New Jersey’s jobless rate fell to 8.7 percent in April, marking the first time since May 2009 that it stands below 9 percent, according to preliminary data released last week.

The rate dropped as the state added 3,300 jobs and 4,400 gave up looking for work and dropped out of the official labor force.

While the widely-celebrated rate drop is indeed a piece of good news, a number of dark clouds continue to hover over New Jersey’s recovery:

The unemployment rate is higher than that of our neighbors and the nation. The U.S. unemployment rate is 7.5 percent; Pennsylvania’s is 7.6 percent and New York’s is 7.8 percent – all significantly lower than New Jersey’s 8.7 percent, which is now the seventh highest in the nation.

New Jersey has recovered few of the jobs lost in the Great Recession. The state has regained just 47 percent of the 249,000 jobs it lost, while New York has recovered 142 percent; Pennsylvania has recovered 76 percent and the U.S. has recovered 71 percent.

The state’s jobs deficit remains large. The “jobs deficit” measures the number of jobs needed to get back to pre-Recession levels and keep up with population growth. New Jersey’s deficit currently stands at 318,500, or 8.1 percent of the state’s current number of jobs. At this rate, New Jersey would need to create 12,000 jobs per month for the next three years to return to pre-Recession levels. In New York, the number is 117,600, or 1.3 percent; in Pennsylvania, it is 258,600, or 4.5 percent; nationally, the deficit is 9,684,000 jobs, or 7.1 percent.

Low-wage jobs are leading the pack. Many of the sectors that are surging with new jobs, like leisure/hospitality and health services, are on the lower end of the pay scale, while the sectors that are shrinking – financial services, manufacturing, information and government – are exclusively on the higher end of the pay scale.

As NJPP’s Gordon MacInnes noted last week, “it would be foolish to claim victory and to assume that the state’s economy has recovered” because of the rate drop. “It hasn’t.” When potentially dangerous tax cuts lurk around the corner, it’s important to remember that fact and put New Jersey’s economic recovery in perspective.

The legislative budget committees this week held their final two days of hearings with the state treasurer without asking any questions about the governor’s proposed tax cut.

As expected, the treasurer didn’t provide cost estimates (first year or long term) for the cut or how the administration would offset any cost, at the very least, in the next budget. NJPP estimates the first-year cost to be between $250 and $270 million and the fully phased-in annual cost to be $1.5 or $1.6 billion. Unfortunately, no committee members felt that obtaining the facts on this major issue was important enough to ask the treasurer.

It’s common sense that before any legislator votes on the tax cut, he or she should know how the lost revenue is being offset. An opportunity to begin that discussion was missed this week by the members of the committees (though Assembly Budget Chairman Vincent Prieto did hint at the key questions in a post-hearing press release).

The lack of interest in the details on the tax cut raises the question: Is the decision whether or not to cut taxes more political than fiscal?

Here are the facts: The Office of Legislative Services (OLS) is projecting $700 million less revenue than the administration. Last year, the legislature rejected a tax cut primarily due to the revenue shortfall, which OLS was projecting as $637 million less than the administration.

If the fiscal facts are the same there should be no reason the Democratic leadership would even consider a tax cut at this time. However, there is one different fact this year – the entire legislature is up for election at the same time a very popular governor is also on the ballot.

We will know in six weeks how this plays out. Before it does, we hope that answers to some of our key questions posed earlier this week come to the surface:

Most importantly, the legislature needs to look beyond next year’s cost of the proposed tax cut and press the treasurer on the future costs, as well as the implications of a potential annual revenue loss of $1.6 billion beginning in 2016.

Does a tax cut mean that the austerity of the last four or five years – with limited resources for school and municipal aid, higher education and many other vital services – will continue? In short, what can’t be done if the tax cut is enacted?

With $1.6 billion a year, New Jersey could invest in creating jobs and greater opportunities for the increasingly stressed middle- and working-class families. The short list of more productive uses of these funds include improving our crumbling infrastructure, providing a more affordable higher educational opportunity, expanding preschool to half the children who need it but aren’t getting it and fostering new enterprise and research opportunities through public-private partnerships.

So, not only do we need to know the costs of a tax cut, but what economists call the opportunity costs.

The Christie administration has reduced its current-year revenue projections for the second time in three months, despite gubernatorial assurances for most of the past year that the targets would be met, or even exceeded.

