Leaving NJ — What Trenton needs to do about it ?>

Leaving NJ — What Trenton needs to do about it

The New Jersey Assembly wastes its time arguing short term fixes instead of building a great state for the next century.  The governor is put in the position of vetoing silly plans and forcing them back to the drawing board.  Christie’s combative style earned him few friends, true.  When he leaves and we get another round-heeled governor, spending will resume.  People will miss Christie’s combativeness.

What should Trenton really be doing?  I suggest three things.  All are hard.  New Jersey needs to be more attractive for business.  It needs to be more attractive for citizens.  And it needs to operate more cost effectively, generally.

A home for business

Make NJ a home for business.  Stem the tide of business leaving the state.  The list of departures is endless.

New Jersey was the home of the world’s telecom industry for a century.  Despite the breakup of the Bell System, the two remaining players, AT&T and Verizon made NJ home until they left for Texas and Georgia.  Why did they leave?  Cost of labor and quality of life for employees was one.  Corporate taxation was another.

It’s unlikely we could have retained Ford manufacturing in Edison, or GM in Linden.  There was no excuse for losing the North American headquarters of Hertz from Park Ridge or Mercedes from Montvale.

In the pharma sector, the state could do nothing about consolidation, but the outright moves of companies is tragic.  Hoffman LaRoche pulled 13,000 jobs out of Nutley. New Jersey used to host 20% of U.S. pharma manufacturing jobs.  Now it’s less than 10%.

The state is doing its best to attract new, small companies with low tax rates.  It is counting on momentum to tax the established ones.  This short-sighted view is driving the state’s employers out, one by one.  Instead of special tax deals for companies, negotiated one a t a time, the state needs to lower the tax rate for all.  Without a broad-based policy, the company that comes for a twenty-year tax break will be gone in the twenty-first year.  I understand the thinking in Trenton.  Boost the tax by one percent.  That will fix this year’s problem.  Few companies will leave in the next year.  As a long term policy, it’s a loser.  The state is killing the goose that lays the golden egg. We need those companies with good paying jobs for New Jerseyans.

A home for citizens

Likewise for tax rates on citizens.  New Jerseyans are well paid.  They’ll pay a slightly higher tax rate to work here and educate their kids here.  After a few decades of rising taxes, they get fed up.  No question, Jersey schools are worth paying a slightly higher real estate tax.  That bucket though, is not bottomless.  Eventually, we get tired of paying for school boards that have no accountability to taxpayers.

When it comes time for retirement, citizens look at the real estate taxes they are paying.  With no more kids in the house, they don’t care about the quality of the school district.  Sure, it was the reason they bought in that neighborhood to start.  Now it’s not a reason any more.  There are fine houses at half the price in other states, with taxes a pittance.  If they’ve gathered a nest egg, the prospect of New Jersey taking a big bite of the estate is just another reason to split.  We need to keep our well-heeled retirees.

A lid on spending

New Jersey government is expert in spending now and pushing the expense down the road.  No one begrudges paying NJ teachers to educate our youth.  We’re even willing to pay them well.  The reason NJ teachers are so attached to their jobs, though, is a retirement system that allows them to retire after 25 years and potentially collect a pension for another 30.  Industry gave up defined benefit retirement plans a long time ago.  Our public servants are hanging onto this perquisite desperately, and using the political system to keep it alive.

Teachers aren’t the only ones.  NJ police and firefighters area also eligible for retirement after 25 years.  In every other industry, people work longer.  Life expectancy rises every year.  A firefighter who joins up at age 20 and retires at 45 could reasonably expect to collect a pension for another 35.  And he’s free to take another job.

Too much ink has been spilled already on pension abuses.  A town that promotes a police chief three years to retirement has no one else to blame.  New Jersey law does not prohibit a pensioner to take another job while getting state checks.  Many of our retirees are still working.

The solution is simple.  Getting there is hard.  Change the pension scheme from defined benefit to defined contribution.  If that doesn’t fly, change the expectation of work life from 25 years to 45.

Consolidate public services

To manage the number of top public servants on retirement, the number of administrative units needs to decrease.  Why do we need a police department with its own police chief for a town of 15,000?  All over the country, police departments are organized by county.  There is no reason that New Jersey needs 132 municipal police departments, in addition to 26 county sheriff’s offices, nine railroad police departments, and a host of state departments including the SPCA Humane Police.  The same logic applies to school districts, of which NJ has over 500.

Township and their mayors will be loath to give up control to the county.  If this state is to survive fiscally, there isn’t much other choice.  We’ll probably need to amend the state constitution, specifically Article VII, paragraph 11.

Clean up public affairs generally

If you seek to discover money drains in the New Jersey coffers, look for the word Authority.  These quasi-independent bodies have the ability to commit the state to all sorts of obligations, often in violation of the state Constitution, specifically Article VIII, Section I, paragraph 2.  Take, for example, the New Jersey Sports and Exposition Authority, which as part of its deal to support the American Dream Mall, is allowing the first $350 million in sales taxes collected to be applied to the repayment of public bonds supporting this private project.  Those bonds themselves appear to be a violation of Article VIII, Section II, paragraph 1.

New Jersey has almost 500 authorities, each with revenue and spending authority.  They often overlap.  Take for example ports authorities.

  • Port Authority of New York and New Jersey
  • Delaware River Port Authority
  • Perth Amboy Municipal Port Authority
  • Salem Municipal Port Authority
  • Woodbine Port Authority
  • Bridgeton Municipal Port Authority
  • South Jersey Port Corporation
  • Waterfront Commission of New York Harbor

The Waterfront Commission is a great example.  It runs its own police department to investigate crime primarily on properties owned, operated, or regulated by the Port Authority, which in turn has its own police force.

It’s a matter for the Governor and the legislature to go through list of districts and authorities and giving each a reason to consolidate with others.

New Jersey is perhaps the best state, but it takes work to stay at the head of the pack.

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