Going Broke

Small as it is, there is something for everyone in New Jersey, including some things nobody really wants. The state possesses some of the finest beaches on the Atlantic coast, and one of the most dismal lunar landscapes of swamp, industrial waste, and smelly oil refineries to be found in the U.S. Its nearly 8 million people live in communities as diverse as the grinding black ghettoes of Newark, the elegant $200,000 homes of Short Hills and Princeton, and the Rockwellian small towns of Cumberland County that preserve the life-style of an earlier, simpler America.

In theory and on paper, New Jersey is one of the most favored states in the nation, ranking fourth in both per capita and median family income. But its tradition of politically powerful counties has tended to emphasize local rule to the detriment of that wielded from the statehouse in Trenton, and New Jersey has paid a high price for its localism. Higher education, public health and mental institutions suffer from inadequate funding. The state bears only 28.7% of the cost of local education, compared with the national average of 43%. Half the public money spent in the state is raised at the local level, primarily through real estate taxes. Affluent towns end up with the lion's share of the pie, while poor areas struggle under the inequitable system. Part of the problem is that state legislatures have refused to enact a state income tax.

New Jersey may be about to shape up, however, thanks to pressure of two kinds. One is the recession, which has sent the unemployment rate up to 10.3%, and revenues plunging by $135 million. The other is the fact that the state is under a court order to come up with a new method for financing public education. In 1973, the State Supreme Court declared that heavy reliance on local property taxes created wide disparities in the quality of education. But the state senate blocked a $300 million plan submitted by Governor Brendan Byrne to rectify the imbalance because it depended on enactment of that old bugaboo, a state income tax.

Moral Duty. In his State of the State message last month, Governor Byrne warned against the "spectacle of a government so immobilized by fear of political consequence that it cannot do its moral and legal duty." Last week he translated that into figures. He outlined a "rock bottom" spending program for the next fiscal year. His $2.82 billion budget is up only 1.83% over the current year, and represents the smallest increase in 20 years. He called for no pay raises for state employees, a $15 million cutback in optional parts of Medicaid, a freeze on enrollments at state colleges, a reduction in scholarship assistance, lowered daily food allowances in state institutions, and a hold-the-line policy on aid to local schools.

In his budget message, Byrne told the legislature that the state had reached the moment of reckoning, and again recommended a graduated income tax. His proposal would generate $1 billion in income and would cancel his budget deficit of $487 million, provide the $300 million to comply with the court order on schools, and still leave revenue left over to lower the sales tax from 5% to 3% and provide some relief from local real-estate taxes. And this time he may get what he wants. Opposition is wavering. Even Democratic Senator Thomas Dunn of Union County, a longtime income tax opponent, is reconsidering. The Governor, he said, "put a shotgun to our heads."

Until now, Byrne, who took office 13 months ago with a reputation for probity and common sense, has seemed to lack the political wiles to tame the county tigers. While he has been able to put through a number of anticorruption measures, he has lost on other key issues, notably his fiscal program and a controversial bill to revive that fading beach dowager, Atlantic City, by permitting casino gambling there. Ironically, if his budget is passed but no new revenue is found, Byrne may end up as the only state employee to get a salary increase: under a measure enacted before he took office, the Governor is due for a raise in pay from $60,000 to $65,000.

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