Since February, the administration has reduced its estimates by nearly $540 million. When the budget was signed in June of last year, it predicted $31.73 billion in total revenue; that number has now dropped to $31.19 billion. Ironically, the administration’s new projection is actually lower than the Office of Legislative Services’ (OLS) May 2012 estimate of $31.26 billion – yet the criticisms of OLS persist.

The revenue shortfall could have been even worse if the income tax had not outperformed everyone’s expectations. Absent this $426 million boost in income tax revenue, which was driven primarily by a surging stock market and federal tax law changes, not economic growth, the current-year shortfall could have approached $1 billion.

In April, Gov. Christie challenged the legislature to enact an income tax cut based on property taxes as part of the FY 2014 budget. Since then, one essential set of facts has been missing: details on the cost of the cut, and how the governor plans to pay for it.

When the treasurer appeared before the Assembly Budget Committee late last month, instead of providing estimates of the tax cut’s costs, he said that only after the legislature and governor agreed to the tax cut that they would sit down to discuss the options for funding.

Surprisingly, the committee members were passive in pushing for specific and clear answers to these basic questions. Discussing how to fund a tax cut after the leadership agrees to enact it is a bit like agreeing to surgery before a diagnosis. How can a legislator cast an intelligent vote on something without knowing how much it costs and what impact it will have on public services and the state’s economic future?

All is not lost. Legislators will get what is probably their final opportunity next week when the treasurer appears before the Senate (May 20th) and Assembly (May 21st) to update the committees on revenue projections and spending adjustments for both the current year (FY 2013) and the upcoming year (FY 2014).

Committee members should treat this chance as the last public dialogue between the legislature and the administration before the budget – and, potentially, the tax cut – is adopted. The information presented by both the administration and the Office of Legislative Services (OLS) at these meetings will frame the debate as the budget details are negotiated.

When an administration revises its original budget – for changes in revenues estimates, updated spending projections, or policy changes – it usually presents a plan to “recast” the budget to meet the updated facts. This happened last June when the administration acknowledged a revenue shortfall.

For example, if trends suggested that additional money is needed for Medicaid, or if a policy decision was made to increase aid to higher education, the administration would present proposals on how to fund these items.

The proposed tax cut should be no different.

But based on the treasurer’s earlier statement, it doesn’t look like we’ll get the details on the tax cut next week. It may be because the administration doesn’t want to go public with ways to fund a tax cut and then have legislators use that funding source to pay for other priorities, or it may be that the way to pay for it is controversial, and the administration wants the controversy in the public eye for just a few weeks at the end of June instead of for a month and a half.

Regardless of the reason, if the treasurer doesn’t give the details next week, one would hope that the first question from the Senate budget chairman on Monday would be something along these lines:

Mr. Treasurer, it has now been over one month since the governor called for the enactment of a tax cut in the FY 2014 budget. However, since that time this legislature and the public have not been presented with the cost of the tax cut in the first year and in the future and have also not been given any indication of how the revenue loss would be offset in the FY 2014 budget and in future budgets. Would you please provide this committee with the cost of the tax cut for this year and how the administration proposes offsetting the revenue loss in the FY 2014 budget? Would you also provide this committee with the annual cost as the tax cut is phased in and how future budgets will be impacted?

There is no reason not to provide both the first year (likely between $250 million to $270 million) and the fully phased-in costs (likely between $1.5 billion to $1.6 billion) of this proposed tax cut. If the administration does not offer these essential facts, keep an eye on what excuse is given and how aggressively the committees react to being shut out.

Should the administration present a plan to make up for the lost revenue in the FY 2014 budget, it should be seen in the context of other adjustments the administration has – or has not – made to the budget. Some of those issues include:

• Is the administration still projecting higher revenues than the OLS and, therefore, funding the tax cut with uncertain revenues?

• Is the administration adjusting its highly questionable $180 million estimate for revenue from internet gaming after being challenged by credit rating agencies and other experts?

• Is the administration still assuming $166 million from municipal housing funds that are currently subject to court challenges, even though administration officials have testified that they have no idea how much money is actually available if the lawsuits are resolved?

Most importantly, the legislature needs to look beyond next year’s cost of the proposed tax cut and press the treasurer on the future costs, as well as the implications of a potential annual revenue loss of $1.6 billion beginning in 2016.

