Reaganomics in Jersey: Jack Ciattarelli has a supply-side dream if he’s elected governor this week

Jack Ciattarelli may be the Trump-backed nominee for governor of New Jersey, but he’s outlined a Reaganomics plan if elected this week. And no one can say exactly how the math adds up.

He wants to slash 30 percent of state spending, or about $17 billion of the state’s $58.7 billion budget. He says he’d essentially eliminate the so-called millionaire's tax, lower business taxes — which would abolish a tax that helps fund the beleaguered New Jersey Transit — and keep the state’s sales tax steady.

At the same time, Ciattarelli wants to boost public employee pensions and increase state aid for special education, which together would cost billions of dollars. And that doesn’t even include his other tax break proposals.

Ciattarelli’s theory harks back to the Reagan revolution and the Chris Christie years in Trenton, when New Jersey Republicans promised leaner government and lower taxes. But Christie’s own record — marked by credit downgrades and deep pension shortfalls — showed how difficult that formula is to sustain. (Ciattarelli has promised to fund the state’s pension system, which cost the state $7.2 billion for the current fiscal year.)

Now, Ciattarelli is betting that message still resonates in a state transformed by years of Democratic spending and pandemic-era growth. His plan will test whether New Jersey voters are ready to return to a smaller-government vision that hasn’t delivered on its promises before.

“If we are very good at streamlining this state government, downsizing it, … we can afford these tax cuts,” Ciattarelli told an accountant trade group recently. “But mark my words, if these reforms work to grow our economy, we're going to have more tax revenue than we know what to do with.”

However, Ciattarelli has not detailed how his cost-cutting would work, and his detractors question how it all adds up without affecting programs and services.

Peter Chen, a budget analyst at the left-leaning New Jersey Policy Perspective, noted that combined spending for all direct support to run state agencies and all state employee benefits — as well as funding for the state Legislature and state Judiciary — does not come close to the 30 percent target from Ciattarelli.

“I don't know how you would achieve it without causing substantial harm to the ability of the state government to do much of anything,” Chen said in an interview.

The Ciattarelli campaign often points to the growth of the state budget under the Murphy administration and says they could cut just as easily as the state has increased spending. Gov. Phil Murphy has increased funding for public schools by $4 billion since taking office and has made full pension payments — which are required to keep the pension system afloat — by approximately $5 billion since Christie’s final budget.

"Phil Murphy and the Trenton Democrats have increased spending by $25 billion (!) since 2018,” Chris Russell, a Ciattarelli campaign strategist, said in a statement. “Given that, we completely reject the idea that there isn't room in the state budget to reduce spending and afford tax cuts. As governor, Jack will set spending priorities that New Jerseyans can agree on, including taking care of our most vulnerable citizens.”

What Ciattarelli’s promised

Ciattarelli’s calls for cuts are necessitated by his tax promises. Some of his big-ticket proposals include cutting the business tax by 1 percent over five years (the tax currently brings in about $5 billion a year) and reducing New Jersey’s top income tax rate from 10.75 percent to 5 percent — while reducing the total number of brackets (the income tax accounts for around a third of state revenue, the largest single source).

Both proposals would scrap two of Murphy’s signature tax achievements, namely the Corporate Transit Fee, which funds NJ Transit by taxing businesses and the millionaire’s tax, a higher rate for people making over a million dollars in income.

Other tax cuts Ciattarelli has promised include making retirement income tax free, freezing property taxes for residents at age 70 and making student loans and property taxes tax deductible. On the campaign trail, he’s also said that “we’re not raising any other taxes.”

At the same time, Ciattarelli has promised some new spending which could be costly. One proposal to provide cost of living adjustments for the pensions first responders would cost $600 to $650 million annually, according to the nonpartisan Office of Legislative Services. Another idea Ciattarelli has floated, bringing Medicaid rates at parity with Medicare rates for health care, would result in around $110 million more in state spending for primary care alone, according to OLS.

He also wants the state to cover the full cost of all special education students. Special education students currently cost $23,000 per pupil more than other students, according to state data. The school funding formula calculates $5 billion in total special education spending statewide, half of which local governments are on the hook for, according to the Education Law Center. (Ciattarelli has promised an overhaul of the school funding formula.)

There would also be new Cabinet-level agencies under Ciattarelli: a Department of Energy and Department of Commerce, which Ciattarelli said would only be staffed by one or two dozen employees. He has also promised a Department of Government Efficiency, styled after the Elon Musk-led initiative from the start of President Donald Trump's administration, and suggested state workers would be part of cost-cutting measures. 

“I think there's opportunities for downsizing all across the board throughout our state agencies,” Ciattarelli recently told business leaders. “Let me be clear: I don't celebrate putting people on the unemployment line, but I do believe [with] the reforms I have in mind to grow the economy, the private sector will absorb and create those jobs.”

One potentially low-hanging target for Ciattarelli to cut would be so-called pork items in the state budget. While there is no universal definition to what “pork” is in state spending — some defend them as worthy projects — it generally refers to state spending on projects for specific legislative districts added at the end of the budget process.

But such spending usually amounts to a few hundred million dollars — which falls short of Ciattarelli’s big spending cuts. New Jersey is also facing a so-called structural deficit — where spending outpaces revenues — by $1.5 billion.

“$17 billion worth of pork? Come on,” said Democratic state Sen. Andrew Zwicker, who sits on the budget committee. “Are there places where state government can and should be more efficient? Of course. Does that add up to 30 percent of our budget? That’s absurd.”

Ciattarelli’s supporters underscore that he has described a roadmap to making the state more affordable. GOP state Sen. Declan O’Scanlon said that the Democratic nominee, Rep. Mikie Sherrill, has been vague on her tax and spending plans.

“You have one side with the goal of cutting waste, restructuring spending and making life easier for the people and businesses of New Jersey,” O’Scanlon said. “The other one is failing to take a position.”