NJ Business Matters: The Blog of the CIANJ

Maybe They Should've Gotten Degrees in Logic

Less than a week after declaring she was "powerless" to stop educators from receving tuition reimbursement and pay raises based on degrees from diploma mills, State Education Commissioner Lucille Davy now says she will draft rules to stop the practice. It may have something to do with this scathing letter and press release from Senate President Codey.

In the statement, Codey quoted one Freehold educator's excuse for accepting taxpayer dollars to reimburse his tuition at Breyer State,

To quote Freehold Superintendent H. James Wasser, ‘The only thing I would probably do differently, is now that I am aware of this word ‘accreditation,' I would probably thoroughly research that.’

Herein lies the perfect example of why our administrators should receive degrees from accredited universities – to save us the embarrassment of having educational leaders who are unaware of such qualifications to begin with. 

At the very least this is stupidity, at the worst, it may be criminal.”

That middle piece is pretty funny, until you realize it is the rest of us that serve as the ultimate punchline. Codey will draft legislation, Davy will re-write rules, but until taxpayers take an active role at their local level there will be future - more creative - attempts to game the system.

Meanwhile, the Asbury Park Press has uncovered even more educators with degrees that involved sending in little more than a check and a resume.

International Competition Isn't Just for Gymnasts

It's back to school time and American parents are looking for products to help their kids maximize achievement in the classroom. Unfortunately, as the Heritage Foundation's Dan Lips points out in the Philadelphia Inquirer, many never have a say in the most important variable in the education equation - the school their child will attend.

Adjusted for inflation, the US spends more per-pupil than ever, and here in New Jersey we spend more than anywhere else on planet Earth. Despite that, the U.S. ranks in the twenties among industrialized nations in math and science and one-fourth of all students never earn a high school diploma. The problem is even more pronounced in our urban centers, where poverty puts the greatest restrictions on where a parent can send their child to school.

Imagine how much stronger the American education system would be if families had greater control over the 100,000-plus tax dollars that are spent on their children's educations. Families could choose schools - just as they now shop for school supplies and backpacks - shopping for the right classroom that meets their children's unique needs.

For some, greater parental control might mean choosing to enroll their child in a different school, instead of the neighborhood public school. For others, it might mean supplementing their child's schooling with tutoring or extracurricular activities.

Across the nation, policymakers are slowly but surely giving parents more control over their children's education. Many states now offer families some choice in what kind of public school they send their children to. Additionally, 14 states and Washington, D.C., have programs to give more families the option of choosing between public and private schools for their children.

If all families had the power to choose the best school for their children, schools would work to attract them - showing why they offer a superior learning environment that meets children's specific needs. Struggling schools would face more pressure to turn themselves around, and the best schools would become models that are replicated across the country.

Here in New Jersey, a pilot program is sitting on the desks of legislators, awaiting an up-or-down vote. The UEZ Jobs Scholarship Act would, by its fifth year, allow up to 20,000 poor children in eight cities the opportunity to go to a school of their choosing - public or private. They would be tested in the same way as their peers in existing public school, and the legislature could then decide whether the program merits being extended. Even better news is that kids in the program would be educated at 40%-60% less than their peers in local public schools.

It's time for a fundamental change. If the US ranked in the twenties in the medal count in Beijing, there would be a national outcry. More money thrown into the same system has not produced better results. Just as it does in the private sector, genuine competition would. Just ask the residents of Milwaukee, Washington, Florida and elsewhere who have already voiced their support of existing school choice programs. Don't Jersey's kids and taxpayers deserve the same?   

Neighborly Advice

The state's economic woes have been well-documented here at NJ Business Matters, and the result of Trenton's attempt to tax its way into prosperity has been predictable: fewer job opportunities and the slow hemorrhaging of our most productive citizens to other states.

Today, Manhattan Institute fellow Steven Malanga uses New Jersey as a prime example of what New York should avoid as their legislature works through an Empire State downturn. On why New Jersey has struggled to reform its wayward policies, Malanga writes,

Despite the constant stream of bad news, reform has been difficult because the kind of big-government, tax-consuming politics ruining Jersey have given too many residents a stake in the system.

The rapid growth of state and local government - whose employment increased by 15 percent from 2000 through 2006 alone - has created a huge public work force not about to vote for eliminating its perks and benefits.

