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Wednesday, July 05, 2006 • BY ROBERT SCHWANEBERG AND SUSAN K. LIVIO • Star-Ledger Staff

The longer the state government shutdown drags on, the worse it will get.

That was the assessment yesterday from Gov. Jon Corzine, Cabinet heads, business leaders and union representatives.

Blunted by the long holiday weekend, the impact of the shutdown fell mainly on lottery agents and players, highway construction workers, and those motorists who showed up Monday at closed motor vehicle agencies. But the effects will intensify today as casinos, racetracks and state parks and historic sites close and more than half the state government work force stays home.

With each passing day, political and business leaders say, the shutdown will affect more people and businesses in New Jersey.

If the budget impasse is not resolved by the end of this week, the state will be unable to process its next payroll, due to go out July 14. A $400 million school aid payment on Friday is in jeopardy. By Sunday, 15 blind and disabled children will be shut out of a state-sponsored camp.

Beyond that, the shutdown could have effects that ripple through the state's economy. The state and municipalities might be forced to borrow money, incurring interest charges that drive up taxes. Construction could be delayed for lack of state permits, depriving more private employees of a paycheck.

"It's a cascading effect," state AFL-CIO President Charles Wowkanech said. "There are so many people -- innocent people, hardworking people -- who don't deserve this."

And every day, the state will dig itself into a deeper budget hole, forfeiting $3.5 million in lottery revenues and casino taxes it normally collects.

"That's lost revenue that you can't regain. That just makes the hole bigger," said John Bennett, a former Senate co-president who is now a lobbyist for Atlantic Health Systems. He worries that those lost revenues will translate into less charity care reimbursement for hospitals. Failure to pass a budget by July 15 would hold up a $583.4 million charity care payment.

Nonprofit agencies that provide services to the state are nervously wondering how long they can hold on without payment.

"If it goes beyond two weeks, we'll be in trouble," said Jeff Fetzko, executive director of the Somerset Home for Temporarily Displaced Youth in Bridgewater, which relies on $2 million in state contracts to support its $3.1 million shelter and group home operation.

Human Services Commissioner Kevin Ryan said the state is seeking a bank line of credit of about $15 million to ensure some 90,000 adults get mental health treatment and 9,000 people with developmental disabilities stay in group homes just for next week, as well as to preserve some other programs. The bank would pay the contractors on the state's behalf.

Health and Senior Services Commissioner Fred Jacobs said he and his staff are personally calling state associations of pharmacists, asking them to keep filling prescriptions for 220,000 elderly and disabled people under the Pharmaceutical Assistance to the Aged and Disabled program.

"We will make them whole when this is over," Jacobs said. "We don't want them to stop filling prescriptions, but we don't have any money right now. We are in uncharted waters."

Philip Kirschner, president of the New Jersey Business and Industry Association, said a prolonged shutdown means "nothing gets built in the state -- whether it's stores, whether it's offices. You can't get permits anymore." Although municipal building code inspectors are still at work, Kirschner said most projects require state environmental and transportation permits.

LEGAL RAMIFICATIONS

Some effects of the shutdown will be determined by legal technicalities rather than fundamental fairness. Essential state workers who remain on the job will be paid on schedule, but only if they are civil service employees, who are covered by the federal Fair Labor Standards Act, which trumps state law. Others who remain on the job, and all who have been furloughed, will not see another paycheck until the state adopts a new budget.

Local governments cannot finalize their own budgets until they know how much aid they will get from the state, William Dressel, executive director of the State League of Municipalities, said. If the dispute drags on, he said, towns may be forced to borrow money.

Public Advocate Ronald Chen, who is monitoring the impact on the justice system, said a prolonged shutdown of the courts will raise novel legal questions. One is whether a lack of public defenders to investigate while evidence is still fresh means indigent defendants are "deprived of effective assistance of counsel," he said.

"The issue is murky. We've never had to face something like this before," Chen said.

Daniel Phillips, legislative liaison for the Administrative Office of the Courts, said the judiciary can get by for a few days with just a few judges to set bail, order psychiatric commitments and hear emergency matters. But if the shutdown drags on, he said, the judiciary may need to designate probation officers as essential workers and call back more judges.

They might end up hearing cases that never would have been filed had the budget been passed by the July 1 deadline.

The dispute over Corzine's sales tax increase is at the heart of the budget stalemate that forced the shutdown. Assemblyman Frank Blee (R-Atlantic) noted that a laid-off casino worker stands to lose more in salary this week than the $260 impact of Corzine's proposed sales tax increase on a family of four for a full year.

Bob Pursell, area director for the Communications Workers of America, the union for 40,000 state workers, said it has a "no strike, no lockout clause" in its contract. The furlough of nonessential state workers, he said, is a lockout.

"If necessary," Pursell said, "we'll go to court to enforce our contract rights."

It's a short road from annoyance to crisis

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