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Toll Money for Roads, Not Wall Street

Enough Toll and Gas Tax Money to Pay for Roads

Every day we are told we need a billion dollar gasoline tax hike to fix a transportation “crisis”.  That’s a big lie.   The $1.5 billion we already pay in tolls and gas taxes is more than enough to pay for the best roads and bridges in the country.

Only Wall Street banks and investors getting high tax free income would benefit from a gas tax hike.

For years, Democrats and Republicans on the NJ Transportation Trust Fund Authority recklessly spent far more than they took in.   They wasted billions on projects that had nothing to do with roads and bridges.    To do this, they borrowed $16 billion without getting voter approval as required by our state Constitution.

Bonds without voter approval in NJ are high-risk “junk” because state government has no legal obligation to repay them.   That is why they pay such high, tax-free income.

Our State Constitution required voter approval for borrowing since 1844 for good reason.   It was designed to prevent reckless borrowing by state governments that caused a nationwide economic collapse of 1837.

Since the 1960’s, state politicians and clever lawyers created dozens of “authorities” to by-pass this safeguard.    That explains much of our high debt, corruption and taxes in NJ today.

Let’s understand and enforce our State Constitution again.   Tell your State Senator and Assembly members, “Enough!”  Gas tax and toll money should fix our roads and bridges–not bail out Wall Street.

Seth Grossman, the executive director of Liberty & Prosperity 1776 (libertyandprosperity.org), is a former Atlantic City Council member and Atlantic County freeholder, and ran in the 2013 Republican primary for New Jersey governor.

No Gas Tax Hike!

No Gas Tax Hike!

Years ago, politicians lied when they said a new 3% state sales tax, and 2% state income tax would cut local property taxes.   They are doing it again with the gas tax.

The $1.5 billion we already pay in tolls and gas taxes each year is more than enough for safe roads and bridges.

The problem is that Democrats and Republicans on the NJ Transportation Trust Fund Authority recklessly spent way too much–including billions on projects that had nothing to do with roads and bridges.    Over the years, they borrowed $16 billion–all without voter approval as required by our state Constitution.

Our State Supreme Court repeatedly ruled that state taxpayers have no legal obligation to pay these bonds.   Investors got clear written warnings of the risk.

Nearly 180 years ago, reckless spending and borrowing by state governments caused a nationwide economic collapse called “The Panic of 1837”.     We fixed the economy by adopting a new State Constitution in 1844 that required voter approval before the state could borrow any money.

During the past 50 years, state politicians and clever lawyers created dozens of “authorities” to avoid this safeguard.    That is why we have such high debt, corruption and taxes in NJ today.

Let’s follow our State Constitution again.   Tell State Senators Beck and Kyrillos and our Assembly people to stop funding debt that was not approved by voters.    Let the rotten Transportation Trust Fund Authority go bankrupt and shut down.    Then we can again spend all of our gas tax and toll money on  roads and bridges.

 Seth Grossman, the executive director of Liberty & Prosperity 1776 (libertyandprosperity.org), is a former Atlantic City Council member and Atlantic County freeholder, and ran in the 2013 Republican primary for New Jersey governor.

$1.6 billion per year NJ gasoline tax is more than enough.

IV.  KNOW THE TRUTH ABOUT THE GASOLINE TAX.

The “smart” people in state politics and the media say we need  higher gasoline taxes to fix our roads and bridges.    They are wrong.

We already pay $1.6 billion in state highway taxes.   They include a half billion dollars added at the pump,  $215 million on a hidden “petroleum tax” at the wholesale level,  and another half  billion dollars of our 7% state sales tax earmarked for transportation.    We also pay all sorts of tolls, along with $1.6 billion of federal gasoline taxes that are spent in New Jersey.

The taxes we already pay are more than enough to give us the finest roads and bridges in America.

But our roads and bridges are old, shabby, and dangerous instead.  Almost all of our highway tax money is used to pay back some $17  billion of debt run up by the  “New Jersey Transportation Trust Fund Authority”.  The unelected trustees of this Authority have agreed to use every bit of the $1.6 billion we pay in state highway taxes to pay that debt for the next 30 years.

NJ taxpayers have no legal obligation to repay that money because the loans were never approved by voters as required by our state Constitution.  We have no moral obligation, because most of that money was spent on projects that gave fat profits to inside union contractors and Wall Street bankers, but did very little for the rest of us.

