Deja Vu All Over Again: NJ Gov. Corzine and the 2006 Government Shutdown

Former governor’s plan to raise sales tax by 1 cent sparked off a battle of wills between two powerful Democrats. Sound familiar?

Former Democratic Gov. Jon Corzine
It’s June and members of the New Jersey Legislature are balking at the state budget proposed by the governor, a former executive with Goldman Sachs. Particularly unhappy with the budget’s reliance on higher taxes, the lawmakers put forth their own plan. Although both sides are members of the Democratic party, neither is willing to budge. Talk of a government shutdown is all too real.

While that’s an accurate portrayal of the current situation in Trenton, it’s actually a summary of what happened in 2006, the first time New Jersey government went dark. True, not all the details are the same, but there are eerie parallels between the current disagreement among legislators and the one a dozen years ago that led to an eight-day closure of nonessential state operations.

With the leaders of the Senate and Assembly refusing to support Gov. Phil Murphy’s budget and proposed tax increases, proposing their own instead, and Murphy vowing to veto the Democrats’ budget, now seems an appropriate time to revisit the 2006 budget shutdown. Rutgers University’s Eagleton Center on the American Governor has shared an hour-long panel discussion on that event from its May 14 colloquium for the soon-to-be-released archive of former Gov. Jon Corzine.

The 1-cent budget battle

In 2006, the stalemate was with only one house, the Assembly, and it was predominantly over Corzine’s plan to increase the sales tax by a penny to 7 cents to help balance the budget. Not unlike Murphy’s campaign pledge, Corzine had campaigned as someone who was going to use his financial experience to properly craft a state budget that was truly balanced.

“We wanted to have recurring revenues match recurring expenditures,” recalled Corzine, adding, “We weren’t perfect at getting there.”

“In order to do that, in our view, we needed to raise the sales tax by a penny, which raised about $1.1 billion of what was a $4.5 billion shortfall,” said Tom Shea, who was Corzine’s chief of staff at the time.

Bill Castner, who was the Assembly Democratic staff liaison for the budget discussions and currently serves as Murphy’s gun-safety czar, said a perfect storm of factors led a majority of the lower house to oppose Corzine’s plan.

“I think the Corzine administration was inheriting a pretty adversarial climate to begin with, through no fault of the administration,” he said, noting there had almost been a shutdown the previous year when Richard Codey was both governor and president of the Senate. “You had North/South (Jersey) politics. You had policy debate over the importance of property-tax rebates … Some of us were around for Gov. (Jim) Florio, when Democrats were sent to Siberia for over a decade, Watergate-type majorities for Republicans. That was over the sales tax that was increased, and then repealed. You had paid professional pollsters coming in briefing the Assembly caucus saying, ‘This is horrible! You can’t.’”

Florio’s $2.8 billion increase — the equivalent of $5.4 billion today – in sales, income, and other taxes enacted as part of his first budget in 1990 with Democratic support brought a citizen revolt in which the party a year later lost 10 seats in the Senate and 15 in the Assembly and lost control of both houses for the first time in nearly two decades.

A test of wills

But it was also, according to those involved at the time, something of a test of wills between two men in new political roles: Gov. Corzine and the Assembly Speaker Joe Roberts, a Camden County Democrat allied with South Jersey power broker George Norcross. David Rousseau, then Senate Democratic staffer in budget negotiations, called the North/South split “the elephant in the room.”

Of the “political subtext,” Shea said the Corzine administration planned to stand its ground because, “as a new freshman Governor who had come in from out of town … if you get pushed around by the Legislature the first time you have a fight with them, then you’re going to get pushed around by the Legislature every time you have a fight with them.”

“Remember, Joe Roberts was a new Speaker, and so he felt a performance anxiety among his own caucus,” said Josh Margolin, then-State House reporter for the Star-Ledger and now an investigative report at ABC News.

