Putting New Jersey on the Road to Liberty and Prosperity

To: Hon. Wayne R. Bryant, Chairman
Senate Budget and Appropriations Committee

Testimony of Dr. Murray Sabrin, Professor of Finance, Ramapo College of New Jersey
Before the Senate and Budget Appropriations Committee, Bergen Community College
April 3, 2006

Good afternoon. I would like to thank the Committee for the opportunity to discuss the Fiscal 2007 Budget.

We are at a crossroads in New Jersey. For years, governors of both major political parties have engaged in fiscal practices, if undertaken in the private sector, would have led to indictments of business executives. I therefore applaud Governor Corzine for attempting to restore honesty in the budget process. Unfortunately, honesty alone will not solve the state budget crisis.

Yogi Berra said when we come to a fork in a road we should take it; members of the Legislature and Governor Corzine have to take the correct fork in the road if the state’s fiscal condition will come off life support.

For the state budget to be balanced instead of in perpetual crisis, public officials must acknowledge former Governor Florio’s observation in one of his last budgets, namely, government tries to do too much. Moreover, Governor Corzine also got it right in his Budget Address when he said: “I think the values of most New Jerseyans include the expectation that as individuals, and as a community, we must pay our own way in life.”
(Emphasis added)

For example, Newark is a ward of the state, with taxpayers picking up 44% of the cost of municipal government and schools. This is unfair to the state’s taxpayers. All the state’s urban centers must become financially independent over the next few years. The Legislature must begin to nurture Newark and other cities back to financial independence immediately.

The time for tinkering is over; the state budget must be restructured. The state budget must be reduced by billions of dollars. A lower state budget would reflect the common good instead of the needs of specific individuals, groups and communities.

In short, the state’s fiscal crisis is as much a philosophical crisis as it is a financial one.

The culture of entitlement and redistribution of income is so ingrained in the collective psyche of policymakers and many segments of the public, that few individuals can conceive of a society based on low taxes, less spending, less regulation, and limited government. Instead, too many of our citizens believe government’s prime responsibility is to be the social worker, the healthcare provider and the source of income for many of our families.

Policymakers must embrace economist Ludwig von Mises’s insight: “The government and its chiefs do not have the powers of the mythical Santa Claus. They cannot spend except by taking out of the pockets of some people for the benefit of others.”

In other words, the redistribution of income is not only wrong, but in the final analysis is an unsustainable policy. People still have the freedom to vote with their feet.
And everyday productive citizens are leaving New Jersey for more hospitable states.

The trend is reversible, but not by wishful thinking, hand wringing or political posturing.

The time for partisan bickering is over. Policymakers must support unequivocally sound financial principles and limited government, if they want to put the state’s books in order and provide a friendly climate for the business community.

The state’s economy will not be robust if taxes are hiked. The Governor is engaging in wishful thinking if he thinks higher taxes will grow the state’s economy. With New Jerseyans having the second highest tax burden in the United States, higher taxes will not kick start the state’s economy.

On the contrary, taxes should be reduced so businesses and individuals will have additional funds to invest in new technologies and innovations, and keep more of the fruits of their labor.

The free enterprise system is the means to create high paying jobs, create wealth and raise the standard of living of everyone willing to work. State government, therefore, should take its appropriate place in society…limited to protecting the lives, liberties and property of the people.

The following recommendations are consistent with the principles outlined in the state constitution—freedom, liberty, and protecting property rights:

• Amend the Constitution to abolish the “thorough and efficient” education clause, giving the Legislature control over school spending
• Amend the Constitution preventing the Supreme Court from ordering the Legislature or the executive branch to spend money for any purpose
• Amend the Constitution giving land use decisions back to the people or their elected representatives
• The state should implement forensic accountants Rosenfarb Winters recommendations regarding the Abbott Districts, which would save at least $282 million
• Equalize state education aid. Every school district would get the same state aid per student as every other school district
• Implement education tax credits for individuals, families and businesses
• Institute zero based budgeting—all state agencies must justify every dollar it spends
• Reduce the sales tax by one cent every year for three years
• Reduce the personal income tax and the Corporate Business Tax
• Eliminate the income tax on pensions
• Eliminate property tax rebates, saving $1.5 billion per year
• Begin the transition making the state colleges, Rutgers University, and the University of Medical and Dentistry of New Jersey financially independent
• Eliminate all state grants to nonprofits
• End municipal grants
• Release nonviolent drug offenders from prison
• Raise the gas tax 20 cents per gallon only for road and bridge projects
• Kill the Transportation Fund bond issue
• End state government grants, loans, subsidies for businesses
• Abolish unnecessary business regulations
• Repeal the Highlands Act…the greatest violation of private property ownership in the history of the country
• Eliminate dual office holding
• Eliminate pensions for part-time government employees
• Eliminate pensions of legislators

These recommendations are based on several principles, namely, that state government is overstretched, and that the private and nonprofit sectors provide the goods and services the public want more effectively than government.

As the late management consultant and social analyst Peter Drucker observed nearly 15 years ago, “Federal, state and local governments will have to retrench sharply, no matter who is in office. Moreover, government has proved incompetent at solving social problems. Virtually, every success we have scored has been achieved by nonprofits.”

Throughout New Jersey individuals are not waiting for government to solve social problems. In Red Bank, the Parker Family Health Center under the leadership of Dr. Gene Cheslock is providing health care to the uninsured at virtually no cost to taxpayers. In Somerset County Doctors John and Alieta Eck are treating the uninsured at the Zarephath Health Center. These are just two examples of the spontaneous acts of caring by compassionate individuals. We need to encourage social entrepreneurship in every county to address the needs of the most vulnerable in our state.

The ball is the court of both the Legislature and the Governor. They can preserve the status quo, or they can reject the tax, spend, and borrow philosophy that has put the state on the brink of financial collapse…and they can take the road labeled Liberty and Prosperity, the state motto, by adopting sound financial principles and limiting the size and scope of state government. That’s the choice before policymakers.

Thank You.