June 03, 2008

Union County's Budget Crisis

Submitted by John Bury

The 2008 Union County budget was introduced last Thursday and in the time it took Sheriff Ralph Froehlich to get an award and someone from the United Way to present a Needs Assessment I got to take a peek at that budget. I wasn't really able to pay attention to the United Way presentation but if I were to assess what Union County residents need I would start with lower taxes. They won't get it this year.

Revenue needed to be raised by taxes will go from $238.6 million in 2007 to $251.7 million in 2008 out of a total budget of $437.7 million, up from $435.4 million. That translates into a 5.5% increase for the county portion of a property tax bill. However, the county is still waiting for the state to finalize its budget to find out about any grants. Unfortunately that state is New Jersey which has made news recently regarding its own fiscal crisis. I wouldn't count on much relief from that corner as long as New Jersey's priorities remain spending and taxing, in that order.

The primary cost increases for 2008 come from employee health and pension benefits. Health insurance premiums will rise from $78 million to $90 million. Since there is no trust fund set aside to cover these costs, everything being pay-as-you-go, the double-digit increases in this country's health care costs will translate directly onto government budgets.

Pension costs went up from $10.3 million to $16.6 million. Here we have a trust fund for future benefits but because of gross state negligence in funding these costs, beginning with Governor Christie Whitman's contribution holidays in the mid-1990s, there is a severe underfunding even with the increased contributions. If the state pension plan were to be funded on an actuarially sound basis this line item by itself would triple.

Debt payments rose from $40.5 million to $42.8 million. A slight increase to be sure but in this relatively low-interest-rate environment this too is a line item that will increase substantially in future years when interest rates return to even historic levels. If we were to get runaway inflation, which is possible as the value of the dollar falls, debt maintenance costs would balloon.

To sum up, the good news is that it could be worse. The bad news is that it will be worse. Benefit and debt costs are time bombs that will explode with a booming retiree population sapping more resources. The accountants and actuaries are out of gimmicks and someone will have to pay the tab without draconian cuts in government spending. If you live in Union County, that someone is you. Enjoy the Musicfest.