By Jon Hurdle

TRENTON (Reuters) - New Jersey Gov. Jon Corzine wants to cut a massive $3.2 billion from the state budget and eliminate thousands of jobs in the coming year in an effort to restore financial health, officials said on Monday.

In a speech on Tuesday announcing his proposed fiscal 2009 budget, Corzine will say the state needs to cut 3,000 to 3,500 workers, or about 5 percent of the overall state work force, while closing some departments and imposing cutbacks throughout state government.

"It's going to have a real impact on the level of services," Acting Treasurer David Rousseau said at a briefing for reporters after discussing the proposed budget with lawmakers. "There will clearly be things the government will not be doing in the future."

Rousseau declined to state the overall size of the budget -- which will be disclosed when Corzine delivers his speech to lawmakers starting at 11:30 a.m. EST on Tuesday -- but said revenue for the year beginning on July 1 is projected to be $32.5 billion.

The proposed budget is $3.2 billion below the amount that would have been spent, assuming automatic growth in various state programs. The cutbacks consist of an unprecedented $1.7 billion reduction in spending and $1.5 billion in deferred growth such as less spending on state pension contributions.

The budget will reduce the number of nonrecurring revenues, consistent with Corzine's policy of returning New Jersey's finances to a sustainable footing after what he says has been years of mismanagement by politicians seeking to curry favor with voters at the expense of the state's long-term financial health.

Most of the reduction in state payrolls will be achieved through early retirement although there will be some layoffs, Rousseau said.

Although revenue was in line with official forecasts in the first half of the current fiscal year, it began to decline in December and January as receipts fell from income and sales taxes, officials said.

While cuts will be felt throughout state operations, the smallest impact will be in education, public safety and welfare services. In addition, property tax relief, a key priority of Corzine's, will continue with a slight increase. Payments on the state's $32 billion in bonded debt will go up by $100 million.

Rousseau declined to identify departments scheduled for closure.

The budget follows the publication in January of Corzine's plan to pay down half the state's debt and pay for road and bridge repairs by handing the management of the state's toll roads to a public benefit corporation that would issue bonds backed by sharply increased tolls.

The plan to raise tolls has stirred a storm of criticism among lawmakers and the public. An opinion poll by Fairleigh Dickinson University published on Monday found that a third of commuters who use the New Jersey Turnpike or the Garden State Parkway -- two of the roads where the planned toll hikes would hit -- described Corzine's performance as "poor," as opposed to 23 percent who used other roads.

Only 25 percent of voters believe the state is headed in the right direction, the lowest percentage since before the Democratic governor was elected in November 2005.

(Editing by Gary Hill)

$50 million state deficit fuels once-radical idea

By Jenna Russell Globe Staff / February 26, 2008

ACWORTH, N.H. - On a still, cold night last week in this woodsy outpost, the talk at town hall was of revolution. Ten residents had gathered, braving country roads ravaged by frost heaves to consider a radical notion: that New Hampshire should consider implementing new taxes.

Such a move has been dead on arrival for generations in the Granite State, where residents treasure their "Live Free or Die" sensibility and have demanded that leaders take a pledge against new taxes. But a small, vocal group of dissenters says the tide has turned against flinty tradition, and that voters, fed up with fast-rising property taxes and facing a $50 million deficit in the first year of the state's two-year, $10 billion budget, are ready to talk about other options for raising revenue, including a state sales or income tax.

Next month, Town Meeting voters in 88 of New Hampshire's 221 towns will weigh in on a nonbinding resolution that declares the property tax system unjust and calls on legislators to give up their vow against new taxes, as a first step toward crafting a more equitable tax system. The Granite State Fair Tax Co alition, a two-year-old nonprofit group that describes itself as nonpartisan, is crisscrossing the state to promote the measure, which it drafted.

New Hampshire already taxes a variety of goods and services, including cigarettes, meals, and hotel rooms. Attempts to enact more broad-based taxes, such as those on sales or income, have failed in the past. Even if the measure passes, it has no teeth to force change, and Governor John Lynch has already promised to veto any sales or income tax.

But leaders of the new movement say they are patient. They say they have not endorsed any specific new taxes, and don't expect fast change, and simply want to start a statewide conversation about options for funding government.

In New Hampshire, where voters have prized their freedom from taxes, even that modest manifesto has proved inflammatory.