Meanwhile, the state's recent tax increases have fallen almost entirely on upper-income residents, so that those earning more than $200,000 a year (just 4.9 percent of households filing tax returns) are paying 60 percent of all income taxes. Jersey has even managed to make its onerous local property-tax system progressive by instituting a state rebate program - but only for those earning below certain incomes.

The effect of all of this is to make Jersey a place where businesses and a few residents pay the freight. So many people are on the public dole that reform becomes virtually impossible.

But such a system can't sustain itself long as businesses balk at expanding, some shrivel (like the newspapers) and declining job opportunities stifle growth. That's why New Jersey now lurches from crisis to crisis.

During the debate on paid family leave, business groups warned the legislature that the mandate would be bad for business and that the mistake would only be amplified during an economic downturn. In response, we were told that maybe Jersey was just late emerging from the 2002 recession (which we never really did) and that the cyclical nature of the economy would eventually boost it.

It doesn't work that way. There is no law of nature that requires boom times to always follow a slowdown. The only way the legislature can improve the situation is to create a low tax and regulatory environment, and then allow businesses and citizens to create wealth. All the incentive programs, subsidies, and property tax rebates ever devised are not enough to overcome a tax code that ultimately punishes success.

Consider it friendly advice, New York.

Burning Food

Last week we noted Texas Governor Rick Perry and the Reason Foundation's opposition to the current system of producing corn based ethanol. The mandates are widely considered a driving force behind higher food and higher fuel prices with questionable benefits for the environment.

Now the Sierra Club is urging Governor Corzine to petition the federal EPA to reduce New Jersey's ethanol requirement.

Ethanol had long enjoyed wide political and public support, with proponents citing it as a cleaner fuel that could reduce carbon monoxide emissions from automobiles and leave the nation less reliant on fossil fuels and foreign oil. Refineries already have been using it to replace methyl tertiary butane ether, or MTBE, in gasoline to meet decade-old mandates to reduce carbon monoxide emissions.

But critics contend ethanol production -- and federal subsidies encouraging farmers to grown corn instead of other products -- have driven up food prices and the cost of feed for livestock.

Environmentalists contend the push to ethanol actually reduces fuel efficiency, as corn-based ethanol takes more energy to produce and market, and that its use creates ground-level ozone -- smog.

The federal mandate requires 11 billion in corn ethanol be used by 2009. Freezing the requirement in New Jersey would have a significant impact in neutralizing a harmful mandate.

In the words of Governor Perry,

Forcing Texas ranchers to close their doors because they can no longer afford to feed their livestock takes food off the table for millions of Americans. If that's not "severe economic damage," what is?

Good question. 

Setting an Example v.2

We can't wait to hear how this one is in the best interest of the child.

New Jersey taxpayers often foot the bill for school administrators to obtain advanced degrees and then pay for those degrees again through higher salaries and higher pension payments. Despite that, the Education Commissioner says the State is powerless to prevent Superintendents from getting their degrees through so-called diploma mills.

Freehold Regional High School District became the epicenter of the diploma mill controversy in New Jersey when the superintendent and two top administrators obtained degrees from an online school that has been deemed an "apparent diploma mill" by Alabama officials.

After completing an investigation into the administrators' degrees, the education department's report stated there was "no sustainable evidence" that the administrators "possessed the prerequisite intent to deceive when they obtained the degrees" from Breyer State University, which has been chased out of two states and an African country.

The education department report suggested — but did not require — that high school administrators, in the future, earn college degrees from reputable, accredited schools. (emphasis ours)

None of the three administrators investigated — Superintendent H. James Wasser, Assistant Superintendent Donna Evangelista and recently retired Assistant Superintendent Frank Tanzini — was required to pay back the $10,750 they received in taxpayer money to obtain degrees from Breyer State.

Two academics reviewed one of the doctoral dissertations in question, and found it would be insufficient at an accredited school. The entire article in Sunday's Asbury Park Press is an absolute must-read.

We fully expect a parade of outrage from elected officials and will link to the press releases as they become available. Outrage aside, the truth is that any legislative remedy can always result in further attempts to game the system. The only true measure of accountability is through voter rejection of those who allow the system to perpetuate itself.   

Not the Best PR

Today's Wall Street Journal editorial "America the Uncompetitive" uses the Tax Foundation's study of world corporate tax rates as a springboard for making the "worst of both worlds" argument regarding America's tax code. The Tax Foundation study found that for the 17th straight year, the world's average corporate tax rate fell while the US rate stayed flat. Our corporate tax rate is now 50% higher than the competitive average and second only to Japan.

