Invest, Grow, Prosper

3/22/2005

Blueprint for New Jersey’s Economic Growth

I want to thank President Altenkirch and the faculty and students of NJIT for inviting me to speak here today.  To me, there is no better venue for talking about New Jersey’s future than an institution that is dedicated to educating the best and brightest on the science and technologies of tomorrow.

When I announced my candidacy last December, I said that as Governor, I would work to make New Jersey one of the best places to live, to work, to go to school, to start a business and to grow old with dignity to set a new standard of excellence.

I said this because I believe New Jersey has everything it takes to make this vision a reality.

So let’s be clear about why we are here today.  The old politics of tax, borrow and spend has failed New Jersey.  We need a new paradigm, of invest, grow and prosper.  And that requires strong and strategic management.

Within our borders, we have all the assets we need to make this happen.  But too often, our assets are just not being used effectively to improve our lives and enhance our future.

When I served as Chairman of Goldman Sachs, it was rated one of the 10 best places to work in America.

We valued our employees, we offered honest service to our clients, and we expected and demanded excellence by our team.

We never lost track of the bottom line, but we always retained a steady eye on the long-term.

By planning for the long-term growth of our business, we not only met our objectives, we generally exceeded them.

These are the same high expectations and results I want to bring to New Jersey as your next Governor.

We cannot achieve the best hopes of our people if we tolerate the wrong instincts in our leaders.  We cannot retain and attract new jobs and new businesses in an environment that tolerates corruption and insider deals.

And we will not restore restraint and integrity to New Jersey’s fiscal policies, if we do not demand both from our leaders.

Growing New Jersey’s economy and creating good-paying jobs cannot and will not happen unless four important things happen.

We must enact the comprehensive ethics reforms I offered last month.

We must once-and-for-all get New Jersey’s fiscal house in order.

We must bring 21st century management practices to State government, and start treating it like the 28 billion dollar operation that it is.

And we must end hand-to-mouth, year-to-year decision-making and replace it with long-term thinking and planning.

These are the simple pre-conditions for taking New Jersey to a higher level.  Without them, the state’s future will fall short of our potential.  With them, we will be able to invest in New Jersey’s pre-eminent asset – its people and define a brighter future for each of them.

Additionally, New Jersey has many valuable assets with distinct features and qualities that we can claim uniquely as our own.

We have one of the most diverse ecosystems anywhere in the world: a combination of highlands, farmlands and the Jersey shore.

New Jersey is the connecting corridor in the most vibrant region in the world – where seaports, airports, rail lines, and roadways converge to serve the diverse needs of regional, national and international commerce.

We were the crossroads of the American Revolution, and today we are on the frontier for the fine and performing arts.

We host and support one of the most respected public and private higher education systems anywhere with a world class threesome of public research universities including NJIT and with state and community colleges that serve hundreds of thousands of citizens every year.

We are home to some of the fastest growing industries in the world: pharmaceuticals, medical devices, health sciences, biotech, and financial services.

And we are home to one of the most diverse, best educated, highly skilled, and most ambitious and hopeful populations in the world.

Because of all of our assets, New Jersey has the highest median income of any state in the nation, but to keep it that way, we have to work hard, work smart, and do more.

And, we have the potential to do it.  And all of that potential must be put to work to broaden opportunities for every family in New Jersey.

I know the American Dream.  I have been blessed in my life.  I’ve had the benefit of a loving family and good public schools.  I had the strength and support of my community.  I started at the ground floor of a great American business, worked hard and made my way to the top.

I want everyone in New Jersey to have that same shot at the American Dream.  That is why I entered public life, and that is why I am running to be the next Governor of this great state.

I believe that the challenge for our next Governor is to keep track of the bottom line while never losing sight of our long-term goals.

We need to think in new ways about old problems, and use the assets we have at our disposal.  Let’s commit ourselves to putting our best minds to work on a plan for New Jersey’s future.

In order to get us started, I have come to this great institution of science and learning to offer my ideas about fixing New Jersey’s finances, managing its government better, and growing our economy:

To fix our finances, we must transform New Jersey’s fiscal policy from a short-sighted process of tax, borrow and spend, to a long-term strategy of invest, grow and prosper.   Stronger revenues come from a stronger economy.

