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New Jersey State Government Suffering from Overspending, Wall Street Dropoff

The New York Times reports that New Jersey is expected to have a state budget shortfall in excess of $4 billion that must be closed in the next budget proposed by Governor James McGreevey in February. According to the article, "...largely because of sharp spending increases in the late 1990's, New Jersey ran out of money earlier than New York. For the current budget, Governor McGreevey resorted to one-time fixes of the kind New York is now considering, like borrowing against future proceeds from the tobacco settlement...."

The article goes on to attribute much of the increase in state income over the past few years to taxes collected from people who work in the financial services industry:

"We had this bubble attributable almost entirely to what happened on Wall Street," said David J. Rosen, the lead budget analyst in the nonpartisan Office of Legislative Services. "These folks were making their money from capital gains, commissions, stock options, bonuses. They may still have their jobs, but their income could have dropped from $1 million to $150,000."

The big problem, as McGreevey admits in the article, is the unsustainable level of future spending commitments made by the State Government in the late 1990s. This is as much a pox on the house of the Republicans who led the government at the time, and the Democrats who refuse to cut state services back to a level that is in line with expected future tax receipts.

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