Published July 14, 2016 in Bergen Record (northjersey.com).
ATLANTIC CITY’s casinos are booming. Yet its local government can’t make payroll without “bridge loans” and budget gimmicks from the state. We pay $1.5 billion in tolls and gas taxes each year. Yet Governor Christie says we can’t afford to fix a single road or bridge for years ? unless we agree to a billion-dollar-a-year tax hike. Our public employees pay more than ever for their pensions. Yet the pension funds need massive tax hikes to pay what was promised. Why?
The simple answer is that we are being choked by unsustainable debts borrowed by all levels of government. This money was borrowed to pay for years of unsustainable spending. Democratic Gov. Jon Corzine condemned this “credit card culture” by both political parties in his State of the State speech eight years ago.
In 2008, Corzine said our state’s $32 billion in bonded debt ? $3,700 for every man woman and child ? was then about three times higher than the national average. In the speech, Corzine said we had $25 billion more in unfunded pension liabilities and an estimated $60 billion in future health care costs for retirees. Corzine said funding that debt consumed $5 billion, or 15 percent of each year’s budget. He said it would cost $10 billion per year, or 30 percent of the budget, to fully fund those obligations.
Right problem, wrong solution
Corzine was right about the problem, but wrong on the solution. In 2008, he proposed bailing out a small part of these debts with a convoluted Wall Street scheme to “monetize” our toll roads with massive toll hikes. One year later, Corzine was voted out and Republican Chris Christie came in. All public discussion of the debt crisis ended.
For the past seven years, our Republican governor partnered with Democratic Senate and Assembly leaders to borrow billions more with gimmicks that even Corzine never dreamed of.
Atlantic City’s local government and public schools now have debts of nearly $600 million. Last May, the state passed special legislation that exempted all eight casino hotels from any future tax increases for the next 10 years. Since those casino hotels pay 65 percent of Atlantic City’s property taxes, there is simply no way the remaining business owners and 40,000 residents (roughly one-fourth of whom live in tax-exempt housing) can afford to pay that debt.
Five years ago, the New Jersey Transportation Trust Fund Authority borrowed and refinanced some $16 billion of debt by hocking every nickel of the $1.5 billion we pay each year in tolls and gas taxes for the next 12 years! Dozens of other governments, school districts and authorities throughout New Jersey are in the same sorry shape.
This is legal. The same bankruptcy laws that billionaires such as Donald Trump take advantage of work just as well for taxpayers. Also, the Transportation Trust Fund Authority borrowed money with bonds that were never approved by voters, as required by our state constitution. As a result, its debts are not legally enforceable against taxpayers, and Wall Street banks repeatedly warned investors of the risk.
This is fair. The “credit card culture” that created this debt grossly inflated construction costs with waste, mismanagement and pay-to-play corruption. Since taxpayers got very little for what was borrowed, it is not fair to make us pay back the full price.
This is the only way to get Wall Street money out of New Jersey politics. We need those insiders to start losing money on their sweetheart deals with the politicians they bankroll.
Fear of Wall Street losses
Business and political leaders argue that bankruptcy by Atlantic City government or the Transportation Trust Fund Authority is wrong because it will cause financial losses to Wall Street investors. But didn’t those investors get higher tax-free returns because of the risk? Why are financial losses to taxpayers through billion-dollar tax hikes less important?
This establishment claims government bankruptcies are “unthinkable” and “irresponsible.” As a lawyer who does bankruptcies for individuals, I know that living way beyond your means with credit cards is unthinkable and irresponsible. Using bankruptcy to wipe out debts and then living within your means are the first steps to being responsible again.
Seth Grossman is executive director of Liberty and Prosperity, a Tea Party group that applies New Jersey’s motto, “Liberty and Prosperity,” to specific issues.