For example, $1 billion of this borrowed money was spent on the nearly empty Camden to Trenton trains that cost $30 per passenger to operate.

New Jersey spends $2 million for every mile of road.    This is triple the $675,000 spent by Massachusetts, the next highest state, and more than 8 times the national average.

We spent half a billion dollars to replace two simple draw bridges between Somers Point and Ocean City.    Did we have to build an artificial mountain for a new visitor center?   Did we have to build a Pulaski Skyway over a mile of swamp?

To fix our broken roads and bridges, we must first fix our broken “pay to play” political culture.

The first step is for our Governor and Legislators to repudiate (refuse to pay) the  $17 billion “NJ Transportation Trust Fund Authority” debt starting now.   They can and must simply refuse to appropriate the money in the next budget.

Once that is done, the Governor and the Legislature can negotiate with bondholders to pay a fair amount that taxpayers can afford—without doubling the gasoline tax!

Higher taxes and more borrowing will continue the corrupt and expensive “pay to play” political culture that has ruined New Jersey during the past 50 years.

Only 2% of NJ government debt is enforceable.

III.  Know the Law.

The NJ Supreme Court repeatedly ruled that NJ taxpayers legally owe only 2% of that $183 billion of debts and pensions.  Public offering statements warned investors  for years that NJ “junk” bonds can be worthless at any time.

  1. The Language of Article VIII, Section 2 of the New Jersey Constitution is very clear:

Article VIII, Section 2:

All moneys for State government. . . shall be provided for in one general appropriation law (budget) covering one and the same fiscal year. . .  The Legislature shall not, in any manner, create in any fiscal year a debt or debts, liability or liabilities of the State. . .unless (and) until submitted to the people at a general election and approved by a majority of voters. . . “
Full text at:  http://www.njleg.state.nj.us/lawsconstitution/constitution.asp

  1. The Supreme Court of New Jersey repeatedly stated that future Legislatures cannot be forced to pay for the debts of any state authority that were not approved by voters according to Article VIII, Section 2 of the NJ State Constitution.   In the case of   LONEGAN ( STOPTHEDEBT.COM)  vs. STATE OF NEW JERSEY,  176 N.J. 2 (2003), the NJ Supreme Court stated:

“(T)the Debt Limitation Clause is not implicated when the State is not legally obligated on debt issued subject to future annual appropriations. . . (Lonegan, at Page 8)

“(B)onds issued by New Jersey Building Authority for construction of facilities to be leased by State did not violate the Clause because payments were “subject to legislative appropriations” and State did not pledge full faith and credit to guarantee bonds. . . The debt clause applies only to obligations which are legally enforceable against the State” and that debts of corporate agency created by Legislature neither bind State nor fall under Debt Limitation Clause. . .” (Lonegan at Page 9)

“(T)he Debt Limitation Clause applies only when the State is legally obligated to make payments authorized by the Legislature.”  (Lonegan, at Page 10)

  1. The “Public Offering Statement”  for bonds issued by every state authority and the bonds themselves contain language like this which warns investors of the risk that future Legislatures may repudiate (refuse to pay) the bonds at any time:

“THE SERIES 2007 G BONDS ARE SPECIAL AND LIMITED OBLIGATIONS OF THE NJ EDUCATIONAL FACILITIES AUTHORITY AND ARE NOT A DEBT OR LIABILITY OF THE STATE OF NEW JERSEY OR OF ANY POLITICAL SUBDIVISION THEREOF OTHER THAN THE AUTHORITY (TO THE LIMITED EXTENT SET FORTH IN THE TRUST INDENTURE) OR A PLEDGE OF THE FULL FAITH AND CREDIT OF THE TAXING POWER OF THE STATE OF NEW JERSEY OR OF ANY POLITICAL SUBDIVISION THEREOF OTHER THAN THE AUTHORITY. . .   THE AUTHORITY HAS NO TAXING POWER”.

(Public Offering Statement for $40,250,000 New Jersey Educational Facilities Authority Revenue Bonds, the Richard Stockton College of New Jersey, Series 2007G, Dated November 27, 2007.)

Over 2,000 collect more than $100K each year from insolvent NJ pension funds.

