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Governors and State Finance: Florio Administration

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A transcript of all interview excerpts on this page is available here. Links to full interviews are also available.

 

Election of 1989 and the Transition to the Florio Administration

Congressman Jim Florio, after unsuccessfully challenging Brendan Byrne for the Democratic nomination in 1977 and narrowly losing the general election to Governor Kean in 1981, ran and won in 1989. With Kean ineligible due to term limits, the Republicans also nominated a Congressman—James Courter. Florio led throughout the campaign and on November 7, 1989, won the governorship with 61% of the vote. The Democrats also recaptured the Assembly and held control of the Senate. During the campaign, Florio said he would not raise taxes as governor, but even during the transition, it became clear that the State Budget needed immediate attention. With the state and national economy entering a recession, New Jersey faced a $600 million deficit in the current year’s (FY ’90) budget and an even larger one—up to $1.4 billion—for the following year.

 

Florio Aide and Director of Policy David Applebaum on whether it was a mistake to say there was no need to raise taxes during the campaign. Interview on June 2, 2014. (3:23)

Florio Communications Director Jon Shure discusses 1989 campaign strategy at a Center on the American Forum on the second two years of the Florio administration. Forum conducted on December 1, 2015. (3:10)

State Treasurer Sam Crane (1992-1994) on the 1989 campaign and the importance of the transition period from Governor Kean to Governor Florio. Interview on December 22, 2014 (4:47)

Richard Keevey, Director of the Office of Management and Budget (State Budget Director and State Comptroller) during the Kean and Florio administrations, on the state of the economy and budget at the end of the Kean administration and the beginning of the Florio administration. Interview on May 21, 2015 (9:53)

Former State Treasurers Richard Leone (1974-1976) and Cliff Goldman (1976-1981) on the state of the budget during the transition from Governor Kean to Governor Florio and on whether Governor Kean considered a tax increase during the transition period. Interview on June 9, 2015 (5:11)

Governor Jim Florio on working with the Kean administration during the transition. Interview on September 26, 2012. (2:30)

Dealing with the Budget Crisis

As Florio took over the governorship in January 1990, he and his administration determined that they would quickly need to address two major budget issues. First, they needed to fill the sizable gap in the current and projected subsequent fiscal years’ budgets. Second, they anticipated that the New Jersey Supreme Court would soon rule once again on the state’s school funding system—this time in a case named Abbott v. Burke—and that the ruling would likely require the state to provide more money to under-funded school districts. In his first budget address—amidst a clear statement of the state’s fiscal challenges—Florio proposed increases in the sales and income taxes. Disagreement arose over the best strategy by which to pursue these hikes—whether to pass both at the same time, or to pass the sales tax increase first (to cover the budget deficit) and wait for the Supreme Court’s ruling (and the crisis it would create) before raising the income tax. Choosing to address all of the issues at once, on May 25, 1990, Florio presented a 15-bill tax package and school funding plan; less than two weeks later, on June 5, 1990, the state Supreme Court declared the state’s school funding system unconstitutional. In late June, the legislature passed and the governor signed the state budget, the Quality Education Act (overhauling the school funding system), and the sales tax increase. The income tax adjustment followed in early July.

 

Governor Jim Florio on the challenges presented by the budget crisis and the impending Supreme Court decision on school funding and why he decided to act without delay. Interview on September 26, 2012. (3:55)

Director of the Office of Management and Budget (OMB) Rich Keevey describes the details of the budget crisis and the development of the tax package designed to solve it. Interview on May 21, 2015. (7:41)

State Treasurer (1992-1994) Sam Crane, a legislative staffer at the time, discusses whether it was a political mistake to pass the tax package quickly. Interview on December 22, 2014. (7:48)

Senate President (Senate 1981-2001; President 1990-1992) John Lynch on the importance of timing, disagreements with the Assembly, and why he urged splitting the income and sales tax hikes. Interview on October 25, 2013. (6:10)

Speaker of the Assembly (Assemblyman 1979-2004; Speaker 1990-1991) Joe Doria explains why the Assembly preferred to be proactive, whether that decision was a political mistake, and the importance of luck in politics. Interview on October 6, 2014. (5:35)

Business leader Len Lieberman describes why he thinks the administration should have waited until after the Abbott v. Burke decision to pass the tax package. Interview on June 7, 2014. (2:53)

Chief of Staff (1989-1990) Steven Perskie compares Governor Florio's approach to tax hikes to that of Governor Kean. Interview on March 28, 2013. (4:41)

Former State Treasurers Richard Leone (1974-1976) and Cliff Goldman (1976-1981) on why they think it was a mistake to raise the sales and income taxes simultaneously. Interview on June 9, 2015. (3:10)

Public Reaction to the Florio Tax Plan

The tax increases led to an intense public reaction. Activists organized protests at the State House in Trenton, a new New Jersey-focused radio station known by its FM frequency 101.5 became a statewide focal point for public opposition often expressed as outrage, and anti-tax forces (with help from other conservative groups such as the National Rifle Association) organized as a group named Hands Across New Jersey. While some opposition was expected, the breadth and rhetoric of the opposition was far stronger than New Jersey had experienced in response to proposals and actions of previous governors.