"There has been a sea change in the political climate of New Hampshire, and people who were perfectly happy with the status quo 10 years ago aren't happy today," said Paul Henle, a former real estate agent who is the coalition's full-time director. "Property taxes have gotten so high that people are willing to consider a change, and that's the message we hope this will send to legislators."

Last spring, when the group tried out the article at 14 Town Meetings, 13 approved it.

The chairman of the state Republican Party, Fergus Cullen, has accused the group of "hijacking" the Town Meeting process.

"They're advocating an income tax, but they don't have the courage to say so," said Cullen.

Leaders of the campaign say the state's mood has changed in recent years, as demand for rural properties has increased, driving up real estate prices and boosting taxes. Some towns have struggled to meet the costs of educating students under the state's disputed school funding formula, which has been criticized for disproportionately benefiting property-rich towns.

The debate over taxes is the latest sign of political change in New England's most conservative state, where Democrats currently control both houses of the Legislature, and Lynch, a Democrat, is in his second term. Last year, some conservatives cringed as lawmakers approved a 17 percent state budget increase. Others marveled at the state's adoption of civil unions for same-sex couples.

Adoption of a state income tax would mark a more dramatic shift in the state's fiercely independent identity. New Hampshire is one of nine states with no income tax, according to the IRS.

"It would very much change the character of the state, because more revenue would come in and be spent," said Andrew Smith, a political science professor at the University of New Hampshire. "The current tax structure keeps government small."

According to the Fair Tax Coalition, the state's reliance on property taxes at a time of sharply climbing property values has overburdened poorer residents, whose bills are not scaled to their incomes. Total property taxes collected statewide have increased about 8 percent per year, on average, since 2000, to $2.6 billion, and provide 60 percent of state revenue, more than in any other state, said Henle.

In Acworth, a rural town of 880 near the state's western border, where the town hall sits on a hilltop beside a white church and a snowy town green, residents who sat on narrow wooden benches at the meeting led by Henle said the time for talking about taxes is long overdue. Donna Wentworth, who works at the town's general store, said her customers, especially the older ones, worry about their taxes. Her own bill has more than tripled, from $700 to $2,400, since 1992.

"People are losing their homes," she said. "It's getting pretty scary."

Critics of the plan to revamp the tax system say the way to ease the burden is to rein in spending, not add new taxes. They point to the involvement of Mark Fernald, the coalition's treasurer - who proposed a state income tax when he ran unsuccessfully for governor in 2002 - as proof that the campaign is a veiled attempt to generate backing for an income tax. (The group is not part of the national "fair-tax" movement, championed by GOP presidential hopeful Mike Huckabee, that would replace federal income taxes with a national sales tax.)

"I think the state is on the road to getting an income tax if we don't put the brakes on out-of-control spending," said Mike Biundo, chairman of the New Hampshire Advantage Coalition, which opposes the resolution. "If you give the average citizen an alternative, an income tax or lower spending, they'll pick lower spending every time. [The coalition] is preying on the fact that people think property taxes are too high."

The history of "the pledge," the swearing off of sales or income taxes that became almost a requirement for New Hampshire politicians, dates back to the 1970s, when Republican Governor Meldrim Thomson Jr. signed a written promise not to allow either one, and to "keep the greedy hand of government out of your pocketbook."

Tom Thomson, the son of the late governor, has recently led a statewide campaign against the practice of heavily taxing properties with scenic views. Despite his criticism of the current system, he adamantly opposes any move to new kinds of taxes.

"A broad-based tax won't reduce property taxes - they will use it to build bigger government," said Thomson, an Orford tree farmer. "All you have to do is look to Vermont, Massachusetts, and Maine. They all have sales and income taxes, and their property taxes are as high as New Hampshire's."

Since Governor Thomson's day, most successful candidates have taken the pledge. During a school funding crisis in the late 1990s, legislators moved toward a state income tax, but the proposal died when Democratic Governor Jeanne Shaheen promised to veto it. Colin Manning, a spokesman for the current governor, said Lynch has made it clear he, too, would veto a sales or income tax.

After 40 Democratic primaries and caucuses, capped by a winning streak in 11 contests over the last two weeks, Mr. Obama has made substantial gains across most major demographic groups in the Democratic Party, including men and women, liberals and moderates, higher and lower income voters, and those with and without college degrees.

