NJ should sell assets, cut workers’ benefits – Gov

By Joan Gralla

NEW YORK (Reuters) – New Jersey Gov. Jon Corzine on Friday
proposed reforms to shore up the state’s finances, adding that
within three months he will recommend what assets should be
sold or leased.

The Democratic governor, who briefly shut many government
agencies after the state missed its June 30 budget deadline,
also will consider using naming and development rights and
public-private partnerships to raise cash for long-term
investments.

Previously, he has rejected privatizing the New Jersey
Turnpike to raise money for day-to-day expenses. Several other
states — from Virginia to Texas — have raised hundreds of
millions of dollars by leasing highways to private companies.

Corzine was forced to close a $4.6 billion deficit in the
state’s new $31 billion budget. The former U.S. senator,
addressing lawmakers on the first day of a special session,
proposed rewards and harsh changes as long-term solutions.

New Jersey residents pay some of the nation’s highest
property taxes, and Corzine proposed using $350 million of
sales tax revenue to partly pay for a $1.6 billion program to
replace the rebates homeowners now receive with tax credits by
July 1, 2007.

Property taxes, which for two decades have risen an average
of 6.5 percent a year, also should be capped at 4 percent a
year for four years, he added.

New Jersey derives 46 percent of its tax revenue from
property taxes. The U.S. average is only about 30 percent.

“Frankly, I’ve never in my life wanted so much to be
average,” Corzine said.

New Jersey’s tradition of letting localities exert much
more control than in other states drives up property taxes by
creating too many costly bureaucracies, Corzine said.

“I grew up in a small town. I know the pride and sense of
community it creates and no one has any desire to undermine
it,” said Corzine, who was raised in a small town in central
Illinois. But he added that this tradition cannot justify
creating too many costly and inefficient bureaucracies.

Like other entities, localities would benefit from
economies of scale, he said.

Corzine wants to spend $250 million a year to reward
counties, cities and towns that cut property taxes by merging
services. He urged lawmakers to create a financial control
board to monitor how well they combine and improve services.

New Jersey also must curb state workers’ pension and health
benefits, Corzine said, estimating that the pension system’s
unfunded liability is $18 billion. The unfunded health care
liability is even bigger at $20 billion, he said.

The governor, citing New Jersey’s history of poor financial
management, said a new state comptroller office should be
created, with a six-year term.

By mid-September, Corzine wants to start contract talks in
order to cut pensions for new and recent hires, add means tests
and change retirement ages. State workers also would be asked
to pay more for healthcare and adopt preferred provider
systems.

If state workers spurn such changes, their health benefits
will cost New Jersey 70 percent more in four years, he said,
estimating the price at $3.6 billion.

Corzine urged the legislature to end loopholes that let
political appointees and “people who barely work” get the same
benefits as career public employees, adding:

“That said, I don’t believe we have the legal or moral
authority to break or take away nonforfeiture rights.”

New Jersey also must slash its debt, Corzine said, noting
that repaying that debt now costs $2.3 billion a year and the
sum will increase by 25 percent in four years.

Corzine, who previously ran investment bank Goldman, Sachs
& Co., reminded lawmakers he is a financial expert. “I’m an old
bond guy and they’re really high,” he said of the state’s debt
service estimates.