II.  KNOW THE NUMBERS.

According to the 2/19/2015  report of Mark Lagerkvist for New Jersey Watchdog,  New Jersey state government is now $183 billion in debt.    This is nearly six times higher than the state government yearly operating budget of $32 billion.  See http://watchdog.org/200984/nj-state-debt/

That figure includes roughly $135 billion in unfunded pension promises made to current and retired state, local, and public school employees.    More than 2,000 retired public employees are getting pensions of more than $100,000 per year, and that number increases every month.    There is no connection between how much public employees pay into the system and how much they receive when they retire.

For example, Robert Codey, the brother of  former State Senate President Richard Codey retired nine years ago at age 55 with a state pension of $98,000 per year.   That is more than twice as much as he earned each year when he worked his regular state job.   However, three years before he retired, he “juiced” up his pension by getting extra sweetheart government jobs in Cape May and Morris County.   As a result, he already collected far more than he ever paid into the system.

Under our State Constitution every dollar of pension payments which is over and above what was set aside while that retiree was working is a debt or obligation that was never approved by voters as required by the state Constitution.

Another $17 billion was borrowed by the New Jersey Transportation Trust Fund Authority during the past 30 years.   Although the debt is funded by the gasoline tax, much of this money was spent on expensive failures like the Camden to Trenton railroad and local bikepaths and decorative brick sidewalks in upscale shopping areas that had nothing to do with highways or bridges.   None of this debt was approved by voters either.

New Jersey’s $183 billion state government debt comes to roughly $45,750 for each of the state’s 4 million households.    However, New Jersey taxpayers are only legally obligated to pay 2% of that debt.  That is because voters approved of only about $3.5 billion of that debt pursuant to our State Constitution.

The entire $183 billion cannot be paid back without massive new taxes that would crush the economy.   Although average household income was a very high $70,000 in 2014, that income has been declining steadily during the past eight years.     As household income declined, New Jersey taxes have increased.

The Tax Foundation (http://taxfoundation.org/state-tax-climate/new-jersey) reported that in 2011, the average household in New Jersey paid more than $13,000 or roughly 20% of that income for state and local taxes.   Since then, real estate taxes have gone up substantially.  New Jersey households already pay the third highest state and local taxes in the country.

It is difficult to imagine how these same families can afford to pay their $45,750 share of the state debt and pension obligations on top of the taxes they already pay.

The only sensible solution is to repudiate—refuse to pay—any state government debt not approved by voters.

That means the share of state debt to be paid by each household would be less than $1,000 rather than $45,750.

The does not mean retired government employees would not get their pensions.   There is enough money in the pension funds to pay roughly half of what was promised.    If the pension funds are immediately declared insolvent, payments can be restructured so that all pensions are paid out of the pension funds.     However, instead of paying each retiree half of what he or she was promised, pension payments can be capped at roughly $50,000 per year, so that most ordinary workers get most or all of what they were promised, while higher level employees.  who often manipulated the system to juice up their pensions in the three years before they retired, will  get the biggest cuts.

NJ corruption and debt today just like 1837.

I.  KNOW THE HISTORY.

For roughly 20 years before “The Panic of 1837” bank failures,  state government in New Jersey was as corrupt and mismanaged as it is today.   A handful of politicians controlled state government.  They got elected and re-elected with bribes and political support from another small group who owned the biggest banking, construction, shipping, and railroad corporations in NJ.  This handful of politicians  guaranteed enormous profits for the handful of business owners who kept them in power by giving those businesses government loans, permits to form corporations, monopolies, and profitable no-bid contracts that no other businesses could get.

These politicians kept taxes low to please voters by having state government borrow the money needed to run the government and subsidize sweetheart deals for their business allies.   Their request for loans were never turned down because these politicians only granted state charters to bankers who supported them.   If these “public-private partnerships” paid back these loans with interest, there would be no problem.   But most of those loans defaulted instead, and were never paid back.

Many of these projects were not needed or poorly planned.   There are still abandoned canals in many parts of New Jersey that were failures since the day they were built.  They never attracted the traffic promised by their promoters, tolls were never collected, and the loans to build them were never repaid.

Many corporations that got government loans, or made huge profits from government contracts never built what they promised because of mismanagement or outright fraud and theft.

In 2004, Political Economics Professor John J. Wallis of the University of Maryland described all this as “systematic corruption” in research paper  “The Concept of Systematic Corruption in American Political History.”

