Municipalities brace for steep cuts in state aid

By Star-Ledger Staff
November 29, 2009, 10:45AM

In Hope Township, Mayor Tim McDonough said he?s considering cuts to "sacred cows" like money for senior groups, food banks and recreation programs.

Paterson Mayor Jose Torres said the city may trim budgets for police and fire protection.

All across New Jersey, municipal officials are faced with grim cost-cutting choices as they brace for the possibility of unprecedented cuts to state aid by year?s end, leaving them little room to maneuver.

Gov. Jon Corzine said Thursday he might give towns only a portion of a planned December payment to help patch a growing budget deficit that now stands at $1 billion.

Faced with strained finances, municipalities are already scrambling for savings as they struggle to keep their heads above water, experts and government officials say.

"This isn?t like the good old days, when you adopted the budget and you waited until the following June to put together another budget," League of Municipalities Executive Director William Dressel said. "Now we?re going month to month, week to week."

On Wednesday, the state revealed it may freeze up to $400 million in payments to municipalities, schools, higher education, hospitals and pensions.

To cope, towns could lay off workers, borrow money, cut services or spend surpluses. Next year, they may have to raise property taxes to compensate, Dressel said.

Corzine hasn?t said where he?ll cut, but local leaders are holding their breath.

New Jersey municipalities have relied on regular state assistance to fund services since the early ?90s, said Mary Forsberg, who leads New Jersey Policy Perspective. That keeps property taxes, already among the highest in the country, from rising even faster.

"I?ve been through a lot of these budget crises," Forsberg said. "This is the most serious of any of them that we?ve had."

Municipalities have already been cutting costs in ways big and small.

New Brunswick eliminated 25 full-time jobs in 2008, then another eight this year. Mount Arlington shares its municipal court with four other towns. In Lambertville, metered parking is in effect three hours longer and the city has imposed a $35 fee for what had been free trash collection.

More cuts like those being weighed in Paterson and Hope Township are still possible, but Forsberg criticized local officials for not cutting more.

"Municipalities are complaining a lot about their situations, but I don?t think many municipalities have really seriously tightened their belt," she said. "Reality has not sunk in."

FROM BAD TO WORSE

Bad financial news has been constant background music since Corzine took office in 2006. Falling revenues helped drive down the state?s budget from $33.5 billion in 2007 to $29 billion this year.

Corzine is asking his departments to come up with $400 million in spending cuts by Tuesday, but the state also says it needs $350 million in additional spending, according to a financial disclosure statement released last week.

Tax revenue through the year is off more than $412 million, though two big payments are still pending: holiday sales tax and April income tax.

Gov.-elect Chris Christie, who takes office Jan. 19, said the budget gap is his first priority, saying: "The news of the last 48 hours just shows how desperately out of control government has been in New Jersey."

Christie?s transition team is scheduled to meet for a second time with Treasury officials next week, and there are already signs of disagreement. Rich Bagger, one of Christie?s top fiscal advisers, said the $350 million in extra spending is unacceptable.

"These budget shortfalls make it clear that the Corzine administration must take urgent and immediate action to bring the budget under control," he said in a joint statement with Robert Grady, another Christie adviser.

The spending includes items such as Medicaid waivers from the federal government that have not yet come through, Bagger said.

Treasury representatives, who were furloughed Friday in a cost-cutting measure, did not return messages.

FOGGY FORECAST

The state promised $1.77 billion in municipal aid this fiscal year, down from $1.83 billion in the fiscal year that ended in June. Municipalities use the money to fund anything from police and sanitation to health programs and public employee salaries, Dressel said.

Bradley Abelow, Corzine?s former treasurer, said there have always been mid-year budget adjustments at the departmental level, but the economic crisis has stumped forecasters.

"In the past, they?ve been off a little bit, but over the last two years (revenues) have been much harder to project," he said.

Officials across the state rely on the state?s projections and commitments to plan their budgets, which causes a ripple effect when goals aren?t met.

New Jersey is likely to face more financial pain. In the last fiscal year, the state?s shortfall grew to $4 billion by June. The state is legally required to keep a balanced budget, so state leaders raided rainy day funds and dedicated revenue sources, took millions in federal aid and delayed worker pension and school aid payments.

They also cut department spending and delayed a state employee salary increase.

"No matter how pessimistic the revenue estimates are, they turn out to be not pessimistic enough," said Jon Shure, deputy director of the Center on Budget and Policy Priorities.

By Chris Megerian and Lisa Fleisher/The Star-Ledger

John Reitmeyer and Mike Frassinelli contributed to this report.