Suggested Spending Cuts Courtesy of the Republican Legislators

Last week Governor Corzine complained whined that the mean Republicans should have come to his office rather than take him to court to force him to reveal his planned budget cuts. Maybe Corzine's staff just wouldn't let the Republicans through and didn't give him the message that the Republicans stopped by.

Well, the Governor still needs help and is working through the weekend to come up with spending cuts to announce on Monday. His union friends have made it clear that they will be no help at all.

The Republicans in the Legislature are still willing to help. Governor, if you are reading, here is what you would have heard if you'd met with Senator Thom Kean and Speaker Alex DeCroce:

MAJOR SAVINGS

1. Special Municipal Aid $107,305,000

Over the past six years, a handful of municipalities received state aid from a program whose funding increased from $38 million to more than $145 million. At the same time aid for other municipalities has basically been held flat. The Special Municipal Aid Program has been the subject of harsh criticism in a recent State Auditor’s Report which noted: (1) aid has been awarded without any application process; (2) no objective criteria exists to guide awards; (3) financial recovery plans for recipients have not been prepared as required by law; (4) hearings have not been held to determine if towns should be subject to a fiscal review board as required by law; and (5) grants recommended by staff are subject to “managerial override” (political manipulation). It is clear that the original purpose of the program is no longer adhered to and it has become nothing more than a “fund” for politically-connected municipalities.

Certain municipalities receive annual and increased funding from the program even though the program was originally intended to provide temporary assistance to help municipalities through short-term fiscal problems. For example, Union City received a four-fold increase in funding this year, despite having spent public funds in the past to support questionable expenses. Despite being a distressed city and receiving millions of dollars of distressed cities aid, Union City has been able to pay for several municipal swimming pools and cover a $500,000 jury award paid to a detective who was demoted for political reasons.

There remains a need for funding to address true emergencies in distressed areas, but the amount available six years ago remains the appropriate level for funding the program.


2. Reasonable Increases for Certain Former Abbott Districts $105,070,173

Certain former Abbott and Abbott-Rim school districts are slated to receive state aid increases that are far in excess of the inflation rate, and as high as 20%. There are 23 of these districts, including several such as Newark, that are receiving increases outside the new school funding formula, pursuant to budget language inserted by the Governor, without explanation. The increases are being provided without an individual assessment of the district’s needs. In addition, these 23 districts have seen their state aid generously increase by 30% since 2002. In the recent past, aid amounts have been deemed adequate and constitutional by the courts, so there appears to be no constitutional reason for the increases above and beyond past amounts.

The Department of Education has made no attempt to make sure state aid to these districts is well spent. In response to a request submitted by Republicans to the Department seeking payroll information for these schools, the Department acknowledged it does not keep nor does it have the requested information for these schools. Past reviews of these districts have identified: high administrative costs; blatant patronage positions; gym teachers, drama teachers and French teachers making in excess of $100,000, and even a $122,000 public information officer.

For example, the Harrison School District in Hudson County is slated to receive a 12% increase in funding next year, even though its state aid has increased by 60% during the past six years. Such an increase for a school district that has already been receiving dramatic increases for the past six years is patently unfair. Additionally, it should be noted that the people of Harrison Town don’t even get a chance to vote for their school board members. They are appointed by a mayor whose administration has been roundly criticized in newspapers for top-heavy administration and corruption. Other audits of these districts indicate that up to 25% of what they receive is undocumented, unnecessary or wasteful.

Capping state aid growth to 2% for all Abbott and Abbott-Rim districts that have seen solid increases in recent years is only fair at a time when many other communities are facing aid cuts. Capping the increases will also allow time for additional funds to be spent in a rational manner.

3. Procurement Reform $90,000,000

In a recent bipartisan meeting of legislators working to identify budget savings, the head of New Jersey's procurement office noted that if we saved just “10% off the price of only 15% of more than $6 billion” of annual procurement costs for goods and services, then the State would save $90 million. Stated another way, procurement reform should be able to easily reduce by 1.5% the price of the State's goods and services. That goal is more than achievable and Legislators from both parties have repeatedly offered to support whatever changes in procurement laws may be needed to effectuate savings and efficiencies. Change has been far too slow even though most reforms to procurement can be implemented immediately, without legislation.

First, the State should dramatically reduce its procurement of goods and services without advertising for competitive proposals and bids. The practice of no-bid contracts restricts open and fair competition and drives up prices. Procurement without advertising is made possible by the Department of Treasury when it approves requests for waivers from competitive advertising - which the department is responsible for approving even when the department is the one requesting the waiver. More than $446 million of purchasing was done in 2006 outside of competitive advertising for proposals and bids. As one example of this type of abuse, the Department of Treasury gave itself a waiver from competitive advertising for legal services associated with Governor Corzine’s monetization proposal and then only solicited bids from the most expensive law firms in the country, resulting in a $548 per hour contract that cost the taxpayers in excess of $5 million.