But there are signs of vulnerability for Mr. Obama, of Illinois, in this national poll: While he has a strong edge among Democratic voters on his ability to unite and inspire the country, Senator Hillary Rodham Clinton of New York is still viewed by more Democrats as prepared for the job of president. And while he has made progress among women, he still faces a striking gender gap: Mr. Obama is backed by two-thirds of the Democratic men and 45 percent of the women, who are equally divided in their support between the two candidates. White women remain a Clinton stronghold.

When all voters are asked to look ahead to the general election, Mr. McCain is more likely to be seen as prepared for the presidency, able to handle an international crisis and equipped to serve as commander in chief than either of the Democratic candidates.

Even so, the poll provides a snapshot of Mr. Obama’s strength after this first, frenzied round of primaries and caucuses, which knocked seven of the nine Democratic candidates out of the race. For the first time in a Times/CBS poll, he moved ahead of Mrs. Clinton nationally, with 54 percent of Democratic primary voters saying they wanted to see him nominated, while 38 percent preferred Mrs. Clinton. A USA Today/Gallup Poll released Monday showed a similar result, 51 percent for Mr. Obama to 39 percent for Mrs. Clinton.

These national polls are not predictive of the Democratic candidates’ standings in individual states, notably Ohio and Texas, which hold the next primaries, on March 4. Most recent polls there show a neck-and-neck race in Texas and Mrs. Clinton with a lead in Ohio; her campaign advisers say that if she prevails next Tuesday the race will begin anew.

Mark Penn, the chief strategist for the Clinton campaign, said the polls “reflect momentum from Senator Obama’s recent wins,” and “will snap back if we are successful in Ohio and Texas.” He added that other national polls showed a far closer race. Bill Burton, spokesman for the Obama campaign, said, “As we’ve made our case for change across the country, people have responded.”

The Times/CBS poll shows that Mr. Obama’s coalition — originally derided by critics as confined to upper-income reformers, young people and blacks — has broadened significantly. In December, for example, he had the support of 26 percent of the male Democratic primary voters; in the latest poll, that had climbed to 67 percent.

“He’s from Illinois, and I’m from Illinois, and he reminds me of Abraham Lincoln,” said Dylan Jones, 53, a laborer from Oxford, N.C., who was interviewed in a follow-up to the poll. “I can see him out there splitting rails. I don’t have anything against Hillary Clinton, so I guess it’s because he’s new blood.”

Similarly, Mr. Obama’s support among those with household incomes under $50,000 rose to 48 percent from 35 percent since December. His support among moderates rose to 59 percent from 28 percent. In contrast, Mrs. Clinton’s strength among Democratic men dropped to 28 percent from 42 percent in December; her support among voters in households making under $50,000 held stable.

Even among women, Mr. Obama made strides. He had the support of 19 percent of white women in December and 40 percent in the most recent poll. White women, however, remain Mrs. Clinton’s most loyal base of support — 51 percent backed the senator from New York, statistically unchanged from the 48 percent who backed her in December.

The poll showed Republicans settling in with their likely nominee. Eight in 10 said they would be satisfied if Mr. McCain won their party’s nomination, although just 3 in 10 said they would be very satisfied. Nearly 9 in 10 said he was prepared for the presidency, and more than 8 in 10 said they had confidence in his ability to deal with an international crisis, while a remarkable 96 percent said he would likely make an effective commander in chief.

But misgivings remain among those who describe themselves as conservative Republicans, with a majority saying his positions on the issues are not conservative enough.

On the Democratic side, primary voters indicated they saw few substantive differences between their candidates on issues like the war in Iraq and health care. Most have confidence in both candidates to handle the economy, the war in Iraq and an international crisis. And large numbers think it is likely that either candidate would make an effective commander in chief.

Mr. Obama’s advantages are more apparent on other measures. Nearly 6 in 10 said he had the best chance of beating Mr. McCain, double the numbers that believed Mrs. Clinton was more electable. He is also viewed by more Democratic voters as someone who can bring about “real change” and is willing to compromise with Republicans “the right amount” to get things done.

Democratic voters are also more likely to say Mr. Obama cares a lot about them, inspires them and can unite the country. Sixty-three percent of Democratic voters said he cared a lot about them, while fewer than half thought Mrs. Clinton did. Nearly seven in 10 said he inspired them about the future of the country; 54 percent said Mrs. Clinton did. Three-quarters said he would be able to unite the country as president; 53 percent said Mrs. Clinton would.

