THE COMMON SENSE VETO MESSAGE THE GOVERNOR WILL NEVER WRITE:

Senator Jennifer Beck (R-Monmouth) issued the following statement and model veto message in advance of the Governor's expected signature of the State budget which spends almost 20% more than just two years ago.

"A governor who wants to do something about high gas prices and the rising cost of living in New Jersey would line item veto at least $500 million from the budget so we don't need to raise the gas tax, hike tolls, or waste more of the public's money preparing yet another version of a monetization scheme the public has soundly rejected."

Republicans had previously issued $1.3 billion of structural spending cuts to make new Jersey more affordable and allow for the replenishment of the transportation program without raising gas taxes or tolls. The Governor dismissed the proposal despite unanimous Republican support and support from several newspapers and the public.

"If the governor wants to avoid hiking the gas tax or tolls to replenish the transportation program in the months to come, here's how he can do it."

*Model Veto Below

June 26, 2008

ASSEMBLY BILL NO. 2800

To the Assembly:

Pursuant to Article V, Section I, Paragraph 15 of the New Jersey Constitution, I am appending to Assembly Bill No. 2800, at the time of my signing it, my statement of items, or parts thereof, to which I object so that each item, or part thereof, shall not take effect.

Purpose of Line Item Veto:

I am exercising my authority to line item veto certain spending for one reason: to save our soon-to-be insolvent transportation program without resorting to higher gas taxes or tolls proposed by others. Without this line item veto, our State will become even more unaffordable than it already is.

Background:

Our State is rapidly becoming unaffordable because of a shaky economy and increasing cost of basic necessities.

Unemployment continues to rise. For those with jobs, many are concerned about pending layoffs or are experiencing stagnant pay.

Mortgage and rent payments have become more expensive here than in most places in the world. The cost of things as basic as food and gasoline has risen dramatically. Utility bills are rising faster than ever.

Our State government has been partly to blame for how unaffordable life is becoming. Taxes have been imposed or increased more than 100 times in the past six years. People are paying more because of new or increased taxes on housing, health care, utilities and dozens and dozens of other items and services. New taxes were even imposed on people buying tires or keeping fit at a local gym.

This budget is more of the same. It puts New Jersey on course for yet another major tax increase.

The fund which allows our State to pay for transportation projects is rapidly running out of money. What little money remains in the fund is being pledged away over the next two years entirely as debt service for new debt to fund road projects.

Unless we take immediate action to replenish our transportation fund with revenue from existing taxes, it will soon be insolvent. There will be no way to resuscitate it and pay for transportation projects without a major tax increase.

This budget, despite cuts in certain areas, remains almost 50% higher than the budget enacted 6 years ago. There is room for additional structural spending restraints and I document them below to prevent what will otherwise be one more tax increase that makes life more difficult for our citizens and further damages our economy.

The more than $500 million in spending restraints that are part of this line item veto are modest and reasonable. They represent less than 2% of spending. Some of them amount to little more than providing smaller increases in aid than enacted by the Legislature. Others are focused at paring back government programs that have been unaccountable or that can be managed better.

I present the Democratic leadership of the Legislature with this challenge. If you do not support these reasonable restraints in spending, tell the public why not, and tell them how you will fund a transportation program that will soon be insolvent.

Page 55 

Department of Education, "General Formula Aid" is reduced by $125, 770, 173 to provide Abbott, Abbott Rim, and certain other school districts aid increases consistent with inflation instead of the excessive increases of up to 26% contained in this budget:

Under the enacted budget, 23 Abbott and Abbott Rim School Districts would receive increases exceeding inflation. For example the Hoboken School District would receive a 26% increase, North Bergen would receive a 20% increase, and the Union City School District would receive a 16% increase in this budget. Unlike other school districts throughout the State, these schools have received increases in the past. There is no compelling public policy reason why these and other schools should receive dramatic increases when past aid amounts have been deemed constitutional and when past spending has been the subject of highly critical audits.

Under the enacted budget, 20 school districts other than Abbott and Abbott Rim Districts would receive State aid increases of up to 20% even though the aid they receive now is more than 50% of their total spending. It can hardly be considered fair to increase these communities' aid far beyond inflation when they already receive such large amounts of aid and while aid to other communities is being cut.

Page 45 

Department of Community Affairs, "Special Municipal Aid Act" is reduced by $107, 305, 000 to provide temporary funding for distressed cities at the level provided in Fiscal Year 2002, prior to the program being mismanaged and manipulated as discussed in a May 2008 report of the State Auditor.

Over the past six years, a handful of municipalities received state aid from a program whose funding increased from $38 million to more than $153 million.