Second, major construction procurement and building projects subsidized by the State should be more closely examined before they begin and be subject to a disinterested third party review. The EnCap project is perhaps the best example of a project that was allowed to begin without adequate scrutiny. School construction projects also have been prime examples of major construction projects undertaken without adequate review. Greater up-front scrutiny of major construction projects could prevent the next EnCap or the next school funding debacle.

Third, the Governor's Office of Policy or the Counsel's Office should become more engaged in reviewing proposed procurements by departments and agencies to prevent nonessential spending. During the Senate and Assembly Republican's review of just a fraction of equipment purchases by various departments, obvious examples of nonessential purchase orders were found, including: a $35,000 World War II spotlight for the Department of Environmental Protection; an $18,000 "trinkets order" for the Department of Community Affairs; several $10,000 gym sets and a half dozen $650 customized cigarette lighters for prison inmates; tens of thousands of dollars for top-of-the-line $600 phones for several departments when more modest purchases would have sufficed; and excessively expensive office renovations. A quick, third party check on proposed departmental purchase orders by the Governor's Office would undoubtedly prevent many of the more egregious purchase orders from being pursued in the first place.

Fourth, agencies must require more regular invoices from hourly service providers such as lawyers and more closely scrutinize bills. As an example of where this would have made a significant difference, private lawyers handling EnCap dealings and whistleblower lawsuits were permitted to submit bills for services nine months after beginning work. The result was that virtually all billable hours were paid. Billable time included obviously unnecessary and excessive work which could have been stopped sooner if bills were reviewed on a timely basis.

4. Pension and Health Benefits Reforms $85,000,000

The Legislature has attempted to make fair and equitable reforms to state worker pension and benefit policies. Governor Corzine has thwarted many of these changes, only allowing for relatively modest changes. Further changes should be pursued.

Republicans are recommending that the retirement age for prospective government employees enrolled in the Public Employees’ Retirement System (PERS) by raised from 60 to 62. This will greatly reduce the system’s unfunded liability and will put the public employees’ retirement system more in line with the private sector. It also reflects increased life expectancy.

Second, the current pension formula that determines payouts is based on a three-year average of an employee’s highest pay. In the past this has made it easier to “boost” pensions beyond what has been earned. Republicans propose a pension formula based on a five-year average.

Third, state employees receive three extra holidays that the federal government does not recognize. The number of state holidays for State employees should be reduced to match those given by the federal government. This will lower overtime costs and make State services more accessible to taxpayers.

Fourth, the Benefit Review Task Force issued a report in late 2005 proposing changes in employee and retiree benefits and documenting the savings attributable to each change. One change, which has since been partially implemented, was to increase the employee and retiree contributions to health insurance to 10% of the cost of a base plan. That proposal alone was documented as saving State taxpayers $206 million. The Corzine Administration ultimately embraced a different approach, requiring employees to contribute 1.5% of salary towards the cost of their health plans, which required State employees to contribute far less than could have been saved under the Task Force recommendation.

Possible other reforms include: allowing vested employees to opt into a 401K style retirement program which may be attractive to employees and taxpayers; increasing the annual salary that triggers pension credits beyond the current threshold of $1,500 which is unfair to employees and taxpayers; and increasing the threshold of hours worked to become eligible for health benefits to prevent certain politically connected employees, who do as little as attend one or two meetings per month, from getting health insurance.

Between these and the other proposals being advanced by Senators Sweeney, Buono and others, a benefit at least five times greater than the recommended $85 million into the pension system can be accomplished to bolster the health of the pensions system.

The proposal here is to embrace work on a bipartisan basis and adopt a combination of the above proposals to reduce benefit contributions by $85 million. The combination of substantial additional reforms and a modest reduction in the FY 2009 contributions does far more to bring the pension system into balance in a manner that is fair to rank and file workers and taxpayers alike. In contrast, Governor Corzine has almost exclusively stressed making larger taxpayer contributions to the retirement systems as the means by which unfunded liabilities in pension and post retirement health benefits should be addressed.

5. Eliminate Political Appointees $68,481,000

The Governor has touted an early retirement program to reduce the State employee count. Early retirement programs have failed time and time again in the past and have actually resulted in the State simply increasing its unfunded liabilities in the pension systems.

Republicans have a better way to shrink the payroll – eliminate patronage and managerial positions.

Despite claims to the contrary by Governor Corzine, there remains substantial patronage and top heavy administration in State Government. Some of the people in these positions were hired by Governor Corzine himself. For example, a former County Clerk was recently hired as the Deputy Executive Director of the Board of Cosmetology and Hairstyling. A former Executive Director of the Arizona Democrat Party was recently hired as a public relations expert at the Department of Environmental Protection. A campaign worker whose job included taping opponents at various functions was recently hired as an aid to the Governor. Those are only three of hundreds of examples of positions that could be eliminated with little or no disruption of public services.