Does a tax cut mean that the austerity of the last four or five years – with limited resources for school and municipal aid, higher education and many other vital services – will continue? In short, what can’t be done if the tax cut is enacted?

With $1.6 billion a year, New Jersey could invest in creating jobs and greater opportunities for the increasingly stressed middle- and working-class families. The short list of more productive uses of these funds include improving our crumbling infrastructure, providing a more affordable higher educational opportunity, expanding preschool to half the children who need it but aren’t getting it and fostering new enterprise and research opportunities through public-private partnerships.

So, not only do we need to know the costs of a tax cut, but what economists call the opportunity costs.

For Immediate Release: May 16, 2013

Contact: Jon Whiten, NJPP, whiten@njpp.org or 609-393-1145 ext 15

Over 400,000 low-paid workers would benefit from a ballot measure that would raise New Jersey’s minimum wage by one dollar to $8.25 per hour and index the minimum wage to rise automatically with the cost of living, according to a new report released today by New Jersey Policy Perspective. The report finds that this wage increase would generate more than $174 million in new economic growth and support the creation of the equivalent of over 1,500 new full-time jobs as businesses expand to meet increased consumer demand.

According to the report, which analyzed U.S. Census Bureau data, adults working full-time jobs represent the vast majority of workers who will benefit from the minimum wage increase: 83 percent of workers who’d be affected are adults over the age of 20, 77 percent work more than 20 hours per week and 38 percent have at least some college education.

“Low-wage jobs are stunting New Jersey’s economic recovery at a time when the state needs more consumer spending and growth,” said Gordon MacInnes, president of New Jersey Policy Perspective. “Raising the minimum wage is a smart way to boost consumer spending while delivering much-needed assistance to working families in New Jersey.”

The report shows that many of the state’s lowest-paid workers rely on minimum wage jobs to support their families. More than 231,000 children across New Jersey have a parent who would benefit from raising the state’s minimum wage to $8.25, and the average parent affected by this increase contributes more than 40 percent of the family’s total income.

At $7.25 per hour, New Jersey’s current minimum wage is tied with the federal level and has not increased in nearly four years. Nineteen states across the U.S. have already raised their minimum wage above $7.25 per hour, and earlier this year New York Gov. Andrew Cuomo signed into law a measure that will raise New York’s minimum wage to $9.00 per hour.

Because New Jersey does not currently provide for regular minimum wage increases to keep pace with the cost of living, the state minimum wage remained completely flat for nine years between 1981 and 1990 and then again for eight years between 1992 and 2000. If New Jersey’s minimum wage had kept pace with the rising cost of living since the late 1960s, it would equal $10.70 per hour today. To prevent further wage erosion, tying the minimum wage to rising costs of living is essential.

“At a time when corporate profits have hit record levels, low-paid workers are seeing wages remain flat even as the cost of living continues to rise,” said Christine Owens, executive director of the National Employment Law Project. “Raising the minimum wage will deliver critically-needed relief to working families while addressing the rising inequality that is undermining the economic recovery.”

A poll released by Rutgers-Eagleton in April showed that 76 percent of voters in New Jersey support raising the minimum wage to $8.25 per hour. A national poll released by Small Business Majority in April showed that 67 percent of small business owners across the U.S. support raising the minimum wage and indexing it to rise automatically with the cost of living; the same poll showed 65 percent of small business owners supporting minimum wage increases as measures to boost consumer demand.

That finding is not all that surprising, given that nearly two-thirds of all low-wage workers in the U.S. are employed by large companies – not small businesses. Moreover, 77 percent of the largest low-wage employers have been profitable every year for the past three years and remain in strong financial condition in the post-recession recovery, according to a 2012 study by the National Employment Law Project.

A large body of research shows that raising the minimum wage is an effective way to boost the incomes of low-paid workers without reducing employment. A groundbreaking 1994 study by David Card and Alan Krueger, current chair of the White House Council of Economic Advisers, found that an increase in New Jersey’s minimum wage did not reduce employment among fast-food restaurants. These findings have been confirmed by 15 years of economic research, including a 2010 study published in the Review of Economics and Statistics that analyzed data from more than 500 counties and found that minimum wage increases did not cost jobs. Another recent study published in April 2011 in the journal Industrial Relations found that even during times of high unemployment, minimum wage increases did not lead to job loss.

