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Sunday, July 02, 2006 • BY JOSH MARGOLIN AND JOE DONOHUE • Star-Ledger Staff

Unable to reach a budget agreement with members of his own divided party, Gov. Jon Corzine yesterday ordered a step-by-step government shutdown for the first time in New Jersey history.

Corzine, his demeanor grim, said at a morning news conference he had no choice but to close down non-essential state operations after he and Assembly Democrats failed to agree on a balanced budget by yesterday's 12:01 a.m. deadline, as required by the state constitution. Without a budget, the state has no authority to spend money.

The shutdown follows a week of political brinkmanship between Corzine and Assembly Speaker Joseph Roberts (D-Camden), who opposes the governor's plan to plug a billion-dollar budget gap with a penny increase in the state sales tax.

"It gives me no joy, no satisfaction, no sense of empowerment to do what I'm forced to do here," Corzine said. "And there will be people who do not receive the attention that they rightfully deserve from our state government. I don't like it. Others don't. And we will do everything we can to bring this to a short conclusion."

Corzine's signature on an executive order just after 9:30 a.m. led to the immediate furlough of about 45,000 state employees across 31 departments, agencies and authorities.

By 10 a.m., work on non-emergency highway projects was ordered stopped. By noon, Motor Vehicle Commission offices had closed.

Until a budget is adopted, the state Lottery is out of commission. The last tickets were sold just before 8 p.m., drawing an angry reaction from players accustomed to a daily date with scratch tickets and pick-'ems.

"It just doesn't make any sense," said Rachel Harris, 68, a retired teacher who spent about $30 on lottery tickets at a Newark convenience store ahead of yesterday's moratorium. "They're taking away from our recreation."

Lottery drawings will continue for those tickets already sold.

Horse racing at Monmouth Park was suspended at 6 p.m. At the Meadowlands, it never got started, with last night's slate of 13 live races and simulcast wagering canceled. The tracks are not permitted to operate without state inspectors.

Last night, however, a judge lifted the ban on racing to allow two groups representing horse owners to challenge it in court. A spokeswoman for Meadowlands Raceway said it would reopen today for simulcasting and that Monmouth Park would resume its racing.

State parks, beaches and historic sites were scheduled to shut after the Fourth of July weekend. Along the Garden State Parkway yesterday, digital traffic signs flashed the message: "All state parks and historic sites closed as of July 5."

Corzine's order would also idle state casino inspectors and halt gambling at the 12 Atlantic City casinos -- but they received at least a one-day reprieve. The casino industry challenged Corzine's move in court, and yesterday afternoon a state appeals court gave lawyers 24 hours to submit additional written arguments.

The extension had been requested by both the casino industry and the Corzine administration, said Winnie Comfort, a spokeswoman for the courts. The delay makes it unlikely the three-judge appeals panel will issue a decision before tonight at the earliest.

Corzine, in an interview yesterday afternoon, said it appeared the casinos would not close before Wednesday.

SOME SERVICES TO CONTINUE

Facing the first grave crisis of his six-month tenure, Corzine stressed that essential state services will continue, saying, "The shutdown doesn't mean that everything is going to come to a grinding halt."

State Police will continue to work, as will most employees of the state Division of Youth and Family Services. Prisons, veterans homes and psychiatric hospitals will remain open. In all, nearly 35,000 employees will work through the shutdown, though they won't be paid until a budget is in place.

Corzine, a former Goldman Sachs chief executive who made New Jersey's fiscal troubles a key plank of his gubernatorial campaign, framed the shutdown as a principled stand against previous administrations' legacy of "fiscal games, gimmicks and mounting debt."

"I am absolutely committed to signing a budget that is fair, a budget that is honest, and a budget that restores stability and integrity to New Jersey's finances," he said.

He elaborated on the theme later in an interview, saying that for too long state government decisions have been swayed by special interests, individual preferences and a quest for power.

"It's about how business is done," he said. "It's about how budgets were formulated. It's about how agreements to have compromises were put together. It's an issue of change.

"While I don't think (the shutdown) is a good outcome, we ought to get budgets done well before deadlines," he added. "Proposals ought to be vetted broadly with the public about major policy considerations -- not in the dead of the night, not in backroom deals -- but with people actually having to argue their case in public forums."

Corzine has insisted an increase in the state sales tax -- from 6 percent to 7 percent -- will do the least harm to the economy and to taxpayers.

But the proposal has run into vehement opposition by Assembly Democrats, led by Roberts.

The Assembly speaker and his allies last week vowed to bring forward an alternate budget without a sales tax increase. Corzine said he would likely veto it, though he added he would study such a bill if it were presented.

Corzine has publicly warmed to a compromise, offered by Senate President Richard Codey, to use at least half of the revenue raised by a sales tax hike for property tax reform, but Roberts has not embraced the idea.

BLAME TO SHARE

Yesterday, a dispirited Codey called the stalemate "the most unfortunate budget situation I have seen in my 32 years in the legislature."

"I think there's a lot of blame to be placed around," Codey said. "We all have to share in it regardless of where we are on the issue."

Four times over the past five years, the state has missed the July 1 deadline for a balanced budget, and while governors have threatened to shut down state operations before, they have never carried out those threats because no budget was adopted later than July 2.

Now in uncharted waters, no one could say how long the shutdown would last. Codey yesterday reported "no real progress" between the warring Democratic factions, though he said he, Corzine and Roberts were expected to meet this afternoon.

Corzine and Roberts spoke only briefly by phone yesterday, to make arrangements to meet today.

LAWMAKERS TO MEET

Roberts -- who spent most of the day yesterday hunkered down in his second-floor office at the Statehouse, a bottle of Tums on his desk -- ordered the Assembly Budget Committee to meet this morning in Trenton. He said the committee would seek to pass a budget that can be presented to Corzine and that members should be prepared to work through tomorrow.

Corzine and Roberts spoke only briefly by phone yesterday, to make arrangements to meet today.

LAWMAKERS TO MEET

"We believe it is essential for that process to be fast-tracked and for the budget committee to work around the clock," Roberts said. "We're in crisis mode now, and I think we need to redouble our efforts."

Separately, Codey said he would call the full Senate into session tomorrow.

Roberts, who remains opposed to a sales tax increase, criticized Corzine for the shutdown yesterday, calling it a "drastic" and "unnecessary" step.

"This will have an adverse impact on so many New Jerseyans ... as well as state employees who will have their lives disrupted in ways that are enormously unfair," he said.

The shutdown also will take an economic toll on the state.

Dennis Dowd, senior vice president of racing for the New Jersey Sports and Exposition Authority, said shuttering the tracks for the holiday weekend would have cost the state about $1 million.

Closing the lottery will be even more costly. Players spent an average of $6 million a day on lottery tickets last year, generating an average of $2.2 million per day in revenue for the state, according to the state Lottery's Web site.

Casino executives, meanwhile, estimate a closure would cost the state about $1.2 million a day. The holiday weekend alone was expected to generate more than $7 million in gaming revenues, they said.

In the hermetically sealed environment of the casinos, however, the news barely registered. Gamblers continued to roll the dice, place their cards on felt tables and spin the one-armed bandits. Almost to a person, they called it unlikely the state would shut down such a lucrative source of revenue.

Michelle Busman, a Staten Island resident visiting Atlantic City with her mother, had a more unusual take.

"I had already lost my money," she said. "If they shut down, they'd do me a favor."

CORZINE ORDERS STATE SHUTDOWN

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