1 1/2 years ago. They include:

* An $830 million increase in aid to New Jersey's 600 public school districts, with particularly sizable increases for the 30 urban school systems that educate one-quarter of the state's schoolchildren. Currently, the state is providing $3.5 billion to public schools. Originally Florio was going to provide a greater increase to schools, but Democratic legislators skimmed $360 million from school aid and funneled it into municipal funding for tax relief. This left many educators bitter, claiming they were left with not enough money.

* A takeover by the state of about $280 million in welfare and social- service costs now borne by counties. Florio says this will help the counties, particularly urban ones, reduce their tax bills.

* A revised property-tax rebate that will send checks for up to $500 to homeowners and renters depending on their wealth and local property tax burden. The plan will, for the first time, exclude wealthy taxpayers from any rebate. The new rebate will cost the state $710 million, almost a third more than the cost of the two rebates it replaces: the old Homestead Rebate system and the Ford Act tax-credit plan set up six years ago.

N.J.'S NEW BUDGET

OVERVIEW

* Authorizes $14.7 billion in spending, up 18.5 percent. Biggest percentage increase in 14 years.

* No new taxes, but spends money from Gov. Florio's round of tax increases in first term.

* Raises $1 billion through fiscal maneuvers, including sale of a state highway to N.J. Turnpike and the manipulation of the due dates of utility taxes.

* Repeals tax on paper products, including toilet paper.

WINNERS

* Public schools. School funding increases by more than $800 million, although this is $360 million less than Florio originally proposed.

* Town governments. Towns receive $360 million in money diverted from school aid. New Jersey's most impoverished cities get $30 million extra beyond that.

* County governments. Counties receive $280 million in new social-service funding, which already has spurred tax cuts in Burlington, Camden and Gloucester Counties.

* Local taxpayers. The Homestead Rebate is expanded to $710 million, and checks are distributed under a formula that takes into account taxpayer's income and property tax burden.

LOSERS

* State workers. Up to 2,250 state workers will lose their jobs in the new fiscal year. They will join about 1,100 others laid off in the last six months.

* College students. For the third year in a row, higher-education funding is essentially frozen.

* Welfare families. The 400,000 women and children on welfare will go a fourth year without an increase.

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