This week New Jersey will get the latest monthly data blast – and political spin – on April’s job gains (or losses) and the unemployment rate.

The administration will likely tout the private-sector job gains that have occurred on its watch, which right now stand at 127,800. It sounds like a pretty impressive number, particularly when frequently repeated at high volumes by state officials. But a closer look at the job gains shows a disturbing trend that speaks volumes about New Jersey’s slow crawl out of the Great Recession.

According to Department of Labor and Workforce Development information recently provided to legislators, New Jersey has seen a net employment change of 109,400 total jobs gained since February 2010. But an overwhelming majority of those jobs are in sectors with annual average wages below the statewide average of $57,549.

Let’s put it another way: There are nine sectors with average wages below the state average. Each has seen job gains since February 2010. On the flip side, there are 10 sectors with average wages above the state average, but only four of them have seen job gains over the same time. The other six well-paid sectors have seen job losses.

When you add the fact that so many of New Jersey’s new jobs are relatively low-paid to the fact that the state has recovered a far smaller share (currently 46 percent) of the jobs it lost in the Great Recession than neighboring states and the nation as a whole, it is clear that the state’s economic comeback still has a very long way to go.

Much like any other government, New Jersey takes on different kinds of debt. There’s long-term debt, which is usually issued to cover more permanent projects like rebuilding the Pulaski Skyway or acquiring land for parks. Then, there’s also a particular type of short-term debt that allows the state to pay its bills during the first half of a fiscal year before tax collections catch up with spending, even though everything evens out over the course of the year. In recent years, the state has turned to banks for short-term cash flow until the formal notes – known as Tax and Revenue Anticipation Notes, or TRANs – are issued, usually in the early fall. This year, New Jersey borrowed $2.6 billion to meet cash flow needs, with an interest cost of about $12 million.

These short-term notes must be paid before the end of the fiscal year; the state has always made the repayment by the end of June. For the first time, state officials may have opened the door to carrying these loans forward into the next fiscal year in a question-and-answer document posted to the Treasury’s website.

The specific question and answer was:

In the unlikely event the TRANs are not paid off within the fiscal year of issuance, are they considered to be continuing obligations of the state?

A. In that event the TRANs would continue as obligations of the state until they are paid.

The answer to this question, based on the constitution and past practices, should have been simple: “TRANs have always been required to be paid off within the fiscal year in which they are issued; the state is not legally authorized to carry the obligation into the next fiscal year.”

New Jersey’s shrinking cash reserves may be the reason for the potential concern about the state’s ability to pay this debt by the end of the fiscal year. Since the state normally receives around $3 billion in revenue in July that is attributed to the past fiscal year but is not available to pay the notes at the end of June, this may only be a cash flow issue – but regardless, the agreement with the note holders is that they will receive payment by the end of the fiscal year.

This leads to the questions: Does this answer reflect a new legal interpretation or was the answer inaccurate? Does the answer refer to the current year TRANs or future transactions or both? Will the state repay the current debt, as required, by June 27? If not, is the state then in default and will there be longer-term implications on the future cost of similar transactions? If the cost of future borrowing increases simply because of this answer, will that not raise concerns from potential lenders?

These are questions the treasurer needs to answer when he appears before the legislature later this month, if not before. Legislators should obtain a copy of the April 15 treasurer’s report outlining the funds available to repay this debt.

I was recently told I should forget about the schools and instead focus on jobs so that all those students I care so much about could find work. Problem is, “schools vs. jobs” is a false dichotomy. In fact, despite those who think we waste too much money and time on schools and school children, from a business perspective, the education of our children is the best of all investments.

After all, education provides for our future. A lesson I learned in business class was the need to prepare for tomorrow, since being prepared is the most efficient and least expensive approach. Isn’t that my goal as a businessperson?

It’s the well-educated workforce that brings the companies who provide the jobs. Working to improve schools and investing in education is a good business decision. As a case in point, LG Corporation has headquarters in Englewood Cliffs. They are planning a $300 million expansion. LG currently has approximately 800 employees in the Tri-State area. The new facility will house 1,200 high-paying jobs, and the Englewood Cliffs mayor is projecting local tax revenues to increase between $700,000 and $2 million. The high quality of the local schools was given as a reason for investing in this location. They are not receiving any government incentives. A reliably well-educated workforce plus highly-regarded public schools brought the jobs.