The state budget looks like a cold set of numbers, one piled on top of the other.  But the budget affects every single person from the shore to our cities.  It’s an expression of our values and what we think is important.

And when we play games with our fiscal house, when we use budget gimmicks instead of making hard choices, all we do is cheat the people of New Jersey and shortchange their future.

Every family thinks about their long-term obligations – meeting the mortgage, paying for school, putting something away for a rainy day – before they go on a spending spree.  It is long past time for Trenton to think beyond the next budget or the next election.

Acting Governor Codey has taken important steps to slow down the State’s addiction to one-shot fiscal gimmicks.  He has begun treating our fiscal problems honestly, but we all know there is more for us to address.

Homestead rebates are at risk because of our budget shortfall, and saving as much of them as we can should be today’s highest legislative priority.  I have said it before, and I will say it again: it is long past time for comprehensive property tax relief, and to achieve it, we will face some very hard choices.

Let me repeat, whether or not the people vote for a property tax convention in November, I intend to call a special session of the legislature, early next year, to focus exclusively on property taxes and to take action.

Long-term property tax relief requires that we confront the ugly truth of our fiscal condition:  Fixed costs are rising every year at an unsustainable rate.  Health care costs, salary and pension benefits for both employees and retirees are devouring more than our annual growth in revenues, and the trend is getting worse, not better.

The Governor’s task force on fixed costs is a good first step to confront this problem.  But it’s just a start.  In stark contrast, some candidates for Governor ignore this reality, and promise what they can’t deliver:  across-the-board cuts in costs they don’t control.

So let’s be frank.  We must confront the intractable problems of property taxes and fixed costs, but that’s not enough.  We must also take immediate steps to reign in government spending:

We should examine more efficient ways to administer the State Health Benefits Program, which cost 220 million dollars more this year than last.

We should consider bulk purchasing of high-cost items like prescription drugs.  We can consolidate administrative functions in State agencies and cut PR budgets by 50% to save a combined 70 million dollars over three years.

Technology upgrades can save the State 100 million dollars annually by the third year, and energy efficiency measures can add another 20 million dollars in savings over three years.

The steady growth in the State employee workforce must end.  Acting Governor Codey is now cutting 500 positions through attrition. We should continue that approach for a number of years.  In addition, I will limit political appointees and work to reduce their numbers by a substantial percentage.

And finally, it is time to evaluate the true benefits of every State agency and program.  It is time to determine which ones are worth the cost, and which ones simply cost too much.

It is time to introduce “outcome-based” budgeting to State government, where programs are scored and retained on the basis of their effectiveness.  My cabinet will be told to identify which programs produce results, and to eliminate those that under perform.  A fresh look and consolidation are necessary in leading any large organization.

Another step to getting our fiscal house in order is to fight George Bush’s budget assault on New Jersey.

His anti-New Jersey budget cuts would end all Amtrak service in the state; throw 20,000 New Jerseyans off Medicaid; slash homeland security block grants by 30 percent; deny after school programs to 33,000 kids; and increase prescription drug co-pays for veterans.  Altogether, his budget cuts would cost New Jersey over 300 million dollars next year.

I am a leader in fighting these cuts.  And last week Senate Democrats, joined by a handful of Republicans, managed to scale back draconian Medicaid cuts, although we will continue to face stiff opposition in the House.

While we need bold ideas and a willingness to fight, we also need something more basic: good information.

As a businessman, I never would have made an investment in a company without first understanding its finances top to bottom.  That understanding can only be reached with honest and complete information.  I will bring that same kind of thinking to fixing our State’s finances.

In a Corzine administration, we will conduct a careful, bipartisan analysis to uncover the true fiscal situation in the State.  This is not a Democratic or a Republican issue, and I’m not interested in a political exercise.

So I will put together a group of experts from inside and outside government to scrub the numbers in every area and every agency, from revenue projections to entitlements to trust funds.  With this honest picture of the State’s finances, we will level with our citizens and forge a consensus for a comprehensive, long-term solution to the State’s fiscal problems.

In the Senate I won hard battles to ensure the honesty, transparency and accountability of corporate financial reporting.  In the same way, I will make sure that the finances of the State are honestly and regularly reported.  And as Governor, I will hold state officials personally accountable for the honesty and accuracy of their financial reports.

