Corzine Hits a Speed Bump
By PAUL MULSHINE
March 22, 2008; Page A24
Trenton, N.J.
New Jersey isn't usually considered exciting news. But it wouldn't have hurt the national media to pay a bit more attention to what happened recently when Democratic Gov. Jon Corzine tried to sell the public on the largest borrowing scheme in American history.
Mr. Corzine's motive was the looming disaster in the state's public-employee retirement costs. As in other states, New Jersey politicians for years have promised government employees lavish retirement packages but failed to put aside money to fund them. The unfunded liabilities are far in excess of a trillion dollars nationally.
New Jersey faces one of the worst crises. The state pension plans cover not just state employees, but also teachers and law-enforcement personnel at the county and local levels. When the former CEO of Goldman Sachs was elected governor in 2005, he seemed uniquely qualified to address the problem, thanks to his grasp of finance.
Unfortunately, he also had a grasp of politics. And the politics of the Democratic Party require that benefits for public employees be expanded, not reduced. Ever since the New Deal, Democrats have embraced a trickle-down theory on public-employee benefits. The public employees get gold-plated benefits first, and this creates pressure on private employers to eventually match those benefits for their workers. As union leader Carla Katz told me, the Democrats embrace "the progressive theory that unless you create a substantial wage and benefits package that reflects good jobs and the ability to have a middle-class life style, there will be a perpetual race to the bottom."
Ms. Katz is the New Jersey state president of Communications Workers of America, which represents thousands of state employees. She's also the ex-girlfriend of the governor. Eyebrows were raised when her ex-squeeze addressed a Trenton, N.J., rally of about 10,000 public workers in 2006 and yelled, "We will fight for a fair contract!"
We? Apparently, no one told the governor he was in management. And at the time, management was being pressed to make the sort of changes that could have cut the pension burden, such as raising the retirement age and putting new hires into the public version of 401(k) plans.
Mr. Corzine rejected those reforms. That left him looking for money to make up unfunded liabilities of an estimated $25 billion for the pension fund and $58 billion for post-retirement medical benefits. Politicians in other states had sold their toll roads and gotten billions. And as toll roads go, New Jersey's are among the busiest in the country. Mr. Corzine put up the idea of a sale as a trial balloon. The unions shot it down. But the governor came back with another trial balloon, this one based on a bond sale the size of the Hindenburg.
His plan was to create a "public-benefit corporation" that would sell bonds to buy the roads from the state. The purchase price, $38 billion, would be paid off by toll receipts over the next 75 years. Mr. Corzine's fellow Democrats, who control both houses of the state legislature, were skeptical. Tolls would rise at four-year intervals far beyond the Corzine era, which could end as early 2010. So Mr. Corzine planned to build public support through a series of "town meetings" in each of New Jersey's 21 counties. The idea was that the former Wall Street whiz would put the plan before the public in a 45-minute slide presentation, and then easily handle the questions that would follow.
That worked well at the start, but then most of the Hindenburg's flight was uneventful as well. The descent of the Corzine plan began in Cape May County. A small protest was organized outside the hearing by Steve Lonegan, a former small-town mayor from Bergen County with aspirations to be governor. Mr. Lonegan was handing out leaflets when the local Democrats had him hauled off to the hoosegow. Editorials lambasted Mr. Corzine for suppressing free speech. The charges were dropped, but the damage was done.
By the time Mr. Corzine reached Ocean County, where the Hindenburg went down, his plan was also ready to crash. Joining Mr. Lonegan in the campaign against the plan were the Jersey Guys, two drive-time talkers on the state's major radio station, 101.5 FM. The Jersey Guys centered their criticism on a line from Mr. Corzine's speech introducing the plan: "Pigs will fly over the statehouse before there's a realistic level of new taxes or spending cuts that can fix this mess."
This inspired protesters to show up at a Toms River, N.J., hearing dressed as pigs with wings. This time, the audience didn't sit patiently. Mr. Corzine's pleas for full funding of the retirement system were met by catcalls from the audience who -- despite Democratic theory -- see very little benefit trickling down to them from paying for gold-plated government pensions.
Then on Feb. 8, the Jersey Guys sponsored a "Flying Pigs" rally at the statehouse. The rally culminated in the release of hundreds of flying-pig balloons that, thanks to a helpful east wind, flew directly over the statehouse.
The pigs having flown, Mr. Corzine soon announced he was suspending further town meetings until after his annual budget address in late February. In that address, the governor introduced an austerity budget for fiscal 2009 that did not include the bonding scheme.
But the damage was done. Earlier this month, the governor's approval rating sank to 34% in a Monmouth University/Gannett Poll, down from 47% in October. Mr. Corzine still hopes to revive his toll plan. As for his political prospects, all that's missing is an announcer crying, "Oh, the humanity!"
Mr. Mulshine is a columnist at the Newark Star Ledger.
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