Now that we are all on the same page, the key is to invest smart. Where is the best return on our investment with the lowest risk?

As a recent NJPP issue brief pointed out, investments in high-quality early education have been found to be some of the most surefire investments around, with great returns:

James Heckman, a Nobel Prize winning economist who spent years running the numbers on investments in different forms of human capital, found that investments in high-quality early education offer the biggest bang-for-buck.

Isn’t this good business sense?

What isn’t good business sense is what we seem so intent on doing: leaving so many poor children behind. Whether I’m miserly or generous, whether I’m a “tree hugging” liberal or a conservative businessperson, I’ve got to know that these children won’t be going away. We know that children who grow up in poverty do not perform as well at every educational level. We know that this hurts everyone of us, rich or poor. It makes good business sense to find the most efficient and least expensive approach to making these students as productive as possible. The educational value of high-quality preschool and intensive early literacy in the K-3 grades has proved to increase the chances for success. That is how we achieve the greatest return on our investment.

As Stanford professor Sean Reardon recently wrote, the “differences in educational success between high and lower income students have grown substantially” over the last few decades.

Why?

“Because rich students are increasingly entering kindergarten much better prepared to succeed in school than middle-class students,” Reardon writes. “This difference in preparation persists through elementary and high school.” And the academic gap from rich to poor is even greater.

Elsewhere, the federal Equity and Excellence Commission finds that “universal access to high quality early learning programs must be a matter of the highest national priority, with a special priority for children in our poorest communities.”

The commission points out that low-income students, plus English language learners and students of color combined are the fastest growing segment of our population and will soon be a majority. As they go, so we go. It makes good sense to prepare these children to compete in the world we face.

“Every dollar invested in a high-quality early childhood education produces a 7-10 percent per annum return,” the report finds. This is a better rate of return on investment than most mutual funds and by a lot. Compare that to the cost of not providing this preparation and tell me, isn’t the investment in these quality programs good business sense?

That’s the answer; that’s the business sense: Be better prepared at the earliest age possible! Since this is a lesson we all know, why don’t we apply it to our education challenges? Instead we choose unproven reforms that leave children behind in very big numbers. We look to the short-term with strategies that might provide positive sound bites, but don’t meet long-term needs or goals. Voucher schemes haven’t worked anywhere. Even if they did, they still wouldn’t be OK because so many are left behind. The charter school movement has had mixed results at best, and still so many are left behind. Setting higher standards and providing more evaluations might or might not have favorable results moving some children forward, but it still isn’t the answer. We know the answer that potentially impacts the most children: Be better prepared.

The Equity and Excellence Commission concluded its report by saying: “The achievement gaps we have described weaken the country internationally, economically and morally.”

If we don’t fix this because of our social and moral sense, then we must fix it for our business sense. In the end, they aren’t so different – but what matters most is that we get this done.

John M. Richardson, an academic, once said: “When it comes to the future, there are three kinds of people: those who let it happen, those who make it happen, and those who wonder what happened.”

Which are we?

STATEMENT ON S2644 BY RAYMOND CASTRO, SENIOR POLICY ANALYST, BEFORE THE SENATE HEALTH, HUMAN SERVICES AND SENIOR CITIZENS COMMITTEE, TRENTON, NJ
MAY 9, 2013

New Jersey Policy Perspective strongly supports S2644, which would increase the Medicaid eligibility level to 133 percent of the federal poverty level for nonelderly adults consistent with the Affordable Care Act. I’m also representing the New Jersey for Health Care coalition today which consists of over 80 organizations and is the largest health consumer coalition in the state. The coalition has been working on this issue for several years and also strongly supports this legislation. Our concern is not with the policy but rather that insufficient resources have been allocated in the governor’s budget to fully implement it.

This bill addresses a major gap in Medicaid eligibility. New Jersey has made much progress in providing Medicaid and New Jersey FamilyCare to parents and children but that is not the case with childless adults. The only way that they can become eligible for Medicaid now is if they apply and are approved for General Assistance which has a monthly income eligibility limit of $140 for an employable individual as well as many other eligibility requirements that sharply limit participation in the program. Because of this major restriction, it is estimated that about 307,000 adults will be eligible for the Medicaid expansion.