In 1837, customers of state banks in New Jersey and elsewhere in America panicked when they learned their bank deposits were “invested” in these bad loans and worthless state bonds.   When they ran to the banks to withdraw their money, the banks were closed and their money was gone.

This “Panic of 1837” caused a seven year economic depression in most of America.   Farmers who had lost their savings and could no longer borrow from banks, had no money for seeds.  Factories had no money to hire workers or buy equipment and raw materials.   Stores had no money buy factory goods.    Consumers had no money to buy.    Home and business owners lost their properties in foreclosure.   Many Americans went hungry.  Others turned to crime and alcohol.    Others turned to radical politics.   John Brown became a militant crusader against slavery after he lost his saving, his home, and his leather factory during this economic depression in 1839.   He and others claimed that this economic collapse was part of God’s punishment for slavery.

Many Americans publicly warned that the country was falling apart and that our  experiment with self-government might fail.  One of them was a 29 year old Illinois  lawyer named Abraham  Lincoln.   In a speech to the Lyceum, a social group for young people, he said the country would collapse from within if Americans did not return to the principles of our founders.   See Abraham Lincoln Lyceum Address, 1838.  

Stephen Foster, America’s most popular songwriter of the day captured the mood of the nation’s despair in his song “Hard Times Come Again No More” written several years later in 1851.

But in 1844, the people of New Jersey turned everything around.   They adopted a new State Constitution with three provisions that Professor Wallis later called “simple yet ingenious”.  They were as follows:

  1. State legislatures could no longer create corporations with “special” laws that helped only special, selected people.    The new NJ constitution forced the Legislature to make “general” laws that gave every citizen an equal right to form a corporation and start a business,  .
  2. State government money could no longer finance private business corporations.
  3. State government could no longer borrow money or incur any long term debts or obligations unless most voters approved it  in a statewide referendum.

These three basic reforms had an immediate and dramatic effect.

The state soon got out of debt and remained debt free for the next 120 years.  Taxes were low and the economy boomed.   Thousands of ordinary citizens formed new corporations that created hundreds of thousands of jobs.

Here in Atlantic County, a country doctor names Dr. Jonathan Pitney of Absecon joined with Sam Richards of Hammonton  to form a new corporation in 1854.   That new corporation raised money from private investors, bought an empty island by the Atlantic Ocean and a strip of land that connected it to Camden.   Their corporation then built a hotel and a railroad in less than one year and created Atlantic City as a first class resort.

Thomas Edison, America’s most successful inventor, was so impressed with low taxes and opportunity in New Jersey that he built his laboratory here in Menlo Park in 1878 when he formed America’s first technology research corporation.  (Many people joke that if Edison were alive today, he could never get the permits he would need to do that!)

Henry Leeds formed a corporation that  replaced the old wooden Chalfonte Hotel with an eight story brick and steel “skyscraper” hotel at North Carolina Avenue and the Boardwalk in less than 10 months.

Sarah Spence Washington, opened a beauty salon in Atlantic City in 1913.   When she could not buy products suitable for African-American hair, she formed a beauty products corporation that made her a multimillionaire ten years later.

During this entire time, New Jersey had no state sales tax and no state income tax.   Real estate taxes were low enough for one working parent to own a home and support a family.  However, New Jersey public schools were so good that many foreign diplomats in Washington, D.C. bought second homes in Atlantic City so their children could attend Atlantic City High School.

New Jersey adopted a new State Constitution in 1947 that included those three basic features of the 1844 NJ Constitution.

In 1963, New Jersey adopted its first 3% state sales tax.   However, government taxes and spending did not get out of control until 1968.  That was when the New Jersey Supreme Court approved a loophole that let the state borrow hundreds of millions of dollars without voter approval–if it did so indirectly.

The NJ Supreme Court agreed that state government could not simply borrow money, and pay back the loan with tax dollars.   However, it did let state government create “independent authorities” like the Economic Development Authority (EDA) which were allowed to borrow money.    It also said that NJ state government could fully fund those authorities, because its obligation was “unenforceable” and could be repudiated at any time.

Two years later, New Jersey increased its 3% state sales tax to 5% with a Republican Governor and Legislature..    In 1976, New Jersey started its first  2% state income tax with a Democratic Governor and Legislature.

