"Chris Christie Is Taking $2.4 Billion From Pensions After Giving $3.3 Billion To Business"
CREDIT: Associated Press
The amount of money New Jersey has spent on corporate tax giveaways and investment fees since Gov. Chris Christie (R) took office would be more than enough to replace the $2.4 billion he just took from the state’s pension funds to balance the budget.
The governor’s most recent budget had promised $3.8 billion for the state’s struggling pension funds over the next two years, but he announced last week that he would take back $2.43 billion of that total. Christie said the move was “not only the best but the only decision we’re left with” for the state’s $2.7 billion two-year deficit.
But the circumstances that left Christie in that hole didn’t arise on their own. He created them by spending $2.1 billion on business tax subsidies over the first three years of his tenure and by overseeing “alternative investments” of pension money with hedge funds and other high-fee money managers who pocketed a combined $1.2 billion in fees that would otherwise have gone into the state’s pension funds over the past year alone.
Those pension fund costs are part of a national trend toward riskier, costlier investment vehicles. The contracts states enter into with hedge funds and private equity companies sometimes feature guaranteed revenues for the firms, as documents recently obtained by PandoDaily show. The website has also reported that Christie’s appointee to manage such decisions by New Jersey’s pension funds has personal financial ties to some of the firms that benefit from investing the state’s money. While the costlier investment vehicles have been trendy for pension managers around the country, New Jersey has been especially eager to use them. It now has the second-largest amount of assets invested with hedge funds of any pension system.
The $2.1 billion in business tax subsidies was supposed to spark economic growth. Such schemes are common across the country, but Christie has leaned on them especially hard. After spending a total of $1.25 on tax subsidies in the decade before he took office, the state dumped $2.11 billion into the giveaways from 2010 to 2013, according to New Jersey Policy Perspective.
The escalation of tax breaks hasn’t brought prosperity to the state. New Jersey ranks 48th in private sector job growth since 2010, according to the Star-Ledger, tied with Mississippi. It has recovered a little under 40 percent of the total jobs it lost to the Great Recession, while neighboring New York (122 percent) and Pennsylvania (81 percent) have performed far better, according to the paper.
That experience is all too typical. State tax rate cuts do not create jobs, as the Center on Budget and Policy Priorities has shown. Neither do specific tax incentive programs: “there is no conclusive evidence from research studies conducted since the mid-1950s to show that business tax incentives create net economic gains…[or] have an impact on business location and expansion decisions,” experts Marilyn Rubin and Donald Boyd wrote in a report for New York state legislators. Most states fail to adequately calculate the actual impact of their tax incentive programs on business decisions and net economic growth, according to a Pew Center on the States report, but one report last spring found that manufacturing tax credits in 20 different states had approximately zero effect on growth in the targeted industries.