Hard budget decisions await N.J.'s Whitman CAMPAIGN 1994

October 16, 1994|By John W. Frece | John W. Frece,Sun Staff Writer

TRENTON, N.J. -- Do more with less. Shrink government. Cut taxes. It is the new gospel of State House politics, for which New Jersey Gov. Christine Todd Whitman has become the high priestess.

A decided underdog against incumbent Democrat James J. Florio a year ago, Mrs. Whitman promised to slash income taxes by 30 percent in three years. She won. Now, upset-minded Republican candidates throughout the Northeast -- including Maryland's Ellen R. Sauerbrey -- are modeling themselves after her, hoping to strike the same chord among tax-weary voters.

In New Jersey, Mrs. Whitman has already delivered on half her promise, cutting taxes 5 percent this year and 10 percent more beginning Jan. 1. But Marylanders looking for a glimpse of the impact of such cuts on government services will have to wait.

That is because Mrs. Whitman's success to date was largely engineered through budget maneuvers that allowed her to dramatically reduce taxes without a comparable reduction in spending. Political gain with little pain.

One of her biggest budget "cuts" came from reducing the state's contribution to its employee pension program -- a move that merely shoved the liability off to future generations. It was a big-dollar trick that cannot be replicated in Maryland, where state officials took essentially the same step a decade ago.

Mrs. Whitman's really hard budget decisions -- the kinds Mrs. Sauerbrey would be forced to make here -- are still ahead of her.

And neither woman is telling taxpayers yet what she intends to do.

Mrs. Sauerbrey, surprise winner in last month's GOP primary for governor, has pledged to cut Maryland income taxes 24 percent over four years, even while giving state workers a 3 percent raise next year.

She says she can do all that without big layoffs or damaging cuts in state services.

Moreover, Mrs. Sauerbrey says she will not even have to cut into previously scheduled increases in state aid for schools and other local programs -- a huge budgetary target that Mrs. Whitman is already aiming at in New Jersey.

"It is my intention, over the four years, not to take state budget decisions out on local governments," Mrs. Sauerbrey said. "I know I can do it."

In New Jersey, Mrs. Whitman has found the challenge of delivering on her own tax-cut promise so daunting that she now talks of a one-year delay in what had been a firmly promised three-year plan.

"Oh, we're going to do it," she says with confidence. "It may be four years, rather than three, but we'll get it done."

Critics see the slippage as proof her plan is unraveling. Her politics, they chortle, have suddenly come face-to-face with budget realities.

Mrs. Whitman's biggest problem is that New Jersey, like Maryland, faces an inherent budget imbalance: Because of programs mandated by various state laws, it is scheduled to spend more money next year than it is likely to take in.

If nothing were touched, spending in New Jersey would go up by about $1.1 billion, while revenues are expected to rise by only $600 million.

Something must be touched, however, since the state's constitution -- like Maryland's -- requires a balanced budget. So Mrs. Whitman must close that gap even before she attempts to provide more tax relief.

In part, she and her aides say they intend to deal with her budgetary problems by doing old tasks in new ways, perhaps with new technology, and by being more efficient.

Mrs. Whitman also says she is certain her tax cuts will ignite New Jersey's economy, ultimately increasing revenue for the state.

But she acknowledges that some permanent cuts in state spending also will be necessary.

Critics predict failure

Skeptics -- Mrs. Whitman's in New Jersey, Mrs. Sauerbrey's in Maryland, and Democrats in New York, where a tax-cutting state senator is running neck-and-neck with three-term Gov. Mario M. Cuomo -- say states cannot sustain the loss of so much revenue without doing irreparable harm to government services, school systems and the overall quality of life.

They complain that buzzword solutions -- such as "privatizing" -- services or "reinventing government" -- are unlikely to produce the big-dollar savings needed.

And they predict these grand tax-cutting plans inevitably will become a shell game in which the burden is merely shifted from state to local governments, just as Ronald Reagan's tax-cut policies shifted federal responsibilities to the states.

Claire Cohen, a specialist in state credit ratings for Fitch Investor's Service in New York, has been watching the tax-cut fad spread from one state to another.

"It doesn't seem to me in any of these [states] that we've seen any realistic detail of how you would balance revenue loss of that magnitude," she said.

"You hear, 'We would tighten the belt of state government,' but ** everyone that was affected by the recession has already done a lot of belt tightening. . . .

"The ultimate effect has to be on the local units of government."

Budget preparations

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