New Jersey's 13th Legislative District

Senator Declan O'Scanlon

Senator Declan O'Scanlon

Editorial: NJ Can’t Tax Its Way to Prosperity

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The following editorial by Senator Declan O’Scanlon (R-Monmouth) was published by the Asbury Park Press on March 6, 2019:

Gov. Phil Murphy’s second annual budget message to a joint session of the state Legislature this week outlined his plans to raise taxes, unnecessarily, yet again.

Sen. Declan O’Scanlon said mention of cost-saving structural reforms that would lower the cost of government was noticeably absent from Gov. Phil Murphy’s tax-hiking budget proposal. (Pixabay)

Absent from his message was any mention of support for “Path to Progress” reforms recommended by the Legislature’s bipartisan Economic and Fiscal Policy Workgroup, which have the potential to significantly lower the cost of New Jersey’s many layers of government.

That absence was especially noticeable considering Murphy’s prior chairmanship of the Benefits Review Task Force under Acting Gov. Richard Codey. The task force, under Murphy’s leadership, examined the state’s significant fiscal challenges and proposed bold reforms.

Sadly, none of the courage demonstrated when the so-called “Murphy Commission” issued its final report in 2005 has carried through into the current administration’s proposals.

According to the Pew Charitable Trusts, New Jersey currently has the most underfunded pension system in the nation, with a combined pension and retiree health benefit liability of $151.5 billion.

That liability is nearly four times as big as our annual state budget, amounting to a nearly $17,000 debt hung around the necks of every one of our state’s 9 million residents.

As we continue our multiyear effort to increase pension payments to chip away at our liability, the $3.2 billion that we’re spending on pensions this year will more than double to $6.6 billion by 2023.

The billions in increased costs that we’ve already realized as we continue to phase in bigger pension payments has begun to strangle our budgets and impact our ability to fund other important priorities like schools and transportation.

Over the next four years, the cost of health benefits for current and retired public employees is set to rise by another $700 million, driven by the extreme expense of maintaining platinum-level health plans that are virtually non-existent in the private sector, or in any other state’s public system.

Consider that the annual premium cost for a public employee’s family to be covered by the State Health Benefits Plan this year was $30,200. But that pales in comparison to the $42,700 cost of providing family coverage to those enrolled in the School Employees’ Health Benefits Program, and most of that cost is paid by property taxpayers.

If we do nothing to lower those premium costs, New Jersey faces the imposition of a 40-percent Cadillac tax on those excessively expensive plans in 2022 as a result of the Affordable Care Act.

Clearly, something must be done to rein in public employee health benefit costs that are already unsustainable and set to get much worse.

While other states are flush with cash due to a booming national economy, New Jersey continues to struggle financially under the weight of these lingering burdens.

That dire fiscal outlook was reflected in Murphy’s new spending proposal for the upcoming fiscal year, which is dependent, in part, on a proposed income tax increase of nearly $450 million.

That follows more than $1.5 billion of income and business tax increases that he approved less than a year ago.

The simple fact is that we could have avoided all of these tax increases, and the governor’s incessant, Jersey-economy-and-investment-killing rhetorical message, had the bipartisan reforms we’ve proposed been enacted.

For example, our “platinum to gold” proposal to lower the cost of public employee health benefit costs could save New Jersey taxpayers approximately $500 million in FY 2020 if enacted.

That single reform would more than offset the $447 million that would be raised through Murphy’s proposed income tax increase this year.

Other “Path to Progress” proposals, such as moving new public employees to a hybrid retirement system and ending six-figure payouts at retirement for unused sick time, could save billions more if implemented.

While soundly balancing our state budget is essential, it’s not at the top of residents’ concerns.  Stunningly and consistently absent from the governor’s plans is any mention of a substantive solution to the issue our massive property tax burden.

Here, again, the  “Path to Progress” reforms are the single greatest, multi-billion-dollar-tax-saving answer.

In short, the $2 billion of taxes proposed or implemented by Murphy since taking office are completely unnecessary. He is pursuing taxes as a matter of politics, not sound public policy.

We’re also concerned that the governor is employing a variety of risky budgetary practices to compensate for his failure to pursue the well-researched structural reforms that many of us in the Legislature support.

He appears to be playing fast and loose with revenue estimates, projecting hundreds of millions more in tax collections through the end of the current fiscal year than was forecast when the current budget was adopted last July.

That’s concerning since actual revenue collections reported by his Treasury Department are coming in at less than half of the rate that is necessary to finish the year with a balanced budget. There simply is nothing in the trends that supports his rosy projections.

He also has reported finding nearly $1.1 billion in savings in the current fiscal year, which had never been mentioned before his budget speech and which he has yet to explain in detail so it is hard to determine just how much of it is real.

The spending “cuts” the governor outlined in his speech are only a small fraction of what’s needed to reduce the burden of our outrageously expensive government and avoid a fiscal crisis that will crush our taxpayers and destroy the fiscal futures of our public workers.

It’s important to note that these nondescript savings and unsupported revenue claims represent the entire difference between New Jersey being in a state of deficit or having the $1 billion surplus that the governor projects.

It’s also hard to reconcile the supposed revenue gains and savings he’s projecting with the need for an income tax increase as he’s proposed. His mixed messages just don’t jive.

Thankfully, there’s a growing consensus on both sides of the aisle in the Legislature that New Jersey can’t tax its way to prosperity.

The bipartisan Economic and Fiscal Policy Workgroup set up by Senate President Steve Sweeney has been touring the state to discuss “Path to Progress” reforms that represent a better approach to Governor Murphy’s tax proposals.

To learn more, Senate President Steve Sweeney and I will be hosting a town hall at Monmouth University’s Woodrow Wilson Wilson Hall on Monday at 6 p.m., along with Senator Vin Gopal and Peter Reinhart, the director of Monmouth University’s Kislak Real Estate Institute, who served on the panel.

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