Op-Ed: How Paul Ryan’s Budget Plan Would Hurt New Jersey

August 9th, 2012  |  by  |  Published in Budget and Tax Policy, Editorials & Op-Eds, NJPP Blog: As a Matter of Fact ...

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This op-ed appeared in the August 9, 2012 edition of the Record.

New Jersey is hurting. It’s hurting so bad that the only way the governor could pay for his proposed tax cut is to borrow the money from our kids and grandkids. Float a bond for $260 million to pay for the $200 million or so tax cut proposed for this budget year. Benefits to future taxpayers? Zero. No matter, we can all enjoy a night out with the reduced taxes and let our kids pay. Given the amount we’ll get back, most of us can reserve a spot at the nearest White Castle.

This is not the condition one would expect of the “Comeback” state. But it gets even worse.

The United States has suffered a cut in its prime credit rating because Congress wouldn’t provide timely funds to repay the nation’s debt.

To add to our growing burdens, the House of Representatives has passed a plan that is supposed to balance the federal budget without increasing revenues. It’s called the Ryan Plan for its Wisconsin sponsor, Paul Ryan.

The first-ever state-by-state analysis of the Ryan Plan released this week by the Center on Budget and Policy Priorities presents the bad news. The plan, if approved, would dig the New Jersey hole even deeper, about $760 million deeper in the budget year that begins next July.

That may not sound like enough money to worry about in a $32 billion state budget. But the reason the governor was driven to borrow money for his tax cut was that tax collections came in $700 million short between the time he delivered his budget message in February and when the receipts were counted in May.

$1.5 billion in the red

By July, the non-partisan legislative research arm estimated the hole was $1.5 billion; Moody’s — the credit rater — suggested that it was closer to $2 billion and counting.

So, a reduction in federal aid of $760 million has significant and negative consequences for New Jersey citizens. Is the state helping to pay the bill for your grandmother in a nursing home? If so, you might have a problem since Medicaid — the federal-state program that pays for most nursing home care — is due to take a one-third cut between 2013 and 2021.

Other programs would suffer as well — programs for special education kids, for putting cops on the street and for providing emergency aid following fires, floods and hurricanes.

The companion proposal to the Ryan Plan is to repeal the Affordable Health Care Act. The combination of repealing the act with its Medicaid expansion and the one-third cut proposed by Ryan is to add another $500 million per year to the budget burden.

This time the addition comes because there will be no expected reduction in the charity care payments to hospitals that treat uninsured patients. With the health care act and the existing Medicaid population, the state could assume a sharp falloff in its hospital payments (that now total about $1 billion).

Balance cuts with revenue increase

As New Jersey residents, we might hope that our governor would use his influence with Governor Romney and the national Republican Party to call on the House of Representatives majority to balance some of its tax cuts with revenue increases. Not only would such a move increase the chances of avoiding the “fiscal cliff” we all jump off on Jan. 1 if there’s no agreement on taxes and budgets, but it would do less harm to New Jersey, which is still crawling out of the Great Recession.

So far, instead of making the call for New Jersey, the governor has applauded Ryan, hailed the cuts in Medicaid and remained silent about the negative consequences facing his state. It’s not too late for him to show that he puts New Jersey above party politics.


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