 

Governor Florio on public reaction to the Florio tax plan. Interview on September 26, 2012. (3:37)

Senate President (Senate 1981-2001; President 1990-1992) John Lynch on the administration's failure to sell the Florio tax plan to the public. Interview on October 25, 2013. (5:24)

Rick Wright, associate state treasurer (1990-1993) and chief of staff (1993-1994) under Governor Florio, on how the tax issue came to dominate the public perception of the Florio administration. Interview on May 15, 2014. (1:34)

Governor Florio, journalist Michael Aron, Communications Director Jon Shure, and Speaker of the Assembly Joe Doria discuss Hands Across New Jersey, 101.5, and the early 1990s public and press environment. The discussion took place during a Center on the American Governor forum on the second two years of the Florio administration. Forum held on December 1, 2015. (9:28)

The Continuing Question of School Funding

While much of the public reaction focused on the tax increases, the Florio administration faced other fiscal challenges, as well. Despite the passage of the Quality Education Act (QEA), for example, school funding and the related issue of property taxes remained difficult. Some observers (including Senate President John Lynch) urged a reapportioning of some QEA funds directly to property tax relief. Others questioned whether simply providing equal money to under-funded school districts would even solve the underlying problems. In addition, other serious fiscal issues arose, particularly as revenues did not hit projected levels and it became more difficult to fully fund pension obligations. The administration dealt with these issues in various ways, including by restructuring the pension system and, in the budget Governor Florio signed on June 30, 1991, selling a portion of the New Jersey Turnpike to the Turnpike Authority and reducing the size of state government via layoffs.

 

Governor Florio on school funding, amending the Quality Education Act, and the role of the New Jersey Supreme Court. Interview on September 26, 2012. (4:34)

Senate President John Lynch (Senate 1981-2001; Senate 1990-1992) on spending caps, teacher pensions, amending the Quality Education Act, and complying with Abbott v. Burke. Interview on October 25, 2013. (4:52)

Speaker of the Assembly (Assemblyman 1979-2004; Speaker 1990-1991) Joe Doria on the Quality Education Act, resistance from the NJEA, and the importance of clarifying funding responsibility for teacher pensions. Interview on October 6, 2014. (5:03)

Director of the Office of Management and Budget Rich Keevey on declining state revenues, the sale of a portion of the New Jersey Turnpike, and restructuring the state pension system. Interview on May 21, 2015. (5:11)

Impact of the 1991 Midterm Elections

Governor Florio’s approval ratings remained low as the 1991 midterm elections approached. Democrats paid a significant political price. On November 5, 1991, Republicans not only took control of the Assembly and Senate, they won veto-proof majorities in both. The Republicans immediately began to attempt to roll back some of the tax increases, quickly passing a bill that would lower the sales tax by 1%. Florio vetoed the bill, but the legislature overrode the veto. It was a preview of things to come: on June 26, 1992, after budget negotiations failed, Governor Florio became the first governor in New Jersey history to fully veto the state budget passed by the legislature. Four days later, the Assembly and Senate overrode Florio’s veto, making it the first budget in New Jersey history enacted without the governor’s support.

 

State Treasurer (1992-1994) Sam Crane on becoming treasurer and working with a veto-proof Republican legislature. Interview on December 22, 2014. (7:55)

Director of the Office of Management and Budget Rich Keevey on state employee layoffs and battles between the governor and the legislature over the budget. Interview on May 21, 2015. (4:23)

Assembly Speakers Joe Doria (1990-1991) and Chuck Haytaian (1992-1996), Treasurer Sam Crane (1992-1994), and Governor Florio discuss the sales tax and the relationship between the executive and legislative branches after the 1991 midterm elections. Excerpt from a Center on the American Governor forum on the last two years of the Florio administration. Forum held on December 1, 2015. (10:38)

The Florio Legacy

With economic conditions improving in New Jersey, the budget battle would not be as intense in the election year of 1993. Governor Florio signed the budget on June 29, 1993, with only minor use of the line-item veto. Florio also received the Profiles in Courage Award from the John F. Kennedy Library Foundation in 1993 for his support of assault gun ban legislation in the face of political opposition. But the tax increases and fiscal issues continued to dominate his reelection campaign, especially when his opponent, Christine Todd Whitman, in the closing weeks of the campaign promised to cut the income tax by 30% if elected. Florio went on to lose a close election.

 

Governor Jim Florio on his fiscal legacy. Interview on September 26, 2012. (2:04)

Links to full interviews:

For more information on the James Florio Administration, click here.

 

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