Op-Ed: Tax Cuts: Wasting New Jersey’s Recovery

by Gordon MacInnes  |  Published in Editorials & Op-Eds, NJPP Blog: As a Matter of Fact ...
This op-ed appeared in the June 19, 2012 edition of the Bergen Record

Tax cuts are all the rage. Governor Christie and Senate President Sweeney are seeking to reduce taxes by10 percent for households earning $400,000 or less. They would add to New Jersey’s high debt level by borrowing the money to finance the cuts.

Assembly Majority Leader Louis Greenwald, D-Camden, is pushing a similar but larger plan, which would reduce taxes by 20 percent and be partially paid for with a higher rate on high-income taxpayers.

Only Warren Buffet thinks his taxes are too low. The rest of us would delight in having more money stay in our pockets. Unless, that is, the tax cuts would kill New Jersey’s ability to regain its competitive edge.

The governor asserts that the state’s finances are in such good order that he can find $1.35 billion that the state won’t need by 2016. Actually, the evidence is overwhelming that New Jersey is still spiraling downward: Unemployment (5th highest rate naitonally), economic growth (4th lowest) and credit rating (3rd lowest).

We are one of only six states to suffer a decline in economic activity in 2011 — New Jersey is still in a recession.

For the sake of argument, let’s assume that the governor is right: New Jersey has a cushion of $200 million this year, $650 million to $700 million in FY2014, $1 billion in the following year and $1.35 billion by 2016.

Does it make sense to distribute these funds in barely noticeable amounts to millions of households, or would we be better off investing in regaining our competitive edge to attract well-paying jobs and providing concrete opportunities to struggling families?

Not so many years ago, New Jersey was a hotbed of research and development. Bell Labs attracted thousands of scientists, engineers and researchers (including Nobel Prize winners).

New Jersey’s boom years

This was the “World’s Pill Box,” in part because it was the center of the pharmaceutical industry with headquarters, manufacturing and, yes, research and development laboratories. With two world-class research universities at Princeton and Rutgers, the state enjoyed boom years with high wealth and income.

Gov. Tom Kean understood that New Jersey could maintain its place by only investing in new technologies and research. Build the laboratories and computer centers and they — the world’s best educated scientists, engineers and researchers — will come. In his tenure, New Jersey voters approved two bond issues that would be worth almost one billion in today’s dollars to create new centers of exploration on the campuses of Rutgers, Princeton, the New Jersey Institute of Technology and the University of Medicine and Dentistry of New Jersey.

Kean’s raising the visibility of higher education with bond issues and operating-budget support, paired with the construction of state-of-the-art research facilities, produced what is still called “the golden age” of higher education in New Jersey.

In recent years, New Jersey has lost its competitive advantages. States like North Carolina, Virginia, Maryland, California and Massachusetts have been eating our lunch.

Instead of dribbling out modest tax cuts to everyone, New Jersey should concentrate any “cushion” on building on the science, research and technology foundation that brought us prosperity in the first place.

The amount required for the Christie-Sweeney tax cut, which would total $1.35 billion by 2016, could have a major impact on New Jersey’s restoration.

Starting with $200 million in the first year to assist higher education institutions with planning costs, a noticeable boost could be given to graduate, undergraduate and postdoctoral scholarships in specified fields like mathematics, computer science, genetics and nanotechnology.

By the second year, the investments would represent a 35 percent increase or so in state support for higher education, reversing decades of disinvestment.

To put the decline in context, matching the $231 million appropriation for Rutgers operating support in Governor Kean’s last budget in 1990 would require an appropriation of $408 million in FY2013. Instead, the governor’s recommendation is $241 million.

Tuition assistance

The other investment Governor Christie could include is to adjust the Tuition Aid Grants and Education Opportunity Fund scholarships to reflect the steep rise in tuition. A step in this direction would send a message to New Jersey’s striving students that the state wants to hold onto them by helping with rising tuitions and avoiding even higher student loan debt.

The choice is simple: invest in New Jersey’s future or play for short-term political points.

The state is stumbling at the bottom of the recovery from the Great Recession. Our leaders should drop “Comeback” and replace it with “investment” and “opportunity.”

NJPP Monday Minute 4/19/10: Christie budget gets an "F" in higher education cuts

In preparation for yearly budget hearings, the Office of Legislative Services analyzes each state department and posts analyses online. Because the Christie administration was slow to provide budget details this year, OLS analyses are less comprehensive than in past years. The information available, however, details significant changes in the administration's proposed appropriations for higher education.

OLS' Higher Educational Services report estimates that resources available to students and institutions of higher education will be nearly 14 percent less than current year spending. Of the more than 30 detailed changes included in this analysis, only one represents an increased appropriation.