Mrs. Clinton also has her strengths: Her supporters are, in general, more committed; nearly 8 in 10 of Mrs. Clinton’s backers said they strongly favored her, while 6 in 10 of Mr. Obama’s supporters strongly favored him. Only 18 percent of her supporters backed her with reservations; about a third of Mr. Obama’s supporters said they had reservations about their candidate.

Democratic women are also more likely to say that the news media have been harder on Mrs. Clinton than on other candidates: 56 percent felt that way, compared with 39 percent of Democratic men. Both men and women were more likely to think the news media has been harder on Mrs. Clinton than on Mr. Obama.

Not surprisingly, Democratic primary voters had an opinion on the appropriate role of the 795 superdelegates who could determine the party’s nominee. More than half said that these party leaders should vote for the candidate who received the most votes in the primaries and caucuses.

Washington Post Staff Writer
Tuesday, February 26, 2008; Page D01

Former Attorney General John D. Ashcroft agreed last night to appear at a House hearing to discuss his lucrative arrangement overseeing a medical equipment company, averting a showdown with committee members who had planned to meet today to authorize a subpoena.

The move marks an about-face for Ashcroft, who told lawmakers earlier this month that "discussing the details of my legal responsibilities, as requested, in this pending criminal case and related ongoing criminal investigation would violate my ethical obligations."

Ashcroft, who left public service three years ago to start a private consulting firm, won the contract under a settlement the company reached with federal prosecutors in New Jersey. Under a recent government policy, companies facing criminal investigation can accept such outside supervision to avoid indictment.

Ashcroft's consulting firm stands to collect between $28 million and $52 million over 18 months for reviewing the operations of Zimmer Holdings, an Indiana company that makes replacement hips and knees. Zimmer last year settled government charges over kickbacks it allegedly provided doctors in exchange for using its products.

The deal touched off criticism in New Jersey political circles and on Capitol Hill, where leaders of the House and Senate judiciary committees directed congressional investigators to examine the increasingly popular arrangements, known as corporate monitorships. Legal scholars warn they may become instruments of political patronage that involve little if any judicial oversight.

Rep. Linda Sanchez (D-Calif.), who leads the House subcommittee on administrative law, had been preparing to hold a vote today to authorize a subpoena for Ashcroft. Sanchez's chief of staff, Michael Torra, had said he was confident the panel had enough votes to move ahead.

But yesterday evening, representatives for Ashcroft informed the committee that he would answer questions about his dealings with Zimmer.

"Mr. Ashcroft has agreed to testify voluntarily in the coming weeks on the topic of deferred prosecution agreements," Torra said. A hearing date has not been set.

Mark Corallo, a spokesman for Ashcroft, did not return calls or e-mail messages.

In a Feb. 15 letter obtained yesterday by The Washington Post, Ashcroft wrote that he hoped members of Congress would respect his qualifications to serve as a corporate monitor "despite our past policy differences and my political affiliation." Ashcroft, a Republican from Missouri, was President Bush's first attorney general. Before that, he had served as governor of Missouri, state auditor and in the U.S. Senate, where he was a longstanding member of the Judiciary Committee.

Separately, the Senate Special Committee on Aging is scheduled Wednesday to hold an oversight hearing into Zimmer and four other medical equipment companies that settled kickback allegations with New Jersey prosecutors last year.

Zimmer paid the Ashcroft Group $7.5 million between last September and January, according to information provided to the Senate Special Committee on Aging. Ashcroft and about a half-dozen senior staff members of his firm are covered under a flat $750,000 monthly payment from Zimmer. Other top lawyers affiliated with Ashcroft's consulting business are billing as much as $895 per hour under the agreement, while administrative support staff members are billing $50 to $150 per hour, Senate aides said.

Bills submitted by monitors for the other four companies involved in the settlement are less than half of what the Ashcroft group has charged, averaging a total of about $2 million each, the aides said. Zimmer is by far the largest company in the investigation, and it paid most of the financial penalties to the government under the settlement.

The Justice Department is considering whether to issue "guidance or best practices" to prosecutors around the country and is examining how monitors are selected, an agency spokesman said.