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 in FY 2008, despite having spent public funds in the past to support several free municipal swimming pools and to pay $500, 000 because of a civil suit filed by a detective found by a jury to have been 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. In addition to this line item reduction, I will be issuing an executive order requiring meaningful and substantive applications and requiring aid amounts to be given out based on written standards and criteria.

Page Misc. 

Miscellaneous accounts for services and equipment will be reduced by $90, 000, 000, which savings against the billions of dollars of service and equipment procurements by the State will be made possible by procurement reforms I will make by executive order.

The head of New Jersey's procurement office has stated that there is no reason we should not be able to easily reduce by 1.5% the price of the State's goods and services. Legislators from both parties have offered to support whatever changes in procurement laws may be needed to effectuate savings and efficiencies. Pending enactment of legislative reforms, changes in procurement to effectuate savings can be implemented immediately by executive order.

First, I will direct the State to dramatically reduce its procurement of goods and services without first 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 my 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, I will direct that major construction and building projects subsidized by the State will be subject to a disinterested third party review. The EnCap project is perhaps the best example of a subsidized project that was allowed to begin without adequate scrutiny of a disinterested third party. 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, I will direct the Governor's Office of Policy to 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 my office will undoubtedly prevent many of the more egregious purchase orders from being pursued in the first place.

Fourth, I will direct agencies to obtain 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.

Page 250 

"Salary Increases and Other Benefits" and miscellaneous salary lines will be misc.  reduced by $120, 000, 000 to account for savings attributable to two  initiatives: laying off nonessential employees and not funding salary  increases for non-uniformed employees with salaries in excess of $80, 000.

An early retirement program to reduce the State employee count is simply not enough. In addition to signing early retirement legislation I will eliminate patronage and managerial positions which are almost exclusively in nonunionized titles.

There remains substantial patronage and top heavy administration in State Government. 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 aide. These are only three of hundreds of examples of positions that will be eliminated with little or no disruption of public services.

I will lay off 2/3 of the employees in the following titles to 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. Not all of these people will be laid off. Some of them perform valuable functions.

Additionally, I am reducing the salary appropriations by an amount to reflect a proposal not to fund salary increases for most State employees with salaries over $80, 000. If unions will not agree to amend the contracts to reflect this cost-saving proposal for upper-income State employees, I will have no choice but to lay off additional employees.

Page Rev. 

I am adjusting the certified revenue assumption by $69, 000, 000 to prevent

Cert. Urban Enterprise Zones from receiving dramatic increases in the local retention of sales tax collections.

The law establishing Urban Enterprise Zones (UEZs) allows businesses within them to charge a 3.5% sales tax and for the local governing bodies to retain a percentage of collections for their own use. The original UEZ law enacted in 1983 set the percentage of sales tax revenue collected in the UEZ that could be retained by the UEZs. The percentage of collections was to decline over time, with the UEZs gradually being weaned off State subsidies. It allowed UEZs to keep 100% of local revenues in years 1-5, 66% in years 6-10, and 33% in years 11-15, and nothing thereafter.

In the late 1990's, many UEZs were approaching the point where they were about to lose their share of sales tax collections. UEZs were temporarily permitted to continue revenue sharing through language included in the annual Appropriations Act. In early 2002, the law was amended to allow UEZs to permanently retain some level of revenue. However, the law was amended in a way that was neither rational nor fair. The amendment enacted in 2002 provided that in the 16th year (instead of receiving nothing) UEZs would again start receiving 100% of sales tax collections and for the declining percentage formula to start over. The law was purely political in nature.

As of 2008, 19 of the UEZ are now retaining either 66% or 100% of local sales tax revenues – an increase from the 33% they should be receiving late in their lives. These UEZs are located in the following towns: Bayonne, Bridgeton, Camden, Elizabeth, Gloucester, Jersey City, Kearny, Millville, New Brunswick, Newark, North Wildwood, Orange, Plainfield, Roselle, Trenton, Vineland, West Wildwood, Wildwood Crest, and Wildwood.

The proposal here is to keep the lower tax rates in place as well as other benefits in UEZs that attract businesses and customers, but to replace the arbitrary and political formula used to determine local retention of sales tax revenues with a fair and equitable 33% retention of local tax revenues for all UEZs. The 19 towns listed above with UEZs that are currently retaining 66% or 100% of local tax revenues based on the arbitrary and unfair formula enacted in 2002 would receive less revenue for grant programs, but all remaining UEZs which are currently at a 33% retention of sales tax revenues would see no decrease in aid.

Tax cuts and extra revenue are good tools to increase depressed economic areas, but the tools must be reasonable.

Page 45 

Department of Community Affairs, "County Prosecutor Funding Initiative, Pilot Program" is eliminated for a savings of $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.

Respectfully,

/s/ Jon S. Corzine

Governor

Attest:

/s/ Edward J. McBride, Jr.

Chief Counsel to the Governor