New Jersey Reporter

McGreevey's Challenge
How to Fill a $3 Billion Budget Gap Without Raising Taxes

--BY MARK J. MAGYAR

FACING FISCAL CRISIS: Governor-elect Jim McGreevey projects a $1.9 billion current year budget deficit and a $3.7 billion shortfall in the fiscal year that starts June 30. He has entrusted Anthony Coscia (left), as chair of his budget review transition team, with coming up with a solution.

Photos by Linda Holaday

Jim McGreevey spent his formative political years in Trenton as a young Democratic state assemblyman watching another Governor Jim wrestle with a mounting budget gap brought on by a deepening recession.

Governor Jim Florio took the advice of Assembly Speaker Joe Doria and seized upon the crisis as an opportunity not only to balance the budget, but to enact the most ambitious property tax relief program  and the largest income and sales tax increases  in New Jersey history.

The New York Times thought so much of Florio's courage that he made the cover of the Sunday Times Magazine. New Jersey voters thought something else.

Florio became a one-term governor. Doria became a one-term speaker. McGreevey only avoided becoming a one-term assemblyman by deciding to run for mayor of Woodbridge instead.

Eleven-and-a-half years later, Governor- elect James E. McGreevey takes office with a mounting budget gap brought on by a deepening recession.

While Florio said during his 1989 campaign that he could "see no need" to raise taxes, McGreevey has made an ironclad pledge not to raise taxes and he keeps repeating it.

Doria, who pushed McGreevey to vote for that $2.8 billion tax increase in 1990, was in line to become Assembly speaker again. He won't. McGreevey made sure of that.

McGreevey and his transition budget chair, Tony Coscia, are confident they can solve the budget problem by "making government live within its means" and by "making government work," phrases this "New Democrat" governor could easily have borrowed from any number of Republican Governor Christie Whitman's speeches.

McGreevey's right. But it will not be easy, and how he handles the crisis will go a long way towards determining the success of his administration.

DEFICIT POLITICS

For the two months since McGreevey's election, political rhetoric in the state capital has taken on an "Alice in Wonderland" quality as Democrats and Republicans switched their traditional roles.

McGreevey, who thought before the election that New Jersey would face a current-year budget gap of no more than $750 million to $1.5 billion, sounded very Republican with his repeated demands that the lame duck GOP-controlled Legislature quit spending money in the face of a looming budget shortfall that seemed to keep rising -- from $1.9 billion to $2.4 billion to $2.8 billion -- every other week.

Meanwhile, Republican legislative leaders and outgoing state Treasurer Peter Lawrance kept arguing until almost the day McGreevey took office that the Democrat was inflating the size of the potential budget deficit facing New Jersey's state government in the current and next fiscal year.

McGreevey's motivation is threefold, they contended:

1. To be able to blame whatever unpopular budget cuts he makes on the previous Republican administration and the former GOP-controlled Legislature</U>  a contention bolstered by McGreevey's repeated insistence that the outgoing administration take the unusual step of recertifying state revenues before it leaves office. Not surprisingly, Republican Acting Governors Donald DiFrancesco and John O. Bennett III were unwilling to point the finger at themselves to give political cover to McGreevey.

2. To look like an even bigger hero when he manages to balance the FY02 and FY03 budgets without raising taxes</U>  although it is hard to believe that voters will give McGreevey appreciably more credit for solving a $5 billion problem, for example, than a $3 billion shortfall. When the deficit gets into the billions, all but the most devoted budget experts' eyes glaze over.

3. When all else fails, to lay the groundwork to blame the Republicans for the tax increase he secretly plans to seek.</U> The problem with this scenario is that McGreevey has eschewed every opportunity to backtrack on his pledge not to raise income or sales taxes to solve the current budget crisis. He has left himself no wiggle room at all on a promise as ironclad as the "read my lips" pledge that came back to bite former President Bush.