Except for a brief casino boom from 1978 to 2007 (when Atlantic City had a casino monopoly on the East Coast), New Jersey’s economy steadily declined between 1968 and today.    More debt led to more government spending, taxes, and corruption.

For roughly 50 years, citizens and even public officials like former Bogota Mayor Steve Lonegan filed lawsuits to stop this borrowing without voter approval.   Each time, the NJ Supreme Court ruled that while any debt incurred by a state government authority was not a legal debt of the state and could be “repudiated” or rejected at any time, it would not order those authorities to stop borrowing money.

As a result, the only way for the NJ Constitution to be respected and complied with, is for New Jersey voters to elect legislators who will repudiate–refuse to pay debts and obligations not approved by voters.

To save our state–repudiate!   Don’t swallow their bait–repudiate!   Before it’s too late–repudiate!

Both parties agree: Double gas tax after elections.

Republicans and Democrats both agreed to double the NJ gasoline tax in November.   That is why they will not talk about it–until after the elections.

Every week, Warren Buffett’s “Press of Atlantic City” and other daily newspapers falsely blame NJ’s bad roads on our low gasoline tax.   They rarely mention that NJ has the highest business, income, sales, property, and electricity taxes in the country.

They say we have no choice.  They say that that unless we double the gasoline tax, there will be no money to fix our roads and bridges for the next 30 years.   But this is a lie.  There is another choice.

But first, it is important to understand that this gasoline tax “crisis” is a small part of a much bigger problem.   During the past 30 years, New Jersey politicians, Republicans and Democrats, borrowed money and promised to pay back that money together with public employee pensions in the total amount of $183 billion– $183,000,000,000.    They did not make any plan on how they would come up with that money.    Roughly $17 billion of this money was borrowed by New Jersey’s “Transportation Trust Fund Authority”.

Every year, New Jersey collects tolls and gasoline taxes of roughly $1.6 billion.  This money is more than enough to build and fix every road and bridge in the state.   But during the past 30 years, Republicans and Democrats in Trenton “leveraged” that money.  They borrowed $17 billion so they could spend billions on politically connected projects that had nothing to do with roads and bridges–like the train between Camden and Trenton.  The Authority promised to repay that loan with every dollar of tolls and gasoline tax collected for the next 30 years.   That leaves almost no money to fix any road or bridge in NJ for the next years–unless we  double the gasoline tax.  Or unless we “repudiate”,  that is  refuse to pay that unconstitutional debt.

However, the same people who “leveraged” the $1.6 billion gasoline tax we already have are already planning to “leverage” future collections of the new tax.   They are also promising expensive and unnecessary projects to reward the people who support the tax hike and get them re-elected.   Doubling the gasoline tax will do nothing but postpone the day of reckoning.

All this is done in violation of our NJ State Constitution and  common sense.    Our State Constitution  requires a balanced budget every year.   It specifically does NOT permit state government to promise to pay any money in future years unless voters approve  in a November statewide referendum.   Any promise made without such voter approval is NOT legally binding on future Legislatures, and  can be “repudiated” or rejected at any time.

This was also done without common sense.   New Jersey has roughly three million taxpayers.   We already pay some of the highest sales, income, property, business, and gas and electric taxes in the nation.     These high taxes give state government roughly $30 billion each year.   We cannot afford to pay an additional $183 billion on top of all those other taxes we pay.   We would need to double all tax rates for six years, or seize $67,000 of property from each taxpayer.

This ban on state government borrowing without voter approval first became part of our  State Constitution in 1844.   Because that provision was written some 171 years ago, many judges and politicians claimed it was too old-fashioned and out-dated to enforce.

However, that part of our Constitution was written at a time when state government was as corrupt, irresponsible, and broke as it is today.   Back then, massive state borrowing, and  “systematic” corruption caused  the “Panic of 1837” bank failures followed by a seven year economic depression.

That 1844 State Constitution quickly got NJ state government out of that debt and depression.  For the next 120 years, New Jersey state government had no debt, no sales tax, no lottery, few tolls, and no income tax.  Yet New Jersey had more prosperity, better roads, better schools, and less crime than most other states.

All that changed starting in 1968, nearly 50 years ago.   That was when  Republican and Democrat politicians, lawyers, and judges invented and approved loopholes that allowed “independent” government authorities to incur “unenforceable” debts without voter approval.   This made a mockery of our State Constitution and caused the explosion in corruption, debt, and taxes that plague us today.

