Will NJ Supreme Court Uphold Constitution and Force Vote on New Debt?
By Seth Grossman, Political Columnist
“When you find that you have dug yourself into a hole, the first thing to do is to stop digging.”
??? Eight years ago, Steve Lonegan, the Republican mayor of the small North Jersey town of Bogota, tried to force NJ to do that.
??? He sued to stop Republican Governor Christie Todd Whitman and the Republican-run legislature from borrowing $8.6 billion without voter approval – something forbidden by our state constitution since 1844.
??? In 1998, the New Jersey Supreme Court ordered the state to build about $6 billion worth of new schools in 20 “poor” districts.?? In 2000, the Republicans decided to borrow the money instead of raising taxes.?
??? To avoid letting the people vote on this, they had an “independent” Economic Development Authority (EDA) borrow the money.?? But the EDA was “a mere shell” with no income to pay the loan back.?? So the state made an unenforceable and unconstitutional contract with the EDA to reimburse it for all its loan payments.?? Wall Street bet that the state would honor this sham contract anyway.?? If the state did not pay, its credit rating would be ruined.?? Republicans and Democrats also bought friends by having the EDA borrow an extra $2.6 billion for projects in well-off districts, like Ocean City’s new $40 million high school.
??? Republican Mayor Steve Lonegan alone formed a committee, raised money, hired a lawyer, and sued to force a vote on the plan.?? But in April of 2003, the New Jersey Supreme Court ruled against him in a narrow 4-3 decision.?? Here is what the majority said:
??? 1.?? Whitman’s $8.6 billion borrowing plan was “sui generis” (unique).?? Once the new schools were built, the “poor” (Abbott) districts would never need special treatment again.
??? 2.? The state had no legal obligation to pay back any of the $8.6 billion.?? The legislature can simply refuse to pay the money any time during the 30-year life of each unconstitutional loan.
??? 3.? The New Jersey Supreme Court had approved of similar gimmicks for 50 years.?? Why stop now?
??? 4.? “The variety of financing mechanisms employed in both the private and public sectors today were unheard of when the Debt Limitation Clause was made a part of our Constitution in 1844.?? Had the framers been prescient (foresighted), they might have written the Clause differently. . . . Yesterday’s speculation has become sound and economical current business practice.”?
??? Events over the past five years showed that Lonegan was right, and that New Jersey’s Supreme Court majority was wrong.?? First, the $8.6 billion borrowed by Republican Governor Whitman, and spent by Democrat Governor McGreevey did little or nothing to improve education, and the “poor” districts still cry that they “need” billions more.?? Second, Wall Street Governor Corzine hustled his toll hike plan because he said failing to pay even unconstitutional debt was “unthinkable.”?? Third, these borrowing gimmicks to get around the New Jersey Constitution only started 25 years ago with Republican Governors Tom Kean and Christie Whitman.?
??? And finally, after Enron, Fannie Mae, Lehman, etc… it is simply goofy to say that today’s Wall Street schemes are “sound and economical” or that its “geniuses” are smarter than the people who tried to limit government borrowing in New Jersey’s 1844 constitution.?
??? When Steve Lonegan sued to stop state borrowing without voter approval in 2000, our state government had roughly $14 billion of debt, of which only $3 billion was approved by voters.
??? Just eight years later, we now have $40 billion in state debt, with still only $3 billion approved by voters.?? And that does not even count roughly $25 billion more in unfunded pension liabilities and $58 billion in unfunded “free” medical care for retired teachers and other government employees – none of which got voter approval.
??? Last July, Governor Corzine, after two years of warning against too much state debt, agreed to borrow $3.9 billion more – again without voter approval.
??? Two weeks later, Steve Lonegan hired me to file a second lawsuit to stop it.?? The complaint is posted at www.libertyandprosperity.org.? A management conference will be in Hackensack on September 19, before Superior Court Judge Harris.
??? I do not envy him.?? On the one hand, every lower level judge must defer to precedents of our New Jersey Supreme Court.?? But on the other hand, the judge (like anyone who reads a newspaper) knows that if our courts keep making loopholes in our state constitution, most New Jersey bonds and pensions will soon be as worthless as Enron, Bear Stearns, Fannie Mae, Freddie Mac, or Lehman stock.
For more information, visit www.libertyandprosperity.org or contact Somers Point attorney Seth Grossman at email@example.com or 609-927-7333.??? Seth Grossman hosts a two way talk radio program every Saturday from 8am – 9am on WVLT Vineland, 92.1 FM.