COLLEGE FUNDING
Because state funding to colleges and universities has decreased while operating costs increased, state support as a share of college budgets has declined precipitously - from an average across all of the colleges and universities of 48 percent in 1990 to less than 14 percent in the budget Gov. Christie has proposed for FY 2011. Cuts in institutional funding and caps on tuition and fees limit the number and scope of courses colleges can offer.


TUITION AND FINANCIAL ASSISTANCE
The Christie administration proposes reductions in support to state colleges and universities, and funding cuts to all financial assistance programs but one.

On average, college tuitions in New Jersey are already among the highest in the nation. A survey for 2007-2008 by The College Board ranked New Jersey's $9,984 in-state average tuition and fees as second only to Vermont's $10,428.

As tuition and fees have grown, student assistance also has generally increased - until this year. Tuition Aid Grants (TAG) and the New Jersey Student Tuition Assistance Reward Scholarship I and II (NJSTARS) are the state's largest aid programs. TAG may see a cut of $10.9 million to $292.6 million in FY 2011. Currently, one in three full-time New Jersey college students receives a TAG grant. The budget estimates that TAG appropriations will support 63,735 students in academic year 2010-2011, 924 more than in 2009-2010. It will support more students, in part, because awards to students at private colleges would be much smaller due to a reduction in the maximum size of these awards.

The budget plans to increase the NJSTARS programs by $1.46 million to $20.1 million. This is the only increase identified in the OLS analysis. But while it is expected to support 2,100 students in college now (252 more than in 2009-2010), incoming freshman students to county colleges who do not already have a scholarship lined up are out of luck. No support will be available to them for the foreseeable future.

THOMAS EDISON STATE COLLEGE
Perhaps the most bizarre recommendation regarding higher education in the FY 2011 budget is the elimination of the $5.3 million appropriation to Trenton's Thomas Edison State College (TESC) and the recommendation that it (along with the state library and the state museum) be transferred to Rutgers University "as a new model for the revitalization of Trenton's cultural district." Presidents Pruitt at TESC and McCormick at Rutgers reportedly heard about this plan only shortly before the Governor's budget address.

The colleges have little in common and seem to have little to offer one another. TESC's instructional program is not provided through a traditional classroom but as distance learning through online courses. According to NJ Biz, TESC's 18,206 students make it the second largest institution of higher education in New Jersey (after Rutgers and just ahead of Montclair State University). Just under half of its students are active duty military personnel; the remainder are non-military and about 5,500 of them are New Jersey residents. Because TESC has no residential facilities and no campus-based classrooms, its costs are lower. Its $4,815 in-state and $6,840 out-of-state tuition and fees are respectively about 40 percent and 33 percent of those charged at Rutgers.

It is unclear how either institution would gain. Rutgers limits the number of credits that can be transferred from other institutions; TESC does not. Rutgers limits the number of credits that can be earned through testing, prior learning assessment or from military and/or corporate training; TESC does not. Rutgers has few programs tailored to adults and has limited experience with online education for adults; this is TESC's bread and butter. Rutgers operates on a traditional academic calendar; TESC begins a new semester each month, enabling students to begin when they are ready and finish when they complete their degree requirements.

Considering these differences, it is difficult to believe anyone thought about this much at all-particularly when it must happen by July 1 after less than four months of deliberation. In a budget as loaded with controversy and questionable decisions as this one, what really is the point here and who benefits?

FLUNKING OUT
A recent update of NJPP's 2006 report Flunking Out: New Jersey's Support for Higher Education Falls Short found that the budget cuts proposed by the Christie Administration will likely lead to tuition increases, a serious hardship as the state-and the nation-struggle with recession. The further erosion of state support will make it more difficult for the state's colleges and universities to maintain their current programs and will curtail growth. The longer the state waits to invest in these institutions, the more expensive it will be to do it.

Gov. Christie is well aware that New Jersey institutions of higher education are under-funded. His own transition team reported that, "...some [are] grossly under-funded, so more funding for operating support would be a positive thing, especially given NJ's bottom-of-the-nation ranking in funding changes for higher education over the last several years."

Education is vital for those entering the job market, for those in low-level jobs and for the unemployed. The higher tuition rates rise, the tougher it will be to get that education. The state's future and economic vitality is a function of the quality of its workforce. Without a quality workforce, New Jersey will limit its ability to participate in a high tech economy.

The state's decision makers need to consider strong support of New Jersey's universities as a vital and necessary investment in New Jersey's future and economy - this budget proposal does not take this long-range view.