Election '09: New Jersey Shifts its Tone

The day after the recent election, I found myself at a conference in Washington, DC being asked over and over again: What happened in New Jersey? The concern on the minds of the inside-the-beltway crowd was: What does this mean for Barack Obama?

While a lot did happen in New Jersey, it didn't have much to do with the President. Six months ago, all signs pointed to a strong A-B-C (Anybody But Corzine) attitude in the Garden State. After a summer and fall of often ugly campaigning, some spirited debates, and a bit of genuine excitement courtesy the Independent candidate Chris Daggett, voters returned precisely where they were six months earlier. They replaced Gov. Jon Corzine with Chris Christie, a federal prosecutor who promised to lower taxes and clean up corruption. Christie had the benefit of a unified base and an unpopular incumbent, and the independents who usually decide New Jersey elections broke his way decisively. New Jersey has approximately 2.4 million unaffiliated registered votes, compared to 1.8 million Democrats and 1.1 million Republicans, which had given Chris Daggett his hope for an insurgent third-party run. But on election night, the only surprise was the larger-than-expected 100,000-vote margin of victory. Governor-elect Christie can certainly claim a mandate for change, although how that translates into specific action isn't yet clear.

Jon Corzine had the terrible luck of serving during four years of economic turmoil, following even more years of bipartisan fiscal mismanagement. He actually took some strong stands in his single term — shutting down state government in 2007 to force a sales-tax increase, even as he reduced the size of the state budget by about $2 billion. But he never managed to convince voters that he had the fortitude to address the state's fiscal concerns or that he understood their anger. A revealing incident occurred at the commencement of his reelection campaign, when he negotiated two pay raises in a single year (and no layoffs) to the CWA in return for a promise by union members not to picket the Governor's reelection kick-off. Vice President Joe Biden was scheduled to attend the event, but not if it required him to cross a picket line. Faced between the choice of losing the Vice President for his photo-op or striking a deal with the union, he struck a deal that seemed to give away far too much. Less than a week after the election, Governor-elect Chris Christie raised the possibility of declaring a state of financial emergency to void that agreement, among other things. And there's the election in a nutshell.

Chris Christie has promised "to turn Trenton upside down," and now the state and Trenton are watching closely to see what he meant by that. The challenges are fearsome — a projected $8 billion shortfall in a state with the highest property taxes in the nation. Income tax revenues, which generate about a third of the state budget (over $10 billion annually), have plummeted by 17% during the past two years, and raising taxes is a non-starter for a politician who campaigned on a strict message of lowering taxes. Even if Christie wanted to raise taxes (which, again, he doesn't), it's not sure what he could do. New Jersey's top income tax rate of 10.25% for people earning over is $500,000 compares unfavorably to a flat 3.07% in Pennsylvania, which shares a 175-mile long border and boasts many lovely communities along the banks of the Delaware River. The Governor-elect also promised repeatedly not to raise gas taxes or tolls to pay for transportation, but here's the awful truth: after a decade of borrowing against future gas tax revenues to fund current needs, the state has obligated the next 30 years' worth of gas tax revenues to pay back interest on bonds that have already been spent. Without new revenues, the state's capital budget for transportation in a year is approximately nothing. Zero. Even worse, New Jersey will lose another $1.3 billion in federal funds, since it won't have the local funds to match the federal assistance.

History may eventually be kind to Gov. Corzine, who faced a perfect storm of economic havoc and never had a personal connection or compelling narrative to fall back on. He can look to the legacy of Gov. Jim Florio, who was defeated after tax increases and a radio station-organized coup d'etat in 1994, but is now widely respected across the state. More importantly, the next year should be an exciting one for New Jersey as the Governor-elect and his team tackle the mess they've worked so hard to inherit. If Gov. Christie can really find a way to address the dual challenges of annual operating deficits and staggering long-term debt — the Scylla and Charybdis of our current economic mess — he will earn the accolades that should follow. But he will certainly carry the scars of the battles ahead.