Considering the state of New Jersey's budget...and how it may foretell the future of the federal government

I have several friends that are teachers in New Jersey. All across Facebook, I am reading scathing reports of what Gov. Christie is doing and proposing to save New Jersey from heading down the same road that California has traveled in recent years. Everything I see decries him as anti-education, anti-teachers, anti-, anti-, anti-. Understanding there are two sides to every story, I started reading…

Now, I am a teacher, as well. I have an appreciation for what my Teacher’s Association does for me and my co-workers. I also see some of the problems that can arise as a result of that association. One of the biggest things that I’ve experienced is being spoon-fed talking points and rhetoric written to express outrage at what elected officials are doing. The expectation of the Association is that it’s members recite those talking points without considering the actual facts of the matter.

As I’ve read into what Gov. Christie is doing in New Jersey (and why), here’s what I’ve learned:

Last year, New Jersey teachers received a COLA of 5%, during an absolutely terrible nationwide (and world-wide) economic downturn. In other states, teachers got a 2% COLA, if they were that lucky. Many other public sector employees around the nation got letters explaining they weren’t getting any COLA at all. Most private sector employees also did not see a COLA last year. So, while everyone was doing their best to live in the economic situation we were given, New Jersey (irresponsibly?) dished out significant COLAs to it’s public sector employees – and at a rate higher than tax revenues were increasing. These salary increases needed to be funded from somewhere. What happens to you personally when you are spending more money than you make?

Through several years of significant COLAs, New Jersey’s public sector employees have moved up the ladder to  be among the highest paid in the country, including teachers. Public sector employees are retiring with 6-figure pensions and cashing out accumulated sick time, sometimes at levels more than a quarter million dollars. Private sector employees don’t get to save up that much time. All that money has to come from somewhere – who pays for all that sick leave, and top-in-the-nation salaries?

Health care is, of course, a popular topic these days. My sister, who works in the private sector, pays a couple hundred dollars out of each paycheck to pay for her family’s health insurance. In New Jersey, public sector employees aren’t paying for their health care – it’s a free benefit that comes with their job. Pennsylvania has this same benefit for selected public sector employees – and it’s valued at approximately $8,000 per year. Again – who is paying for that kind of benefit for all those teachers and other public sector employees?

One of the biggest things I’ve heard from friends in the private sector in New Jersey is that Jon Corzine was a weak leader – which is probably a testament to the fact that he isn’t the Governor any longer. While it is good to have representatives speaking on behalf of the public sector workers, the government needs to have a strong leader bargaining on behalf of the citizens and tax payers. The skyrocketing costs to the tax payers is proof that Corzine couldn’t stand up to those unions when negotiating salaries and benefits. There is no doubt a correlation between this and campaign finance. Governor Christie has come in now and is willing to fight against the unions to ensure the state isn’t accumulating more expenses than it can afford to pay out over the coming years. Sure, this isn’t popular for all those public sector employees, but consider the ramifications across the entire spectrum of New Jersey’s economy. The largest tax paying entities in any level of municipality are businesses. As the government allows the unions to drive up salaries and benefits, the government needs to find more money in order to pay those salaries and benefits. Where does government get money? Through taxes. As taxes increase on businesses, they have to make sacrifices – first is usually by raising prices, next by cutting payroll. When it gets too bad, the only choice the business has is to close its doors or relocate. In either case, the state has now lost a source of revenue. Less tax dollars come in, so the tax rates need to be raised to keep up with the demand for public sector money. It’s a cycle that is unsustainable. The only way to save the tax revenue is to ask for less from the private sector. This means that public sector organizations – the beneficiaries of tax dollars – need to be more frugal.

The frugality that Governor Christie is asking for from school districts is a whopping 5% – and that’s a maximum. The Governor is looking to save approximately $500M from his budget that goes towards education, and most of where he is looking to get that money is from districts that have already exhibited a budget surplus for the year. In other words – the Governor is asking districts, “Since you guys more than you need from your local taxes, can you give the state a break?” And, be honest, how many times have you heard your principal or department chair, in March or April, say “We have this much money left that we have to spend” – then you come up with things you don’t really need, just to use that money up? We all know it happens. Why not be honest with that money for once?

So, yes – the Governor is seeking to cut money from schools. He isn’t looking to bankrupt school districts, fire all the teachers, and drag kids back to one-room school houses. He’s suggesting that you enjoy the far-above-average COLA from last year for one year and take the step increase on your salary. A lot of teachers in other states ONLY got the step increases, and they have unsurprisingly kept teacher, kept doing it well, and have made do with what was given.

It’s tough when you are a beneficiary of the public sector to think about the ramifications of the cost of the public sector to the taxpayers. Government spending has to be funded from somewhere, and the source of funding is finite. If taxpayers have too high a burden, they will disappear. Businesses will leave. Private Sector employees will leave in search of employment. Government cannot exist without a healthy private sector – tax money has to come from somewhere; it cannot be recursive. Look to California to see what happens with government spending runs unchecked. The government, short on cash, now has to hand out IOUs, rather than paying bills.

Our Federal Government is heading this same direction. We are increasing the number of people who are receiving direct benefits from the government. In addition to all the people already receiving welfare, social security, medicare & medicaid, we are now planning to add 32 million more people to receive healthcare. Who will pay for this? Taxpayers can only support so high a tax burden, and the other way government can offer such services is to increase taxes – money isn’t magic, and you can only shove off debt so long. Eventually, you have to start paying your credit card bills. The federal government is still trying to ignore the debt it’s creating – and New Jersey is now having to face the music. It overspent its credit cards, and now the bill collectors are calling. When your personal credit cards are too high, you have to stop eating out so much and not as many weekends going to do special things and more living within your means. And the guy that make that call is always an evil villain – but he’s still right.