There is one quick, simple, and legal way to  undo this damage,  We must shut down the flow of easy, borrowed money.    We must repudiate–refuse to pay–any debt not approved by voters as required by New Jersey Constitutions since 1844.

If we do that, Republican Governor Christie and the Democratic majorities in the State Senate and Assembly will have all $1.6 billion from our gasoline taxes to immediately start building and fixing every road and bridge in New Jersey.

Article 8, Section 2 of the NJ Constitution clearly states that those debts are not, and cannot be a legal obligation of NJ taxpayers because they were never approved by voters.    The New Jersey Supreme Court has repeatedly stated this.

The public offering statements of all New Jersey bonds issued without voter approval clearly warn investors of this risk in big, bold letters.  That is why these investors get high, tax-free income from them.

Wall Street bankers, Democrats and Republicans say that refusing to pay debts is a radical and disruptive act.   We agree.  But is there any other way to stop this lawless conduct by our elected officials and judges?

In 2000, many of us who later formed www.libertyandprosperity.org worked with Bogota mayor Steve Lonegan and StoptheDebt.com.    We took his case against unconstitutional debt all the way to the State Supreme Court.

But when it appeared that the court would vote 4-3 to stop state government debt without voter approval,  Chief Justice Poritz (appointed by Republican Christine Todd Whitman) delayed the court’s decision until Justice Stein, a conservative Republican, reached mandatory retirement age.   When Justice Stein retired, Chief Justice Poritz delayed the case again until Democratic Governor Jim McGreevey took office and appointed “progressive” Democrat Barry Albin.   Once that was done, the NJ Supreme Court flipped, and voted 4-3 to permit independent authorities to issued more “unenforceable” debt without voter approval.

That decision caused even more debt, taxes, and corruption.    The hotel-motel tax was doubled from 6% to 12%.   There were big hikes in tolls, real estate transfer taxes, and the income tax.  The sales tax was hiked from 6% to 7%.   And yet state government borrowed itself even deeper into debt.

In 2008, Democrat Governor Jon Corzine warned in his State of the State Address that this enormous debt was smothering  the state’s economy.  However, his “solution” was to put the state even deeper into debt by “monetizing” (selling or borrowing against) the NJ Turnpike, the Garden State Parkway, and Atlantic City Expressway and doubling the tolls.

Corzine was voted out of office and replaced with Republican Chris Christie in 2009.   During the past six years, Christie did not say or do anything to reduce the state’s debt.   His appointees to state authorities instead borrowed billions more.   NJ state government and its “independent” authorities now owe roughly $183 billion of debts and pension obligations that were never approved by voters.  (Taxpayers have a legal obligation to pay only the $3 billion of bonds that were approved by voters).

For the past 12 years we did everything we could to persuade our officials to comply with our State Constitution and not borrow money without voter approval.   But they ignored us.  Now we have no other choice.  We must repudiate to save our state.

1968: Court OK’s “unenforceable” debt without public vote. NJ taxes explode.

In 1947, New Jersey adopted a new State Constitution to replace its old State Constitution of 1844.    However, it continued these three basic reforms of 1844 that brought New Jerseyt out of a six year economic depression, and gave our state 120 years of economic growth.   These were the three key provisions:

  1. “General” state laws gave every citizen an equal right to form a corporation and start a business,  .
  2. State government could not borrow money without the approval of voters in a statewide referendum.
  3. Taxpayer money could not longer finance private business corporations.

Four years later, in 1951,  the Governor and Legislature tried to create a loophole in the State Constitution and borrow money without voter approval.   They created a “New Jersey Building Authority” and gave it power to borrow money to build new state government buildings without voter approval.   The state would then use tax money to repay the loans in the form of  “rent” under long term leases made with the Authority

In 1953, the New Jersey Supreme Court in a 5-2 decision rejected that plan.

For the next 15 years, New Jersey continued to be one of the most prosperous and least taxed states in the nation.   In 1968, New Jersey’s 7,005,000 residents had total personal income of $28.6 billion, or $4,083 per person—among the highest in the nation.   At that time, our state government was virtually debt free.  Its annual budget was $1.06 billion, or 3.7% of state income.   New Jersey state government spent roughly $143 per person each year.   New Jersey had  just adopted its first 3% sales tax in 1963, but it still had no personal income tax.