The overwhelmingly positive benefits of Medicaid coverage have been well documented. In addition to the obvious health benefits to the individual obtaining Medicaid, research released within the last week has also shown that it will help reduce financial hardship. For example a study in Oregon found that one of the biggest benefits of providing Medicaid coverage to childless adults was an 80 percent reduction in the number of individuals with catastrophic health care costs compared to those individuals in the control group. This is welcome news in New Jersey and other states where these unexpected costs too often result in bankruptcy and foreclosures.

New Jersey Policy Perspective has also released a series of reports which have shown the positive impact of expanding Medicaid in New Jersey. These reports found that:

• About half of all adults eligible for the Medicaid expansion work in low-wage jobs in New Jersey and that most occupations in our state include individuals who will be eligible for the expansion.

• The expansion will stimulate New Jersey’s economy because it will result in New Jersey receiving about $1.6 billion annually on average over the next decade in federal Medicaid funds which will create thousands of jobs, and it will improve the health of New Jersey’s workforce making it more competitive.

• It will result in at least $2.5 billion in state savings over the next decade because the matching rate for individuals currently eligible for Medicaid will be increased to 100 percent for the first three years then gradually reduced to 90 percent on a permanent basis.

These benefits, however, are only opportunities – they will not be achieved without sufficient resources. Our main concern is that no funds were allocated in the governor’s budget for outreach, marketing, and contracts with community-based organizations to reach the uninsured and help them fill out the application. This problem is compounded by the lack of sufficient staff in our County Welfare Agencies. The research shows that about 78 percent of all individuals who are eligible for assistance in the Affordable Care Act are not aware of this opportunity.

The individuals who will be eligible for this expansion have many barriers to enrollment including mental illness, substance abuse, physical disabilities, homelessness, and an inability to speak English. Many of them have never been on Medicaid before and do not know how to apply for it or they have had very bad experiences with health insurance which will make them reluctant to apply again for help.

The lack of state funding for outreach not only affects participation in the Medicaid expansion, it will also affect the number of individuals who will apply for premium subsidies in the federal exchange. NJPP estimates that without outreach New Jersey will lose $690 million in federal funds each year, and 186,000 fewer New Jerseyans will likely benefit from health care reform.

Unfortunately New Jersey is at a disadvantage because the state opted for a federally run exchange rather than a state based or federal-state partnership exchange. That means New Jersey will receive far less in federal funds for outreach than many other states. Currently only $1.5 million has been allocated to New Jersey by the federal government for the navigator program, which will award contracts to community-based and other organizations for outreach. States with a state based or federal-state partnership exchanges have been allocated far more than that in their exchange planning grant. For example Maryland, which will operate a state based exchange, plans on spending $16 million in federal funds and $8.8 million in state funds for outreach and related activities for a total of $24.8 million.

Recommendation

Based on what other model states with a state based exchange are planning to spend on outreach and they need in New Jersey, NJPP recommends that the legislature appropriate about $12 million in state funds for outreach, which would draw down an additional $6 million in federal Medicaid matching funds bringing the total funding for outreach to $18 million. The state funds should be evenly divided between the Department of Human Services and the Department of Banking and Insurance which will need to coordinate their efforts. About $1 million in outreach funding generates about $40 million in federal funding in New Jersey, so this is a worthwhile investment.

There is also no shortage of ways to pay for this initiative. As the governor made clear in his budget, the Medicaid expansion will result in $227 million in state savings in state fiscal year 2014. Those savings are only for 6 months since the expansion does not start until January 2014. Therefore in 2015 the savings will about double to nearly a half billion dollars which would increase in subsequent years. A small percentage of the savings would fully fund this initiative.

Expanding outreach will also mean a major reduction in the number of uninsured who go to the emergency room, which could generate savings in state charity care funds to hospitals – so in effect this initiative would pay for itself. Furthermore we know that state revenues will increase from taxes on health insurers as a result of more people becoming insured.

The federal government also awarded $7.6 million in federal exchange planning funds to the Department of Banking and Insurance for other purposes about a year ago but these funds were never spent. The federal government has determined that these funds could be used for outreach and marketing rather than have them lapse. This creates another excellent opportunity for New Jersey to expand outreach.

When we hear about a new medicine that makes an awful disease less awful, we are elated. But when we learn that this new medicine damages your liver, enlarges your prostate or makes blood clots, it becomes clear: In spite of the limited good it does, this is bad medicine.