[T]hough if you are silly enough to base a corporation in California, Iowa, New Jersey, Pennsylvania, or other states with high corporate levies, your tax rate on business income is even higher than in Tokyo. For the first time, the U.S.

Having a leading business publication call people "silly" for having a company in New Jersey does not help the state's image. And the Journal takes a shot at the populist wave that can sometimes consume election year politics,

In Washington, meanwhile, the politicians are still living in their own populist alternative universe. Last week Senator Byron Dorgan of North Dakota waved around a new politically generated study by the Government Accountability Office (GAO) finding that 28% of large U.S. corporations paid no income tax in 2005. "It's time for big corporations to pay their fair share," Mr. Dorgan roared.

Well, the Tax Foundation looked at those numbers and found that, among the large companies that paid no taxes, 85% of them also made no profits that year. American Airlines and General Motors escaped income tax for 2005 through the clever tax dodge of losing $862 million and $10.5 billion, respectively. How unpatriotic.

Guns Or Butter - No Wait - Food or Fuel

Earlier this week, Texas Governor Rick Perry took to the op-ed pages of the Wall Street Journal to declare his state was fed up with corn ethanol. Today, Reason TV lays out their case against ethanol.

Setting an Example

Camden High School has an average attendance rate of 69%, and a dropout rate of 25%. Even more troubling is that only 12% of its seniors were deemed "proficient" in the High School Proficiency Assessment, an 8th-grade level test required for regular graduation. The full rundown of statistics from the school is available here.

Against that backdrop, the Courier-Post reports,

Camden school board meeting canceled due to too few members attending

A special city school board meeting scheduled for Tuesday was canceled because too few members attended.

At least five members must be present to hold a meeting. The board was set to discuss a long list of school personnel changes.

Gone, But Not Forgotten

In some of the day's least surprising news, State Treasurer David Rousseau told state leaders gathered in Atlantic City that the Governor's original monetization plan is officially finished.

"Not only did it not have 21 or 41 votes, it did not have one sponsor," Rousseau said. "It's not a viable option anymore. It's dead. It's done. It's over."

CIANJ welcomes that news. Long-term blog readers will remember that CIANJ opposed the original plan as it would have drastically increased the state's cost of living and doing business along our most vital transportation hubs. A large percentage of the money would have been lost to financing costs with still more taken from drivers and used for spending items unrelated to transportation.

Rousseau blamed both the media for focusing on the 800 percent toll hikes that accompanied Corzine's original asset monetization proposal and the administration for not being prepared to defend the plan.

"We never got past the 800 percent toll increase. That was 800 percent over 75 years, but we never got a chance to say what's a loaf of bread going to cost in 75 years?" Rousseau said. "We got slammed right out of the box very quickly."

That last part is a misstatement, and the Asbury Park Press was right to correct it in their coverage. The Governor's plan would have increased tolls 800% within just the first fourteen years. Here's a link to the Gov's own presentation (pg 23), which shows an average three-exit trip on the Turnpike would climb from the current rate of $1.20 to more than $9.80 by 2022, and THEN be irreversibly indexed for inflation for the next 60+ years. Anyone predicting $27 milk by 2022?

As noted earlier this week, transportation may turn out to be the debate in the fall. Transportation dollars must increase, but the question is how deep into its own bureaucratic pockets is Trenton willing to reach? A good starting point could be to take all money collected from drivers and automatically re-invest it in transportation rather than sending it to the general fund.   

Step Two - Actually Save Money

The Corzine Administration announced yesterday that it has taken the next step in using "excess" tax collection to pay down state debt - identifying the areas most advantageous to repay now.

The state's Public Finance office identified the most financially advantageous bonds to sell after a six-week search that took into account maturity dates, interest rates and other factors, said Treasury spokesman Tom Vincz.

The agencies whose debt is being retired - the Economic Development Authority, New Jersey Building Authority and the Sports and Exposition Authority - all must approve resolutions authorizing the debt repayment. The EDA board was to meet Tuesday for a vote, the first board to do so.

By retiring $650 million in debt, the state can save $130 million a year in debt service payments.

The state's annual debt service payment is $2.7 billion, making New Jersey the fourth most indebted state in the country.

This is a small, but significant, step on the road back to fiscal solvency. It does not undo prior bad acts, but it shows a genuine desire from the State House to avoid future ones. This part of the budget process deserves praise - - and to be repeated next year.

The Governor's press statement is available here.