CORZINE WILL CAMPAIGN FOR ASSET MONETIZATION"

A reticent Midwesterner by background and a numbers-crunching, bottom line financial manager by profession, Governor Jon Corzine is neither a boastful nor a confrontational guy.  But when he signed the 2008 state budget into law on Thursday, he enthusiastically explained the several positive features of the new spending plan. However, he deviated from the usual election year script of talking solely about accomplishments and reminded New Jerseyans about the serious fiscal challenges that the state will face next year and beyond unless some bold decisions are made.

Rather than simply issue warnings or quibble with his critics, Corzine made it clear that he and his staff are moving forward on developing a plan that will enable state government to meet existing obligations and pursue other praiseworthy policies. As the Governor explained at the budgeting signing, the details of that plan is still to be fleshed out. But it will entail the monetization of assets.

If you believe last week's STAR LEDGER article - the paper stands by the story -, the Governor did not want to talk about asset monetization until after the November 6th midterm.  That's because legislators in his own party seeking reelection did not want to deal with the controversial and largely misunderstood concept on the campaign trail.  After all, opinion polls show that a majority of New Jerseyans do not want to the state to sell or lease the toll roads to a private company no matter how much money such a plan would bring to the treasury. But delaying discussion until after the election would look like the Democrats wanted to hide something and deny citizens the opportunity to learn where candidates stand on the issue.

To make matters worse, the day after the legislature passed the budget Republican lawmakers complained that it contained language that enabled the Governor to move forward on an asset monetization plan. Corzine insisted that the new budget simply authorizes spending on further study of the concept of asset monetization, not on the implementation of any plan. Nonetheless, sensing that they found a pretty good campaign issue, Republicans leaders warned that the Democrats may be up to some political shenanigans that undermine the policy-making process and avoid the responsiveness and accountability to the public that campaigns and elections provide. 

What might those Democrats be up to? Republicans think that the Administration will develop, or perhaps already has, a full blown plan and spring it on the public in the lame duck session or in the new session if the Democrats retain their majorities in the legislature.  That plan may well entail selling or leasing toll roads to foreign investors or to a consortium of the Governor's old Wall Street buddies. To make such a deal profitable, the new owners or lessees will probably have to jack up toll prices and cut operating costs by deferring maintenance.  Yes, state government may get a big cash windfall but citizens, especially commuters who regularly travel the New Jersey Turnpike, Garden State Parkway, and Atlantic City Expressway, could get stuck with higher tolls and bumpier rides.

Not many New Jerseyans would claim to be experts in high finance. But, in a state where lawmakers from both parties have made a habit of balancing budgets through creative financing, it shouldn't be a surprise that most folks here regard asset monetization as just another fiscal gimmick. And if it is anything like channeling money from the unemployment trust fund, revaluing the public worker pension fund, or borrowing money to pay for government operating costs, asset monetization won't solve the state's fiscal problems.

With such perceptions, concerns, and yes, confusions about asset monetization out there, imagine being a Democratic legislator running for reelection this fall.  No wonder that a good number of Democratic incumbents and challengers have issued statements that they will not support the sale or lease of toll roads to private firms, foreign or domestic. This in the wake of the Republican's condemnation of any such ideas and their criticism of the new budget as containing unsustainable property tax relief and setting the state up for a big financial crisis next year.

Is this important stuff or just the obligatory attacks the minority party makes on those in control, especially in an election year?  Well, Governor Corzine thinks they are important enough for him to address directly and to change his timetable on explaining and justifying asset monetization to the public.  After listing what the new state budget accomplishes, most notably the large property tax rebates, increased aid to non-Abbott school districts and to municipalities, and new initiatives to fight autism and cancer, Corzine candidly explained the challenges the state still faces. These include closing a $2.5 billion deficit in next year's budget, paying more into the public worker pension and health care funds, funding new school construction in Abbott districts, keeping up with the ever-increasing cost of health care, and paying more for debt service.

How can the state do all this?  Not simply through budget cuts, said Corzine, because the state's financial obligations are too big and efficiencies are already being pursued.  How about tax hikes?  Republicans, Democrats, and the public don't want them.  What then? Corzine strongly stated that criticizing asset monetization before fully exploring the idea is unfair and deflects attention from dealing with the very issues the Republicans say they are worried about. Yes, the Governor does bear some responsibility for the situation he find himself in.  His passivity created an opening for the Republican to define asset monetization on their own terms and caused some of his fellow Democrats to distance themselves from the idea.

Corzine tried to take corrective action at the budget signing by doing the unconventional. He stated that to deal with its obligations and to improve the quality of life, state government needs new resources and the political courage to make the necessary investments. He said, "My administration is working on a proposal that will allow the state to continue to own and operate our toll roads while giving us some of the same financial advantages other states achieved through privatization." And, he proceeded to lay out eight core principles on asset monetization that his administration will adhere to in its study and final recommendations.

These eight principals address the concerns discussed above and more. No roads would be sold or leased to profit-making firms. Safety, maintenance and operating standards will be improved, Capital projects will be funded. Tolls schedules will be "open, predictable, and available to the public" but will no doubt increase.  And, before any plan and deal are finalized there will be broad public discussion.  The Governor said that he would visit all twenty-one counties for town meetings on the topic.

On these terms, the budget signing took on the form of another budget address, or at least a big addendum to the new spending plan.  And, despite the fact that the Governor is not on the ballot this fall, he kicked off a campaign of his own that entails explaining and selling an asset monetization plan to a skeptical public.  Will Corzine's campaign provide political cover for legislative candidates who would much rather talk about the property tax relief in the new budget and are concerned about a public backlash over asset monetization?  One suspects that most incumbents know how to take care of themselves. The real question this summer and fall is whether the Governor has the ability to persuade the public to support what he believes the state needs to improve its fiscal condition and make progress on other praiseworthy policy goals.  If he doesn't, his next two years in office may be not only unpleasant but his last.

David P. Rebovich, Ph.D., is Managing Director of the Rider University Institute for New Jersey Politics (www.rider.edu/institute). He also writes a regular column, "On Politics," for NEW JERSEY LAWYER and monthly reports on New Jersey for CAMPAIGNS AND ELECTIONS Magazine.