If the Administration eliminated 2/3 of the employees in the following titles, they would save $68,481,000 in salary and benefits: State Supervising Photographer, Government Representative, Confidential Aide, Aide to the Governor, Senior Executive Service, Legislative Liaison, Confidential Secretary, Confidential Assistant and Administrative Assistant. It is not claimed that all of the employees in these positions should be fired. In fact, some of these people perform valuable functions, but political appointees are clearly employed in these titles – most of which are outside civil service laws and competitive hiring requirements.

Firing political employees who are not protected by civil service is a far easier, more sensible, and more efficient way to reduce the workforce without promising unwarranted benefits through an early retirement program.

6. Phase-in aid increases for greater than 50% state aid school districts $20,700,000

There are 33 school districts (non-Abbott, non-Abbott Rim) that receive State aid totaling more than 50% of the revenue to support their budgets. Twenty of these districts are slated to receive increases far exceeding inflation. It can hardly be considered fair to increase these communities aid far beyond inflation while aid to other communities is cut. This proposal would hold these communities to reasonable increases of 4% instead of up to 20%.

7. County Prosecutor Funding Initiative Pilot Program $8,000,000

This program provides a subsidy to four counties (Camden, Essex, Hudson, and Mercer) based on nothing but pure partisan concerns. It is nothing more than an unfair and unbalanced slush fund disguised as a policy concern.

8. Elimination of the Department of Public Advocate $6,670,000

Eliminating this department, which didn't even exist until recently, and transferring its essential functions to other departments will save the state considerable funding without jeopardizing essential State services. Spending for the programs operated out of this department have increased from the $13.164 million expended during FY 2005 to the $19.20 million recommended for FY 2008. In addition to substantial administrative savings achievable by eliminating this department, there are carry forward accounts available for some of the functions that should be transferred to other departments.

9. Elimination of Compensation to Members of Commissions
and Boards $4,000,000

Hundreds of politically connected people who sit on various state boards and commissions and attend infrequent meetings, receive full-time pension credit, as if they are full time employees. Individuals need to earn just $1,500 a year to be eligible for a year of pension credit, provided they were hired prior to recent pension reforms. Compensation should be reduced to a level so that cumulative payments throughout the year would not exceed the $1,500 needed to earn pension credit. This option would eliminate pension and benefits for more than 250 members of various commissions and boards who receive just enough compensation to be eligible for credit in the State pension system. Examples include the Real Estate Commission, Public Employee Relations Commission, the various licensing boards in the Department of Law and Public Safety and local boards such as the County Tax Boards. Total budget savings, would include $3 million in salary savings and $1 million attributable to a board members who statutorily receive health benefits.

10. Board of Public Utilities $4,000,000

$4 million received by the BPU should be returned to the General Fund to offset indirect costs incurred by the State, including defense of a whistle blower lawsuit and criminal investigations and audits. This can be achieved by cutting confidential employees at BPU, whose number has increased by 40 over the past several years. In addition, BPU leases expensive office space in Newark. A portion of the premises could be subleased and BPU could move to cheaper office space elsewhere.

11. State Cars $2,100,000

The proposed budget assumes that the state will hold title to 15,544 vehicles. This is an increase of 144 since January 2007. The budget also assumes that 2 additional mechanics will be on the payroll to service the additional vehicles. Treasury, the Department responsible for the State Central Motor Pool, should evaluate who is driving these vehicles and if they merit vehicle assignment. Eliminating a small portion of the fleet as well as placing a moratorium on purchasing additional vehicles (not including the replacement of state police vehicles) will save the cost of new vehicles and cut fuel costs and reduce claims against the Vehicle Claims Liability Fund.

12. Governor's Contingency Fund $600,000

The Governor's Contingency Fund began more than 100 years ago for the purpose of allowing the Governor to make funds available to address true emergencies. It was politicized by former Governors McGreevey and Codey. Recently spending from the account has been more reasonable. For example, small amounts of money have been expended from the account to recognize fallen soldiers who were serving in Iraq and Afghanistan. Carry forward funding is available for these types of expenditures. But, other spending should be eliminated and true emergencies should be funded by the Legislature. Additionally, the account has a balance of more than $1.5 million.

13. Funding for Rutgers' Athletic Facilities $500,000

This funding is specifically designated for capital projects for athletic facilities at Rutgers, New Brunswick, despite the Governor's pledge that no state funding will be used for this purpose.


14. New Jersey Law Revision Commission $400,000

The New Jersey Law Revision Commission was established in 1985 to promote and encourage the clarification and simplification of the laws of New Jersey. This function can adequately be performed by existing staff in the Office of Legislative Services.

15. Sports and Exposition Authority (NJSEA) $350,000

The NJSEA gave 9 employees (executives) salary bonuses worth a total of $350,000 annually. The bonuses were 1/3 of each executive's annual pay. Additionally, the NJSEA retreated from George Zoffingers' cost cutting initiatives and hired numerous nonessential employees. At the same time, the state subsidy of the NJSEA is increasing.