New Jersey Politics and Government: The Suburbs Come of Age

Chapter 14. The Politics of Taxing and Spending

274 Chapter 14 The Politics of Taxing and Spending The passage of a law equalizing taxation seems to be imperatively demanded by the people, and I respectfully but earnestly commend it to your early consideration and prompt and efficient action. —Governor Daniel Haines’s message to the legislature, 1851 Our whole system of taxation, which is no system at all, needs overhauling from top to bottom. —Governor Woodrow Wilson’s inaugural address, 1911 We’re going to talk about taxes today, which Yogi Berra would say is déjà vu all over again. —Former Governor Brendan Byrne at a conference on state tax policy, 1987 In 1900, New Jersey state government collected and spent less than $3 million.The general public paid none of the state taxes of the time—on bank stock, insurance companies, railroads, corporate franchises , or large inheritances. Nor did they benefit directly from Trenton’s paltry services. More than half the state budget supported “charities”— aid to the blind, deaf, and mentally ill—and “corrections”—judges and the state prison. Local governments spent four times as much, raising virtually all of it from property taxes. By FY 2013, Governor Christie was proposing state expenditures of $32 billion. Broad-based taxes levied at rates among the highest in the nation produced the majority of revenues. The Politics of Taxing and Spending 275 Invisible and insignificant state taxing and spending had become highly visible and significant. What state government spends its money on and from whom and how it raises it are now important questions to everyone in New Jersey.This chapter examines the evolution of tax and expenditure policy over time. The Budget and Budget Politics Before the 1947 state constitution banned them, a morass of dedicated funds made it “impossible for the state to mass its fiscal resources and direct them to the points at which they are most needed.”As a group of Princeton scholars further observed, “[N]o living person knows what expenditures have been authorized. . . . Only by the merest accident can the needful expenditures of a department coincide with its receipts from particular fees or taxes.”1 Formal budget procedures now are deceptively simple.The state’s fiscal year begins on July 1. By that time, the legislature must pass a balanced budget.The state constitution requires a single general appropriations bill. It also proscribes the creation of state debt exceeding 1 percent of the fiscal year’s appropriations without approval in a public referendum. The Role of the Governor in Budget Making Generally, the legislature can play a greater role in determining how revenues will be raised than in how they will be spent. Legislators usually can do little but tinker with proposed expenditure levels.A line item veto allows the governor to remove appropriations he or she does not favor. The governor can also prohibit or limit expenditure of any appropriation if revenue collections fall below the certified amount. It is the governor who certifies revenue estimates. To an ever greater extent, the governor’s office rather than the extended executive branch develops spending recommendations. Until the 1980s, cabinet officials proposed whatever they thought they could get away with, guided by the informal mandates of an incremental budget process. The budget director, the treasurer, and the governor would then review the cabinet’s recommendations. Everyone understood that department requests would be cut 10 to 15 percent, and acted accordingly.With the civil servants in the budget bureau playing a larger role than the understaffed governor’s office, policy aims got rather short shrift. Governor Kean instituted a tighter and more focused process beginning in 1983, and Governor Christie embellished it. Departments file budget requests with the 2 7 6 N e w J e r s e y P o l i t i c s a n d G ov e r n m e n t Office of Management and Budget (OMB) in October of the preceding fiscal year.They must be predicated on specified target amounts and arrayed in what are now called“core mission packages.”2 The governor specifies the core missions. To some extent, therefore, the annual budget is thus a statement of the governor’s priorities and can be an instrument to reward or punish departments and constituencies. Governors have far from a free hand, however. As Jon Corzine described his...