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Governors and State Finance: Whitman Administration

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

 

The Campaign and Election of 1993

The economy was not the only issue in the 1993 gubernatorial campaign, but it was the dominant one. This became especially clear in late September 1993, when Christine Todd Whitman, the Republican candidate, unveiled a plan to reduce state income taxes by 30% over three years. Trailing in the polls at the time, Whitman argued that the tax cut would provide a boost to an economy lagging in its recovery from the recession. Governor Florio, running for reelection, dismissed the plan as unrealistic, claiming that it would dramatically reduce revenues needed for important governmental functions. Following Whitman’s announcement of the plan, Florio’s lead began to narrow. On November 3, 1993, Whitman surprised many onlookers by winning – by just over 26,000 votes or 1% of the total—while Republicans maintained legislative control but lost veto-proof majorities. Whitman would become the first woman governor in the state’s history.

 

Governor Christine Todd Whitman on the importance of taxes and the economy in the 1993 gubernatorial campaign. Interview on August 20, 2012. (1:38)

John Whitman, Gov. Christine Todd Whitman, Chief of Staff Harriet Derman, and Professor James Hughes discuss the state of the New Jersey economy during the 1993 gubernatorial campaign. Discussion took place at a Center on the American Governor Forum on the economic policies of the Whitman administration. Forum conducted on October 28, 2013. (6:31)

Governor Jim Florio on the 1993 gubernatorial campaign and his reaction to the Whitman tax cut plan. Interview on September 26, 2012. (2:20)

Michael Aron, Florio Communications Director Jon Shure, and Speaker of the Assembly (1992-1996) Chuck Haytaian discuss the importance of the Whitman tax cut plan in the 1993 gubernatorial campaign and whether it was a political mistake for Governor Florio to veto the sales tax reduction bill. Discussion took place at a Center on the American Governor Forum on the second two years of the Florio administration. Forum conducted on September 26, 2012. (4:02)

Governor Christine Todd Whitman on the transition from the Florio administration to the Whitman administration. Interview on May 22, 2013. (1:19)

Governor Whitman’s Tax Cut Plan

Governor Whitman moved quickly to put her tax cut plan into action, making it the first priority of her economic plan. In her Inaugural Address, the new governor called on the legislature to pass a five-percent reduction in the income tax that would not only take effect immediately, but be retroactive to the beginning of the year. The legislature responded and on March 7, 1994, Whitman signed the bill enacting the 5% retroactive reduction, the first step towards the 30% cut she had promised during her campaign. During her Inaugural Address, Whitman also issued her first Executive Order—signing the document on the stage—establishing an Economic Study Commission.

 

Governor Christine Todd Whitman on proposing in her first Inaugural Address that the first tax cut would be immediate and retroactive, and the legislature's reaction to being taken by surprise. Interview on May 22, 2013. (4:51)

Candace Straight, co-chair of the Whitman Budget Advisory Committee, discusses the Inaugural Address and her own role in advising the governor on the tax cut plan. Interview on January 29, 2015. (2:28)

Michael Torpey, deputy chief counsel at the time, on working with Senate President Donald DiFrancesco and Speaker of the Assembly Chuck Haytaian on the tax cut issue. Interview on April 24, 2014. (9:42)

Chief of Staff (1994-1995) Judy Shaw recounts Governor Whitman announcing the retroactive tax cut and establishment of the Economic Study Commission during her Inaugural Address. Excerpt includes a clip of the Inaugural Address, showing Governor Whitman signing her first Executive Order. Interview on October 24, 2012. (5:00)

Clip of Governor Christine Todd Whitman's first Inaugural Address, announcing her plan for retroactive tax cuts. Footage from NJN. Address given on January 17, 1994. (3:16)

Chief Counsel (1994-1995) Peter Verniero, later Chief of Staff, Attorney General, and Justice of the New Jersey Supreme Court, discusses the strength of Governor Whitman's Inaugural Address and the importance of signaling that Governor Whitman would keep her campaign promises. Discussion took place at a Center on the American Governor Forum on the economic policies of the Whitman administration. Forum held on October 28, 2013. (8:49)

The Early Whitman Budgets and Pension Plan Adjustments

Governor Whitman had a number of additional economic issues to confront as she prepared her first budget—including a sizable budget deficit. Compounding the problem, changes in accounting procedures and requirements would force the administration for the first time to include certain expenditures such as unfunded pension obligations, insurance, and, eventually, the pensions themselves in the State Budget. In order to bridge the widening budget gap, Whitman made a number of proposals in her first budget in March 1994, including spending reductions, the elimination of the Department of the Public Advocate and the Department of Higher Education, and a proposal that met with particular criticism: a restructuring of the pension program. Her budgets for the following two years would continue to cut spending and reduce income tax rates.