The politics were somewhat different than today, though. For one thing, Codey was on Corzine’s side and not even South Jersey Democrats wavered from the party line in the upper house, so the Assembly was on its own in its revolt. For another, Democrats in the Assembly were not united in opposition to Corzine’s budget — then Assemblyman and current Sen. Joseph Cryan of Union County was using state treasury and Senate Democratic staff to get him information to rebut Roberts’ attempts at passing his own budget. The administration also had a few Republican allies who “camped out in my office,” said Patti McGuire, Corzine’s deputy chief of staff, “and we crafted, with everyone’s approval, a strategy never to vote for the Assembly budget.”

“The Assembly could never force something down the Senate’s throat,” Rousseau said. “And I think that shaped the dynamic of where we were … the dynamic may have been completely different if they had sent a budget to the Senate.”

Push comes to shutdown

So when the deadline passed, Corzine ordered the shutdown. Initially, it closed the state lottery, motor vehicle offices, certain departments, and parts of the judiciary. Eventually it included state beaches, parks, and historic sites and the casinos and racetracks.

It was after the shutdown that the fireworks really started.

The chairman of the Assembly Budget Committee called then-treasurer Bradley Abelow to testify. He refused. The chairman threatened to send state troopers to “drag Brad to the committee,” recalled Shea. That didn’t happen and Abelow did testify the following night. Margolin described a “near-violent” committee hearing. Corzine called the Legislature in for a special session on the July 4 holiday and was photographed wheeling a cot into his office to demonstrate his willingness to keep working.

Margolin read from his article that described the July 4 session: “Profanity erupts on the Assembly floor, a wrong look gets you a dirty look. A stray remark gets you one back, ‘Bub!’ And watch out for ricocheting wads of paper. ‘We have chaos,’ Assemblyman Bill Baroni said.”

Shea said the tone and tenor of the negotiations after the shutdown were “much more contentious, much more difficult.”

Corzine gave a speech every morning and the administration seriously considered creating ads to run on television to bring an end to the shutdown.

Among the factors that did bring it to an end, the former staffers said the closure of Atlantic City’s casinos — a subsequent law allows casinos to stay open for a week after a shutdown — was one that influenced South Jersey Democrats.

‘Battle fatigue’

“Don’t discount battle fatigue,” Castner said. “As someone who was in that caucus and saw the body language of legislators, you know, four or five days into a shutdown … it’s one thing to have the testosterone and the pollster, and you’re going to get killed, and then when you’re four or five days into a shutdown, you’re hearing about casino workers who may not get a paycheck. It has a sobering effect.”

Ultimately, Corzine suggested dedicating half of the revenue from the increased sales tax to property-tax relief for the next decade. And rather than waiting for Roberts to come to him, Corzine left the governor’s office and walked through the State House to visit Roberts in his office to negotiate the end of the shutdown.

“And so Gov. Corzine got up, the troopers had to run to keep up with him,” Margolin recalled. “And he went over there and at this point, everyone was so drained, it was so emotional, and little things made it possible for the logjam to be broken.”

“I thought that was magnanimous,” Castner said. And noting the Assembly Democrats had been fighting for property-tax relief, he added, “I thought it was also magnanimous for the governor and (in) the interest of the state and the party, in the wake of a bloody shutdown, historic shutdown, (to pick) right back up and start out having a special session on property taxes.”

Ultimately, the shutdown strengthened Corzine, the group agreed.

“It’s interesting. I do think there were motivations of some party bosses who wanted to make the executive branch a subordinate interest to the legislative branch,” Castner said.

“But it demonstrated to the Legislature that this was a governor who was going to lead, not just the party, but the state. And so I think people were more willing to look at him as the leader after that fight than they might have been before it. And I think that was probably critical to a lot of successes that happened later on in the administration,” said Shea.

Margolin said the media exposure the story got “ended up catapulting the governor to a level of national attention that he had not had to that point.”

Corzine agreed: “I do think that this gave our administration, the team, confidence to face off on a lot of other things going forward. It’s not the way you would like to learn the ways of Trenton, but it was a necessary reality if you were actually going to make serious reforms.”