Asbury Park Press

It has been a month since a fiscal reform task force created by New Jersey Senate President Steve Sweeney released its report. It included more than 30 recommendations on ways to make New Jersey government more efficient and the state more affordable for taxpayers. Will the Legislature and governor act on the recommendations? Will it result in lower taxes? Will Gov. Phil Murphy and state lawmakers take the steps necessary to improve the quality of schools and the services provided by government? Sweeney answers those questions and more that were posed to him by Editorial Page Editor Randy Bergmann:

Just how dire is the state’s fiscal outlook? What are the consequences for taxpayers, their communities and the state if action isn’t taken soon on most of the key recommendations in the task force report?

The state’s fiscal outlook is quite dire. If nothing is done, pension payments alone will go up $3.4 billion over the next four years. That’s more than five times as much as the sales tax increase the governor was seeking in his last budget. Pension and health care costs for current employees and retirees would make up 26 percent of the state budget four years from now. Without the changes recommended by the task force, New Jersey will not have the financial wherewithal to make much needed investments in higher education, K-12 education, preschool, affordable housing, economic development, charity care and social services that will make New Jersey more competitive and more affordable.

Gov. Phil Murphy has said he believes New Jersey can “grow its way out” of its fiscal problems by building a strong economy that can expand the state’s tax revenue base. Why don’t you, and the task force, believe that’s feasible?

The math is simple. The increase in pension and health benefits is going to eat up every penny of projected revenue growth for the next four years if you assume the standard 3 percent growth rate. You can’t budget based on hope. You have to budget based on reality. Even if New Jersey revenues grow at 5 percent — and that would be the highest growth rate in the country — that’s just $700 million more. The growth in pension and health care costs is in the billions. Furthermore, any economist will tell you that we’re overdue for a recession sometime in the next four years. Don’t get me wrong, I want New Jersey’s economy to grow, but we need to be able to make the strategic investments to stimulate that growth. Right now, there’s nothing left to invest.

What hope should this report provide New Jersey’s long-suffering taxpayers? Any way to quantify what it might mean in terms of tax relief?

The report provides a road map to save New Jersey billions of dollars, but what’s most important is that it illustrates how we can provide our residents with the high quality of life they expect in New Jersey without massive tax increases. New Jersey has a responsibility to both current and retired public workers — police, firefighters, teachers and public employees who served the state proudly — to fulfill its commitment to a sound retirement. However, we must fix the problems created by politicians and union leaders alike who promised “something for nothing” for years. The late Gov. Brendan Byrne used to joke, “In New Jersey, if you’re not getting something for nothing, you think you’re not getting your fair share.” That has to end.

Many of the recommendations have been proposed by previous commissions and study groups over the past four decades and ended up dying on the vine. Why might things be different this time?

The Economic and Fiscal Policy Work Group not only included top policy experts, but also leading legislators from both parties who fully understand the magnitude of the problem, what needs to be done and — even more — the cost of doing nothing. The governor said he is committed to making New Jersey “stronger and fairer,” but if we do nothing, pension and health care costs will crowd out all of the progressive initiatives that he promised. This is the only way to turn this state around. This time, the urgency is greater than ever before, and many of us understand that.

Which recommendations in the report do you consider most important for the state’s short-term and long-term fiscal health? Which have the most potential to relieve New Jersey’s property tax burden?

The most important priorities are getting control of pension and health care costs, and the way we are proposing to do that is by creating a hybrid pension system for state and local government employees with less than five years in the pension system and shifting from “platinum” to “gold” level health care coverage. The shift in health care coverage alone would save upwards of $600 million just for property taxpayers whose local governments and school districts provide coverage through state health plans. The state shifting to gold will also provide a new benchmark for those local governments who have their own self-funded plans. In addition, legislation to limit future sick leave payments will save billions more over time.

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New Jersey has the highest property taxes in the nation and the heaviest reliance on the property tax for government revenue. Did the task force consider any revenue-neutral plan involving increases in the income tax or adding items subject to the sales tax to reduce reliance on the property tax?

Yes, the committee recommended further study of a local option sales tax, and a plan to shift Extraordinary Special Education costs to the state level will reduce the burden on school property taxes. But the best way to reduce our reliance on property taxes is not by a cost shift, but by controlling pension and health care costs and by making our local governments and school districts more efficient.

Some of the ideas in the report are relatively new. Which have the most potential to make a difference?

The proposal to shift state and local government assets into the pension system — as we did with the state lottery and its $1 billion revenue stream in 2016 — could sharply reduce the unfunded liability for both the state budget and local property taxpayers. The recommendations for education reform are particularly exciting because they will both improve educational quality and provide some costs savings.

One of the key recommendations in the report is pension reform. Gov. Murphy has said he doesn’t want to consider any additional changes to pension plans unless the state first fulfills its previous funding commitments. Is that position realistic? And what will it take to get Murphy to change his mind on supporting new reforms?

That position is not realistic, and when the governor looks closely at the numbers, he will realize he can’t fulfill his promise to make New Jersey “stronger and fairer” without tackling pension and health benefit reform now. We are both committed to making the state’s pension contributions on the current trajectory. I think now is the time to commit to making our pension system as sustainable as possible for retirees, current workers, future workers, and all state residents.

A recommendation originally conceived during the Corzine administration calls for merging all K-5, K-6 and K-8 school districts into K-12 districts, effectively reducing the number of districts by half. What is the thinking behind this recommendation? And how can you overcome likely resistance to the idea from the NJEA and some communities?

This recommendation is driven not by cost savings — although there will be some — but by educational concerns. We need to ensure that we are providing a fully integrated K-12 curriculum, and we can’t accomplish that when we have high schools getting students from three or four different districts who are using different textbooks and teaching different material and methods. Parents will understand that this is about educational quality. We must help taxpayers realize that the smallest school districts spend 17 percent more than regional districts and are unable to provide the same richness of curriculum. Students will attend the same neighborhood elementary schools with the same teachers — but with fewer superintendents and duplicative administrative staff. This is a glaring inefficiency in our educational structure. Addressing it is a no-brainer.

Gov. Murphy and the public employee unions, particularly the NJEA, would seem to be the biggest impediments to getting some of the key recommendations implemented. What is your strategy for overcoming the hurdles?

It will come down to choices in upcoming budgets. Do we want to expand state aid to underfunded school districts to help property taxpayers? Do we want to fix NJ Transit? Do we want to expand preschool, reduce the cost of our county colleges and enhance our universities so we keep more of the best and brightest in New Jersey? Or do we want pensions and health benefit payments to swallow every new dollar coming into the state and then some? I think that’s going to be a clear choice for Democrats and Republicans in the Legislature. In order to invest in our shared priorities, we are going to need to make these tough choices. It is the job that the voters of New Jersey elected us to do.

How many of the 30 reforms are you confident can be implemented in the next year or two?

I would like to see most of them implemented over the next two years because they make sense and they are good for New Jersey.

The task force subcommittees initially came up with 200 ideas before whittling them down to about 50 and then to about 30 that found their way into the final report. What ideas that didn’t make the final cut left you most disappointed?

The subcommittees boiled down the recommendations into manageable numbers and priorities. Although many ideas were left on the cutting room floor, the original 200 ideas that were generated by members of the group contained some overlap that needed to be ironed out. Nevertheless, it doesn’t mean that ideas left on the cutting room floor won’t resurface in the years ahead. The work group did a tremendous job. Its members will continue to be involved, and as legislators, we learned a lot that will inform our decision-making in the years ahead.