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Commentary By Steven Malanga

High Price for Rotten Government

Economics Tax & Budget

When New Jersey Gov. Jon Corzine an nounced his slim med- down budget recently, he said that the state could no longer afford the government that it now has. What he didn't say is that this government isn't just expensive, it's also mismanaged and ineffective.

That is, New Jerseyans pay some of the country's highest taxes to get one of the country's worst governments.

In a new study, Governing magazine ranks Jersey the nation's third-worst-managed state. The problem isn't just the shambles that its finances are in, but also its lack of investment in infrastructure, its poor employee training and development, and a failure to apply technology and data to manage public services well.

Talk about a quadruple whammy for the state's residents, who ought to be asking exactly what the heck the state has been doing with all their money.

One thing that Jersey's patronage-ridden government has been doing is hiring workers at a rapid rate, far faster than most other states. Corzine's recent pledge to trim the state's workforce by 3,000 employees (as part of $500 million in spending cuts) drew a howl from public-sector unions, as well as warnings from some editorialists that the cuts might hurt services.

Corzine might have noted that from 2000 to 2006—after the Wall Street tech-stock meltdown and the economic fallout from 9/11—a succession of NJ governors added 10,000 workers to the state's executive workforce, a 17 percent rise, even as the state's population grew by only 4 percent.

The hiring spree didn't stop there. State agencies and authorities not directly controlled by the governor were rapidly boosting their own payrolls, adding about 13,000 more full-time (or full-time-equivalent) workers to the state's payrolls, reports the Census Bureau. Only a few other states increased their public payrolls as quickly; all were far larger than Jersey and had more rapidly growing populations. By contrast, even New York was a model of efficiency, growing its workforce by less than 1 percent during the same period.

Propelled by the hiring (as well as higher-than-average government pay and fat benefits), New Jersey hiked state spending by almost 6 percent a year from 2000-08, nearly double the inflation rate. To pay for that spree, the state's politicians rapidly ramped up taxes.

Though he lasted just three years in office, ex-Gov. James McGreevey hiked taxes and fees 33 times. Corzine's first year in office featured a whopping $1.2 billion sales-tax hike, with half the money going into property-tax relief and the rest into a bulging state budget.

The taxing and spending has transformed New Jersey into one of the nation's most inhospitable places to do business. Once a low-tax state (a study in the early 1960s placed it 40th among the states in tax burden), it's now ranked the second-worst business-tax environment in the country by the Tax Foundation.

Other surveys of state business climates consistently rank Jersey among the worst places to operate—one reason why the state's economy, which for years outperformed the national average, has lagged since 2000.

But New Jersey residents and businesses have gotten little in return for this spending, taxing and hiring. In an age when states and cities are moving to performance-based systems that accurately measure their work, for instance, Jersey's "agencies do not have goals or performance measures," which will make it difficult to achieve Corzine's budget reductions, the Governing study noted.

Given that Jersey's population is one of the most educated in the country and its private-sector workforce one of the best trained, there's no excuse for this kind of performance. The state government simply has yet to emerge from decades during which patronage, not sensible management, governed hiring.

The biggest losers continue to be taxpayers. Though Corzine's budget has no major tax hikes, it sharply cuts a rebate program used for years to offset municipal property taxes, which are among the highest in the country. Ill-conceived and often used by state pols as an election-year goody for voters, the program was nonetheless about the only good news the state's taxpayers could count on in recent years. Cutting it is a reminder that even under a governor newly preaching fiscal prudence, the state's taxpayers always end up the losers.

Steven Malanga is senior editor of City Journal and a senior fellow at the Manhattan Institute.

This piece originally appeared in New York Post

This piece originally appeared in New York Post