That quickly changed when the New Jersey Supreme Court decided the case of Clayton vs. Kervick in 1968.   It  approved a state law that created the  “NJ Educational Facilities Authority” and let it borrow money for new  college buildings without voter approval..   The Court said that was because (a) taxpayers had no legal obligation to pay the money back, and (b) the Authority had an independent source of income to pay back the loans–namely tuition and dormitory rent collected from students.

In 1971 , the state Supreme Court approved a state law that provided for state reimbursements to county governments that borrowed money for new community colleges–without voter approval.   In 1973, it approved the lease-purchase gimmick to avoid voter approval it had rejected 20 years earlier.

In 1982, the NJ Supreme Court allowed independent authorities to borrow money without voter approval, even where the authorities had no source of income other than what was paid by state government with money collected in taxes.

In 2000, Republican Governor Christie Whitman and a Republican controlled legislature borrowed a massive $8.6 billion for construction of local public schools without voter approval.     In 2002 and 2003, the NJ Supreme Court approved that borrowing, but made it clear that the debt was not legally binding on the “full faith and credit” of state government because it was not approved by voters.

There is a direct connection between state government borrowing without voter approval, and big increases in state government spending and taxes.

Year NJ Population Total NJ Personal Income NJ State Budget Total NJ State Budget as % of State Income NJ State Budget Per Person
1968 7,005,000 $28.6   billion $1.06 billion 3.7% $143
1973  7,335,240 $44.25 billion $2.4 billion 5.4% $327
1981 7,407,471 $96.48 billion $5.68 billion  5.9% $756
2002 8,558.327 $337.00 billion $23.4 billion 6.9% $2,734
2007 8,685,920 $427.30 billion $33.5 billion 7.8% $3,684

In his January 2008 State of the State Message, Democrat Governor Jon Corzine said:

“With $32 billion in bonded debt, New Jersey’s citizens have a higher debt burden than virtually all other states.   Every man, woman, and child in New Jersey personally owes $3,700 of that debt—about three times higher than the national average. .  .

“For nearly 200 years, our State Constitutions have explicitly barred borrowing without voter approval.   Somewhere along the line, the meaning of that requirement got totally lost.    The State, under both Democratic and Republican leadership, has made an end run around the voter approval requirement by issuing billions in contract debt without that approval.

“Since 1990, approximately $24 billion in contract debt has been issued, while “voter approved” debt has stayed flat at $3 billion—a timeframe that coincides precisely with the sharp deterioration in our State’s finances. . . “

Although Democratic Governor Jon Corzine spoke of the problems caused by unconstitutional debt in 2008, he never suggested that state government “repudiate” or refuse to pay it.   Before becoming Governor, Corzine worked as a top executive for Goldman Sachs, a Wall Street firm that profited enormously from helping states “legally” borrow large sums of money without the voter approvals required by their state constitutions.

Corzine instead proposed putting New Jersey taxpayers even deeper into debt by “monetizing” the New Jersey Turnpike, Garden State Parkway, and Atlantic City Expressway.

In 2009,  Republican Chris Christie became Governor by defeating Corzine’s re-election bid.    Christie not only failed to repudiate unconstitutional debt, his appointees in “independent” state agencies borrowed even more money without voter approval and put the state even deeper in debt.

By coincidence, Chris Christie’s wife Mary Pat was employed until just a few months ago by Cantor Fitzgerald, another Wall Street firm that profits enormously from helping state and local governments borrow money without voter approval as required by state constitutions.

According to the 2/19/2015  report of Mark Lagerkvist for New Jersey Watchdog,  New Jersey state government is now $183 billion in debt.    This is nearly six times higher than the state government yearly operating budget of $32 billion.  See http://watchdog.org/200984/nj-state-debt/

That figure includes roughly $135 billion is unfunded pension promises made to current and retired state, local, and public school employees.    More than 2,000 retired public employees are getting pensions of more than $100,000 per year, and that number increases every month.    There is no connection between how much public employees pay into the pension system and how much they receive when they retire.   Because of that, most current retirees are receiving far more than they paid in.   None of this liability was approved by voters as required by the state Constitution.

Another $17 billion was borrowed by the New Jersey Transportation Trust Fund Authority during the past 30 years.   Although the debt is funded by the gasoline tax, much of this money was spent on expensive failures like the Camden to Trenton railroad and local bikepaths and decorative brick sidewalks in upscale shopping areas that had nothing to do with highways or bridges.   None of this debt was approved by voters. either.

