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Amid Property Tax Debate, a Call for Public Say in NJ Debt

Fri September 01, 2006 - Northeast Edition
Tom Hester Jr.



TRENTON, NJ (AP) The New Jersey Constitution seems clear — the state cannot incur debt unless voters approve the expense.

But Garden State citizens haven’t always gotten their say.

Borrowing to build schools, fill pension fund gaps, build highways and bridges and close budget holes has left New Jersey with $33 billion in debt, giving New Jersey the nation’s third highest debt load and siphoning money residents pay to state government through income, sales and other taxes.

“Every dollar we spend on interest is one less dollar for school or municipal aid,” Gov. Jon S. Corzine said.

As New Jersey debates how to cut its highest-in-the-nation property taxes, Assemblyman Rick Merkt wanted the state constitution tightened to close loopholes that have allowed the state to borrow billions without public consent.

That borrowing and the debt it created, Merkt said, has “taken away money that might otherwise be available for a better use.”

“In my view, property tax relief might be a better use,” said Merkt, R-Morris.

The state constitution bars the state government from borrowing “until it shall be submitted to the people at a general election.”

But governors and the Legislature have worked around that by allowing independent state agencies to borrow without voter approval.

For example, the $8.6 billion borrowed to finance a school construction program wasn’t borrowed by state government, but by a corporation created to oversee the projects. The state Supreme Court upheld that borrowing.

Robert F. Williams, a Rutgers University-Camden constitutional professor, recently told legislators that many states have found ways to evade debt limitations.

“The courts are facilitating this by not reading the debt limit provisions strictly,” Williams said.

Besides judges, Williams blamed lawyers and lawmakers, describing them as an “unholy triumvirate to conspire literally to avoid what the people said — ’Quit borrowing unless you have our approval.’”

Williams said some borrowing is worthy, citing the New Jersey Turnpike and state college dormitories as examples, but added, “Maybe you ought to try to convince the voters they’re good ideas.”

The state’s high court did rule in 2004 that the state cannot borrow money to balance its annual budget, as was done earlier that year by Gov. James E. McGreevey and the Legislature.

“It’s the only time in state history where the court has agreed there should be some limitation,” said Senate Minority Leader Leonard Lance, R-Hunterdon.

According to a May report by Moody’s Investors Service, the state’s $33 billion in debt equals approximately $3,000 per resident, compared to an average of approximately $1,000 per person across all states.

New Jersey debt has more than tripled since 1996, and it ranks behind only California and New York among states with the highest debt. It ranks behind only Massachusetts, Hawaii and Connecticut in debt per person.

Much of the state’s debt came without a reliable revenue source to pay it back. For example, the school construction debt was to be paid back with money earned from the state cigarette tax, but that tax covered only $50 million of the $342 million in debt owed on the work this year.

The state budget includes $2.3 billion to pay debt, and Corzine said that will increase by 25 percent in four years.

While legislators mull making it harder to borrow without voter approval, Corzine’s administration plans to complete a study within three months that will recommend selling or leasing state properties or naming rights to raise money to repay debt.

The state’s toll roads have been most often discussed when leasing and selling state properties is considered. Chicago is getting $1.83 billion for a 99-year lease of its skyway, while Indiana is getting $3.85 billion for a 75-year lease of its major toll road.

Corzine hasn’t advocated leasing New Jersey’s toll roads, but his administration has mentioned it as a possibility, as did Corzine’s predecessor, Richard J. Codey.