 

State Treasurers Jim DiEleuterio (1997-1999) and Roland Machold (1999-2001), Assistant State Treasurer Caren Franzini, and Governor Whitman discuss budget challenges and changes in accounting procedures. Discussion took place at a Center on the American Governor Forum on the economic policies of the Whitman administration. Forum held on October 28, 2013. (4:31)

Former State Treasurer (1976-1981) Cliff Goldman criticizes changes made to the pension system in 1994. Interview on June 9, 2015. (7:46)

Governor Christine Todd Whitman describes the challenging state of the economy when she took over the governorship and the difficult decisions she had to make. Interview on May 22, 2013. (4:35)

The Pension Bond Proposal

In 1997—during Governor Whitman’s re-election campaign—the Whitman administration offered another significant plan related to pension payments. They proposed to sell bonds and deposit the proceeds (approximately $2.7 billion) into the pension fund, obviating the need for the state to pay into the fund for a number of years. The state would then pay the bonds off over the course of 28 years. The proposal immediately met with criticism from mostly Democratic opponents who claimed the administration was inappropriately borrowing money against the future to pay down the pension (and thereby balance the budget). But the administration argued that it was simply a fiscally wise choice—an opportunity to reduce the interest rate—and further that the pensions were, at the time, over-funded.

 

State Treasurer (1997-1999) Jim DiEleuterio describes the pension bond proposal and explains the rationale behind it. Interview on October 26, 2015. (4:51)

Former State Treasurer (1976-1981) Cliff Goldman describes how he feels the New Jersey Supreme Court should have ruled on numerous pension issues, including the pension bond proposal. Interview on June 9, 2015. (5:28)

Chief Counsel (1997-1999) and future Attorney (1999-2002) General John Farmer, Jr., on the wisdom of the pension bond proposal; why it was hard to describe; and what its legacy should be. Interview on October 17, 2014. (4:27)

Whitman administration officials, including Governor Whitman, State Treasurers Jim DiEleuterio and Roland Machold, Director of Communication and Press Secretary Pete McDonough, and Chiefs of Staff Harriet Derman and Michael Torpey, discuss the benefits, challenges, and myths surrounding the pension bond proposal. Discussion took place at a Center on the American Governor Forum on the economic policies of the Whitman administration on October 28, 2013. (14:07)

Regardless of its wisdom, the pension bond proposal was a complicated plan that proved difficult to adequately explain to voters, particularly in an election year. Its impact remains today both a topic of fierce debate and one of Governor Whitman’s lasting legacies.

 

Director of Communications and Press Secretary (1996-2000) Pete McDonough on the challenge of accurately describing the pension bond plan to voters and how that difficulty has led to unfair criticism of the plan. Interview on January 24, 2014. (7:26)

Chief of Staff (1994-1995) Judy Shaw on why Governor Whitman and the pension bond plan became subject to criticism. Interview on October 24, 2012. (2:28)

Whitman Campaign Co-Chair Hazel Gluck, Whitman Campaign Policy Director Elizabeth Murray, and Chief Counsel and Chief of Staff Harriet Derman on the failure to effectively communicate the advantages of the pension bond plan. Interviews on November 11, 2013; July 10, 2013; and January 10, 2013. (4:22)

State Treasurer Jim DiEleuterio, Campaign Co-Chair Hazel Gluck, John Whitman, Governor Whitman, Chief of Staff Michael Torpey, Director of Communications and Press Secretary Pete McDonough, and speechwriter and Policy Adviser Carol Cronheim discuss the challenges of explaining and promoting the pension bond plan. Discussion took place at a Center on the American Governor forum on the economic policies of the Whitman Administration. Forum held on October 28, 2013. (4:53)

Governor Christine Todd Whitman on how she would present the pension bond plan differently if she had it to do over again. Interview on December 3, 2014. (2:08)

Members of the Whitman administration also argue that actions taken after Governor Whitman left office (in January 2001) exacerbated the current funding shortfall. They argue that future administrations increased pension benefits and enrollment and did not resume making payments into the system when they should have, based on the bond deal.

 

Director of Communications and Press Secretary (1996-2000) Pete McDonough on mistakes concerning the pension fund made by subsequent administrations. Interview on January 24, 2014. (2:46)

Whitman administration officials, including Governor Whitman, Treasurers Jim DiEleuterio and Roland Machold, and Chiefs of Staff Harriet Derman and Judy Shaw discuss how decisions after Governor Whitman left office, particularly in what would have been the final year of her term, caused fiscal problems. Discussion occurred during a Center on the American Governor forum on the economic policies of the Whitman Administration. Forum held on October 28, 2013. (5:34)

Treasurer (1997-1999) Jim DiEleuterio on the failure of future administrations to re-start the pension payments and on the difficulty of comparing the Whitman and Florio administrations. Interview on October 26, 2015. (5:28)

Governor Whitman’s Legacy

Despite the controversy over the pension bond proposal, Governor Whitman won reelection in 1997, defeating State Senator and Woodbridge Mayor (and future governor) James McGreevey. Whitman would serve until January 31, 2001, one year before her second term concluded, when she resigned the governorship to become Administrator of the Environmental Protection Agency under newly-elected President George W. Bush. Under New Jersey’s rules of succession at the time, Senate President Donald DiFrancesco became governor, serving the remainder of Whitman’s term.

 

Governor Christine Todd Whitman on the economic accomplishments of her administration. Interview on December 3, 2014. (2:26)

Full Interviews:

For more information on the Christine Todd Whitman Administration, click here.

 

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