New Jersey’s $183 billion state government debt comes to roughly $45,750 for each of the state’s 4 million households.    However, New Jersey taxpayers are only legally obligated to pay 2% of that debt since only about $3.5 billion of that debt was approved by voters pursuant to our State Constitution.

The entire $183 billion cannot be paid back without massive new taxes that would crush the economy.   Although average household income was a very high $70,000 in 2014, that income has been declining steadily during the past eight years.     As household income declined, New Jersey taxes have increased.

The Tax Foundation reported that in 2011, the average household in New Jersey paid more than $13,000 or roughly 20% of that income for state and local taxes.   Since then, real estate taxes have gone up substantially.  New Jersey households already pay the third highest state and local taxes in the country.   It is difficult to imagine how these same families can afford to pay their $45,750 share of the state debt and pension obligations on top of the taxes they already pay.

The only sensible solution is to repudiate—refuse to pay—any state government debt not approved by voters.

That means the share of state debt to be paid by each household would be less than $1,000 rather than $45,750.

The does not mean retired government employees would not get their pensions.   There is enough money in the pension funds to pay roughly half of what was promised.    If the pension funds are immediately declared insolvent, payments can be restructured so that all pensions are paid out of the pension funds.     However, instead of paying each retiree half of what he or she was promised, pension payments can be capped at roughly $50,000 per year, so that most ordinary workers get most or all of what they were promised, while higher level employees, who often manipulated the system to juice up their pensions in the three years before they retired, will  get the biggest cuts.

9 POINT PROGRAM: It’s only too late if we don’t start now!

  1. Know the History:   In 1844, NJ changed State Constitution so state government could no longer borrow money without voter approval.   This was also made part of new 1947 NJ Constitution. It got NJ out of debt  and 1837 Depression.  It made NJ one of most prosperous and least taxed states for next 120  years.   NJ has unsustainable debt, taxes, and corruption today because both Republican and Democrat judges on State Supreme Court refused to apply and enforce this part of NJ State Constitution for past 50 years.
  2. Know the Numbers:   NJ’s 3.1 million taxpayers cannot afford, and at some point will stop paying NJ’s $183 billion debts and pensions.  Only question is when and how.   The sooner we stop paying the people most responsible for the problem,  the less damage done, and  the fewer people hurt.    The longer we delay, the more damage done and the more innocent people hurt.
  3. Know the Law:   Although the NJ Supreme Court foolishly allowed  state agencies and authorities to make promises to pay $183 billion in debts and pensions, it repeatedly stated that most of those promises are NOT enforceable, and that NJ taxpayers legally owe only 2% of that amount–debts that were approved by voters in statewide referendums.   Public offering statements warned investors  for years that NJ “junk” bonds are NOT backed by full faith and credit of state, and can be worthless at any time.
  4. Know Truth about Gas Tax:   The $1.6 billion we already pay in gasoline taxes is more than enough to build and fix our roads and bridges.  There is no need to reason to double gas tax other than to  bail out NJ “junk” bonds and the Wall Street banks that sold them.
  5. Know your Investments:    Don’t buy or own NJ “junk” bonds.    Don’t buy or own investment funds that hold NJ “junk” bonds.  Tell your financial advisor to read the fine print!
  6. Know your Pension:   Tell your government and union pension managers to get rid of NJ “junk” bonds as quick as possible.   If they refuse, demand an investigation.
  7. Know the  roughly 2,000 “political insiders”  who are quickly draining the NJ Pension funds by collecting more  than $100,000 per year in “early retirement”  benefits they never paid for.  Learn how delayed retirement to age 66 and capping pensions at $50,000/year are the only ways to save pensions for everyone else.
  8. Know your Politicians:   Apply  Center for Self-Government Methods to find out which members of U.S. Congress, and the NJ Senate and Assembly are “pillars” who will repudiate NJ’s unconstitutional “junk” bonds and stop running NJ’s insolvent pension funds like a Ponzi scam for insiders.   Find out which public officials are  obstacles.
  9. Support officials who are “pillars” Be/Support a candidate for Governor, Congress, State Senate, or Assembly when necessary to remove “obstacles” in 2016 and 2017 elections.