Among the new measures, we will certify revenues twice a year rather than once: the first time when each new budget is enacted, and again in January after the close of the calendar year.  This will keep government honest and help us avoid spending more than we’re taking in.

We will also upgrade the depth and the quality of the State’s capacity for economic and fiscal analysis.  It is unacceptable that we don’t know the economic impact of State policies, or when it comes to taxes, who is paying how much.  Bad data lead to bad decisions.

We must also move forward with installing a common technology platform for all State agencies.  This platform will be fundamental to organizing the good data for good decisions.

I ask, would it surprise you to know that there exists nowhere in State government a complete list and current appraisal of all State assets…or that you would get a different head count of State employees depending on whether you ask the Office of Management & Budget or the Department of Personnel?

It will take a modest investment to fix all this, but the investment will pay off many times over.

I said earlier that as a CEO, I never lost track of the bottom line, but always kept a steady eye on the long term.  It is now time to impose that same discipline on our State finances.

We can start that discipline by submitting a two-year budget every year to the State Legislature.  And included in that budget will be five-year projections for spending and revenues.  Most government programs don’t start and end in a single year, and we shouldn’t budget as if they did.

And multi-year budgeting for operating State government must be accompanied by an equally sound, but separate, capital budget.

A separate capital budget for investment in hard assets, like roads and schools, will not only help us identify new savings, but will allow us to plan and finance ahead for the long-term needs of the state.

And perhaps more importantly, we’ll make sure that capital accounts aren’t raided to pay day-to-day operating expenses.  That’s what’s happened with the Transportation Trust Fund, among others.  You know – we might actually be paying for snow removal with money that was intended to be used for bridge repairs.

That kind of fiscal arrangement was bound to fail, is failing today, and has to stop.

Further, the state has assets worth billions – from racetracks, to highways, to valuable real estate.  The proceeds from the sale or lease of any of these assets should be used for only one of two purposes: to pay down existing debt, or to finance new capital investments in higher education infrastructure transportation networks.

We should reposition our assets the same way that successful companies or individuals would rebalance their asset portfolios to create growth and revenue.

To help us do that, we need real capital planning.  The state’s Capital Planning Commission has been ignored for years.  Most people don’t even know what it does or that it exists.  I’ll change that as Governor.  We will recruit the best talent from the private sector to bring an entrepreneurial view to managing our assets.

This Commission will:
– inventory and value all state assets,
– create, update and recommend capital plans,
– and rank projects by returns for prioritizing and financing purposes

It will conduct a full inventory every year.  It will appraise the revenue stream from state assets, and the costs associated with maintaining and financing them.  This will be done for the assets owned by State Authorities as well as those owned and managed directly by the state.

We should never again take a state asset and use it for a one-time quick fix.

The value locked inside our state’s roads, rights of way, surplus lands and buildings is a key to revitalizing our transportation, education, and our job-creating businesses.  And we will use these assets to unlock New Jersey’s future.

Finally, from day one as Governor, I will instill cost-control discipline in all agencies of State government, from the cabinet departments to the independent State Authorities.  My administration will bring Management 101 to Trenton.

So much for the green eyeshade stuff.

While cutting the cost of government, we must aggressively grow New Jersey’s economy and create good-paying jobs.

We must forge an unprecedented partnership between the public and private sectors: business, labor, government and educational institutions working together as serious partners to make this state a world leader in research, information technology, and new investment.

The best way to help our workers is to create the new jobs of the new economy.  The best way for the state to expand its revenues is to grow the economy.  As the cornerstone of this effort, I intend to propose for voter approval an Edison Innovation Fund to support research and development, technology transfer, and job creation.

Funding priorities will range from nanotechnology to telecommunications… from renewable and clean energy to stem cell research… from food technology to genomics and R &D for both national defense and homeland security.  And this should happen in every part of the state, south and north:  from Einstein Alley to Camden’s universities and colleges.

The Edison Innovation Fund will leverage additional private sector investment and research funds from the National Institutes of Health and other federal agencies that support research and development. And New Jersey will seek shared ownership of patents and use the returns to replenish the Fund.

