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The Legal Corruption Series: Executive Summary
New Jersey is in a bad way. Our economy is weak and significantly underperforms other states. Our tax system is consistently ranked as the worst in the nation. Our public-sector pensions are in the worst condition of any state, and our unfunded liabilities are at least $202 billion—almost six times the size of the $35 billion annual budget.1 We have the second-lowest bond rating of any state—save broke Illinois.2 Businesses, taxpayers, and young adults are leaving our state in droves. Sadly, New Jersey’s future looks even worse.
How did New Jersey get into this position?
It was not happenstance. New Jersey is in this position because its largest public-sector union, the New Jersey Education Association (NJEA), often working in concert with its public-sector union allies, has rigged the system for its own benefit. The consummate special interest, the NJEA has dominated the state’s political system for decades. It structured a legislative regime that allowed it to siphon off hundreds of millions of taxpayer dollars to spend itself to unmatched political clout. Predictably, New Jersey’s politicians—both Republicans and Democrats—have succumbed to this clout and largely given the NJEA what it wanted. Too often, New Jersey citizens and taxpayers have been left out of the discussion, and yet it is they who will foot the bill.
If New Jersey citizens and taxpayers knew what was really going on, they would be outraged. They would be outraged that a special interest was able to control state government to their detriment. They would be outraged that their highest-in-the-nation taxes are flowing directly into union coffers to be used against their own interests. They would be outraged that the future of the state—and that of their children and future generations of New Jerseyans—has been mortgaged for the benefit of the few over the many.
The purpose of this research is to inform New Jersey’s citizens of what is really going on and how we got into this position. Using published research, contemporaneous media accounts, and the NJEA’s own publications to ascertain the facts, this study details the deliberate exploitation of New Jersey’s political system and the resulting consequences—to the benefit of the NJEA and the detriment of New Jerseyans.
There are five parts to the research:
New Jersey citizens and taxpayers must wake up to what has happened in our state and why we are where we are. In the end, the best description of what has occurred is “legal corruption.” Our political system has been thoroughly corrupted—so much so that the corruption itself has been made legal. Either we change the system and root out the legal corruption or it will bankrupt the state—along with the future of our children and the next generations of New Jerseyans.
“New Jersey is dying. The infrastructure is crumbling, smart young people go out of the state for college and don’t return, taxes are out of control.”
—A New Jersey CEO to Chief Executive in 20163
This is a troubling comment—and for more reasons than just the obviously bleak prognostication. As outlined in Part III, New Jersey is ranked as the state in the worst fiscal condition. New Jersey’s unfunded pension and benefit liabilities are at least $202 billion, almost six times larger than the state’s $35 billion annual budget. Without robust economic growth, it will be impossible for New Jersey to meet these obligations without economy-killing tax hikes or drastic cuts in services, or both. The bottom line is that New Jersey needs a strong economy if it is to overcome the enormous fiscal problems that threaten the state’s future. And, yet, as this CEO says, New Jersey’s economy is not strong; it is dying.
New Jersey is certainly not without hope. It has several natural advantages. After all, it is the Garden State, located on the Northeast Corridor adjacent to New York City and Philadelphia and blessed with 127 miles of ocean beaches. It is home to top universities and Fortune 500 companies. It is one of the wealthiest states, with per capita personal income of $61,968, the third highest in the country and 25 percent above the national average.4
But as the above CEO said, all is not well in New Jersey. For the past decade, New Jersey has had one of the weakest economies in the nation, well below the national average for jobs and economic growth. Its economic environment is inhospitable to businesses, both large and small. Its tax climate is the worst in the country, and the cost of living is sky high. Both New Jersey’s fiscal condition and its pension and benefit underfunding are the absolute worst in the nation, earning it the second-lowest bond rating of any state. As a result, New Jersey is experiencing an out-migration of businesses, taxpayers, and most disturbingly its youngest citizens.
As detailed in Parts I and II, New Jersey’s political status quo is dominated by the state’s largest teachers union, the New Jersey Education Association (NJEA). The NJEA has constructed a system that siphons off taxpayer dollars directly into its coffers, giving it unmatched money and political clout. The NJEA has used this clout to dominate New Jersey politics, allowing it to perpetuate its power and gain pensions and benefits for its members that threaten to bankrupt the state (detailed in Part III). As shown in Part IV, the NJEA has also been a persistent and successful advocate for more state education spending and the higher taxes to support it. As the most powerful political force in the state for 50 years, the NJEA has played a significant role in bringing the state economy to its current woeful condition.
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