New Jersey Gov. Jon Corzine (D) is developing a plan to sell the state’s two toll roads to raise money to erase the state budget’s structural deficit and address other needs he says have been neglected.
Opponents charge the plan looks like a continuation of the state’s failed borrow-and-spend practices. Some critics of the “monetization” plan also oppose it because they believe Corzine will use the money that was being used for debt payments to fund new programs.
Corzine would sell New Jersey’s two toll roads to a public benefit corporation the state would create for the sole purpose of buying and maintaining the roads. The sale could yield anywhere from $20 billion to $40 billion, according to estimates from the governor’s office. Kurt Ferguson, an analyst with Standard and Poor’s, told The Star-Ledger newspaper the bond sale could be the largest in U.S. history.
Tolls Could Double
The bonds would be paid off with scheduled toll increases. SaveOurAssetsNJ.com, a coalition of groups opposed to selling the New Jersey Turnpike, one of the state’s two toll roads, estimated tolls on the turnpike would have to double to raise $15 billion.
Corzine has called his approach “asset monetization,” turning public assets into hard cash. Other countries and U.S. jurisdictions have done this by selling or leasing toll roads to private entities.
Corzine repeatedly postponed release of his proposal so that it would not become a prominent issue in the November 6 general election, in which the entire Legislature was up for election. Nevertheless, many candidates of both parties expressed their opposition to the concept.
In a November 15 speech at the annual meeting of the League of Municipalities, Corzine explained he would use the cash to cut New Jersey’s public debt by half. That would reduce the amount of general revenues currently used for debt service, freeing the state to use that money for other purposes, he said.
Lawmakers Have Doubts
“Monetization is debt, and you can’t solve our debt problem by simply shifting our obligations to a new account,” said Alex DeCroce (R-Essex/Morris/Passaic), the General Assembly’s Republican leader, in reaction to Corzine’s League of Municipalities speech.
“He (Corzine) again today avoided the crux of the state’s fiscal problems: unrestrained spending,” said DeCroce’s Senate counterpart, Leonard Lance (R-Hunterdon), after Corzine’s speech.
Since winning the governorship in 2006, Corzine–former chairman of the Goldman Sachs investment firm–has been frustrated by his inability to initiate some programs he promised during his gubernatorial campaign.
Debt Ties Up $2.8 Billion Annually
Instead Corzine has had to grapple with a multibillion-dollar structural deficit he inherited from his predecessors. In addition, he has used money from an increase in the sales tax to pay for new spending.
In his first year in office, Corzine persuaded lawmakers to increase the state sales tax from 6 to 7 percent. The higher tax burden has provided no budget relief, in part because Corzine allowed the Legislature to spend additional revenues on new programs. He had said the tax increase was needed to reduce the structural deficit.
The state’s $33 billion debt load–the fourth highest in the nation, according to Moody’s Investor Service–ties up a large chunk of annual tax revenues for debt repayment. The state currently is spending $2.8 billion annually on debt repayment.
Gregg M. Edwards ([email protected]) is president of the Center for Policy Research of New Jersey.