Initiatives aside, here’s a fact that should concern us all: New Jersey’s growth rate in nearly every technology sector is lagging the national growth rate.

For example, New Jersey’s pharmaceutical sector has declined as a share of the national economy over the past ten years, while in Massachusetts it has grown at a rate of 10% per year.

We know what New Jersey’s economy was half a century ago — heavy on manufacturing items like cars, textiles, and industrial chemicals.  Times have changed.  We need to be thinking about what New Jersey’s economy will look like in five years, in twenty years, and in fifty years.  We need to imagine a new economy and then get to work to make it happen.

New Jersey has to stay competitive.  And more than that, we have to lead.

In addition to the Edison Innovation Fund, I will plan to create new job opportunities at our ports, both north and south.  In today’s advanced economies, logistics are the fastest-growing manufacturing sector of the 21st century.

New Jersey’s ports are the lifeline for this nation’s economy and our link to the world economy.  It’s time we redoubled our efforts to make them a lifeline for New Jerseyans looking for good jobs and the chance to get ahead.

As governor, I will spearhead the Liberty Corridor Port Development and Trade Zone to convert brownfields into warehouse and light manufacturing space, and develop a special purpose road and rail network to ease port-related truck traffic.

And every company who ships its goods through New Jersey should have headquarters or administrative offices in our state.  Some should be encouraged to build their products here rather than ship through here.

Next, we know New Jersey tourism generates 30 billion dollars in spending and 2 billion dollars in tax revenues to the state each year.  But we’re in the bottom fourth of states when it comes to investing in the promotion and development of tourism.  The Jersey Shore, Atlantic City, and our American Revolution history can compete with any destination across America if we tell our story right.

We need a New Jersey Tourism and Travel Commission responsible for finding ways to increase tourism through promotion and working with the private sector.  And instead of neglecting our state parks, we must invest in their health so they become a magnet for future growth.

At the same time we have to strengthen New Jersey’s vital agricultural industries.  They keep the Garden State, Jersey Fresh, and their future is vital to the diversity of New Jersey’s economic engine.

As governor, my job will be to create good jobs, in multiple market sectors all across our state.

And that’s why I will locate an Office of Economic Growth right in the Governor’s Office. It will take over the responsibilities of the Commerce Commission.  The Director of Economic Growth will report to and work directly with the Governor and the cabinet.  Expanding New Jersey’s economy will be at the top of my agenda.

– By this effort, we will attract additional global investments to New Jersey and build international trade relationships.  It is time for this state to have a full-time foreign trade representative and trade office, to bring investments to New Jersey so we become a leader of ‘insourcing,’ not a victim of the opposite.

– We will coordinate the work of our high schools and higher education institutions to foster workforce development in growth areas of health care and technology.

– We will expedite the use of State and federal resources to help the unemployed and workers in transition to get the training to get back to work.

– We will ensure that infrastructure investments enhance the economy while we preserve open-space and protect our environment, which in fact, is one of New Jersey’s greatest economic assets.

– We will make our cities and inner-ring suburbs centers of economic revitalization – by establishing an Urban Investment Bank to pool resources from private institutions and investors, for equity investments as well as loans.  We will focus the investments on small businesses, which will be assisted by incubators at our research universities again like the successful one here at NJIT.

And in all of this, we will place special emphasis on the development of small businesses and women- and minority-owned firms.

Today, there are dozens of separate economic development programs in at least 16 different agencies.  We will consolidate them into one powerful Economic Development Authority a pattern of consolidation that we will implement all across state government   and potentially beyond.

As I close let me be clear:  What I’m proposing today is a fundamentally different approach to state government.  It’s time for New Jersey to stop stumbling from one financial crisis to another.  Instead, it’s time to do the hard work of creating and shaping our future.

My vision is built on basic business principles and on an abiding faith in the talent and hard work of our people.

We have the energy, the opportunity, and the resources to make New Jersey a leader in the global economy, the results providing us the means to invest in education, health care and our infrastructure.

I come to our state’s governance with a different set of experiences, and I intend to be a different kind of Governor.  I intend to move our state from the pattern of tax, borrow and spend to a new paradigm of grow, invest, and lead, in the economy of the 21st Century so that our people can prosper in today’s fast-changing world.

Thank you.