School vouchers – or what we today call “opportunity scholarships” – are bad medicine. They might work well in isolated situations, but they don’t solve the problems of the intended beneficiaries: Poor kids in schools with only other poor kids. This has been a nagging, stubborn problem that has defied easy solution for four decades. Vouchers are merely the latest in a long line of oversold panaceas.

Now Gov. Christie is using budget footnotes to accomplish what the legislature has thus far refused to do: fund a school voucher program. The administration’s proposed budget allocates $2 million for vouchers through a pilot program similar to the “Opportunity Scholarship Act” (OSA) that has failed to gain support in the past – a revised version of which is pending in the legislature.

“When you have a bad situation, you don’t make it worse,” former Gov. Jim Florio recently told me. Taking the money and the most motivated students while leaving behind the great majority of students still in need, as vouchers do, does indeed make the problems of challenged schools worse.

Voucher proposals have been kicking around New Jersey since the 1990s. Gov. Florio has long studied the idea, and has opposed it for many years, viewing it as a real threat to public education.

The obligation to provide public schooling for all children is part of the very foundation of this nation. It’s also good business. When a large majority of those in need are left behind, there is a very large price to pay, with no real return on the investment.

We keep trying to make vouchers something they can’t be instead of spending the necessary time working on improvements that work best for all children in the poorest schools. If a policy change stands to benefit ten percent of our children, we shouldn’t be spending more than ten percent of our time making it happen.

There is another consideration: Money is tight these days, dictating that we use this precious resource efficiently. Vouchers are a terrible use of money. The return on investment is negative (as detailed here by the New York Times and here by Diane Ravitch). At best, we are helping a limited number of students (though the results of the existing programs have not demonstrated any academic advantage) and potentially doing serious damage to many more.

This stands out because there is a terrific proven investment we can make that helps more children, one that helps them and our society forever: Quality preschool and early literacy programs. Why, then, would we even consider investing in vouchers?

Five years ago, Greg Anrig of the Century Foundation wrote about what then appeared to be the demise of vouchers, providing historical background back to 1980 and arguing that the idea of vouchers was driven by ideology, not educational advancement.

“If conservatives could show that private schools worked better than public ones, and that the introduction of competition improved entire school systems, that would advance their arguments for welfare rollbacks, Social Security privatization, and other initiatives to replace government programs with the free market,” Anrig wrote.

That seems familiar to what we hear today. We know from experiences in Milwaukee, Cleveland, Washington, D.C., and other locations that vouchers should be an idea whose time has gone, as Anrig wrote in 2008.

But in a recent update, Anrig offers a convincing reason why this hasn’t come to pass: “[The] rise of the extreme-right Tea Party movement and its state legislative lobbying machine, ALEC, which has been central to resurrecting the voucher idea.”

Worse, the tax dollars diverted from the support of public education happens at a rate that is not representative of true costs. The idea that the money follows the child sounds right, and some people buy in to the idea because it sounds so reasonable. But the fact is the calculation of the aid transferred to a private school is not correct. The resultant damage done to the “failing” school is substantial. The teacher is still there, the lights must still work, all of the overhead remains. To calculate the savings based on an average per-child cost seriously inflates the aid taken from the school. In high-need districts, which house the very children proponents of OSA say they want to help, the impact would be entirely negative.

It should be made clear that there are some voucher success stories, but there are many more that aren’t meeting expectations. Efficient programs and efficient use of money are needed to meet the needs of all children and all taxpayers. We know for certain that education is less costly than remediation. We know for certain that the cost of school dropouts is staggering. We don’t need just a solution; we need a solution that is proven to pay off. Vouchers are not the answer. There are alternatives with demonstrated success.

Existing programs, demonstrated educational successes and fiscal efficiencies prove the point.

“We know what has to be done: pre-school programs, smaller class sizes, quality teachers, modern facilities, and the financing necessary to provide a quality education,” Gov. Florio says.

In a statement issued last year, the Governor offered a condemnation of voucher systems that remains applicable:

“Now, we have this voucher initiative to further divide us into those who will be ready for the knowledge-based economy and those who will be left to fester in failing schools from which we have siphoned off the most motivated students. All of this because we are not up to the challenges of fixing our entire educational system leaving many of our children permanently behind the curve.”

But I’ve saved the best of Governor Florio’s words of wisdom for last.

“Public education is really an investment. It’s not spending, it’s an investment that pays dividends.”