By Raymond Castro and Sheila Reynertson
The 2017 budget presents the state the perennial challenge of funding core priorities that address the needs of all New Jerseyans. Like years past, the price tags of these priorities are daunting in the face of a state economy that continues its slow recovery. What is different this year is a call for a generous tax cut for a handful of New Jersey’s wealthiest families. We strongly recommend that the state halt efforts to repeal the estate tax given the enormous obligations on the table.
For example, the budget proposes a $1.862 billion pension payment, which is a fraction of what is actuarially required. By shortchanging this key priority, the unfunded liability will continue to balloon.
The budget also calls for another year of flat funding for the mandated school aid formula, which translates to a $1 billion short for direct aid for K-12 education. Operating aid to public colleges and universities is also flat funded this year, costs that will likely be passed onto students through more tuition hikes.
Another year of stealing environmental settlement money is in store, leaving the Department of Environmental Protection $100 million short for key programs like lead abatement and cleaning up dangerous pollution across the state.
And smaller programs face cuts which have real-life consequences. Programs like domestic violence services and prevention, which is facing $1.8 million in cuts, and women’s health services that provide contraception and STI prevention to over a million women don’t expect to see its $7.5 million in funding restored for a seventh straight year.
Even in this dire fiscal condition, where the state can’t meet its existing obligations or provide the proper level of public services for its 8.9 million residents, the talk of Trenton is whether we are going to blow a $400 million hole in the budget by cutting taxes for a few thousand wealthy families.
Proponents of repealing the estate tax insist that it would pay for itself because it would help attract and retain wealthy families who would otherwise avoid or leave New Jersey. They point to a deeply flawed study that claims New Jersey has “lost” more than 2 million people over the past decade, taking $18 billion in state income with them, apparently in protest of the state’s high taxes. Yet a more comprehensive analysis of the data clearly demonstrates that New Jersey’s population has remained stable and that the state income has actually grown by $103 billion in the past decade.
Putting aside the tax migration debate, the fact remains that the estate tax has always helped, not hurt New Jersey. The state is adding – not losing – wealthy families, and the revenue collected from this and the inheritance tax is growing, not shrinking.
In fact, the proposed 2017 budget expects to collect $848 million from the inheritance and estate taxes – the highest amount ever.
A tax cut that benefits just the wealthy few is glaringly out of step with budget priorities of New Jersey, will make it harder to restore earlier funding cuts and will make it nearly impossible to do much to tackle some of the state’s other big problems, like growing poverty, for example.
To address the alarming increase in extreme child poverty in New Jersey, we strongly recommend additional funding to increase the Work First New Jersey grants which would directly benefit 54,000 children. As you may be aware, we recently released a comprehensive report on this issue and the findings were startling. We should all be embarrassed that these grants have not been increased in 29 years and that we now have the tenth lowest grant in the nation when housing is factored. New Jersey also has the lowest grant in the Northeast, which is almost half New York’s level.
Because of the eroding effect of inflation, the value of the maximum WFNJ grant, which is $424 a month for a family of three, has been cut in half since the last increase in 1987. It has gone from 61% of the federal poverty level in 1981 to only 25% of the poverty level today. New Jersey spends about $360 million less annually today on WFNJ assistance to families than it did in 1997 when it was established.
You might be asking yourself, how can any family live on so little? The answer is they can’t; thousands of families in WFNJ are routinely evicted from their homes and have ended up in shelters or motels at much higher cost to the state. The impact on these children of not having a stable home is unimaginable.
Since eligibility is based on the WFNJ grant, far fewer poor children are eligible for any assistance. Whereas in the past, most poor children received help, today over 80 percent do not received any assistance. Unless something is done soon, WFNJ will cease to be a viable safety net for children.
Giving all children a shot at success is not only the right moral choice, it’s a much better investment. The newest research shows that poverty costs New Jersey $13 billion each year in reduced productivity, increased crime and poorer health outcomes.
There is no question that the WFNJ grant is woefully inadequate, even by the state’s own standards. Since 2003, the Department of Human Services has established a standard for decency that takes into account real needs of a family including the cost of housing. That standard is now $2700 for a family of three, seven times higher then the current WFNJ grant.
The research shows that many families go in and out of poverty depending on their employment situation. The trick is to provide the supports that families need while they are working to prevent dependence and the temporary cash and employment assistance they need when they lose their job or other income. Although it could be better, the state has made substantial improvements in supports for working families. However where the state has completely failed is helping the poorest families who are unemployed and have no income at all. They deserve a shot at the middle class too.