Did anyone expect a higher grade?

Here's the sentence in the report card that sums up the state's well-known fiscal problem: "New Jersey hasn't yet found a way to deal with the long-term imbalance between its revenues and its spending."

Like the high school student who didn't study and then wonders why he got a C on the test, New Jersey's public officials are still not dealing with reality. They aren't ready to make the hard decisions that must be made before the state can hope to earn a B or an A.

Just look at the reaction that greeted Governor Corzine last month when he unveiled all the proposed cuts in his austerity budget. Even members of his own party backed away. No one can deny the state is facing a fiscal crisis that calls for bold steps. But Corzine's dramatic attempt to reduce state debt with his toll increase plan has also been met with a cold shoulder.

And other alternatives to the toll plan, such as suspending the costly homestead rebate program or raising the gas tax, are not winning friends either.

The report card notes that "deferred maintenance in the transportation system has swelled to $13 billion. ... Although New Jersey has the nation's third-lowest gas tax, a tax increase to bolster maintenance doesn't seem politically possible."

By the way, the state gets a C+ for general maintenance of infrastructure, including bridges and roads.

The state is given credit for some reforms, including finally trying to address its pension liabilities after years of neglect. But the report card states that they continue to grow -- in addition to a "$58 billion long-term bill for post-employment retirement benefits owed to its workers. Many other states are up against big bills on this front, but New Jersey's is a whopper by anyone's standards."

The next few months could be compared to final exam time for New Jersey. What lawmakers do in response to the governor's proposed budget and toll plan will likely determine whether the state can bring up its grade or not.

It took years of pension increases, pork, patronage and other profligate spending to get us to this point. Now the state's debt load is almost the size of the budget itself.

It's past time for all of our legislators to become serious students of fiscal reform. Bad grades don't bode well for the future.

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This budget has no sleight- of-hand fiscal tricks to soften the inescapable truth: The state must learn to live within its means now or confront a future in which a bankrupt state is unable to attract businesses or residents. Think New York City in 1975.

Over the next few months, lawmakers will scour the budget line by line, as they should.

Undoubtedly, there'll be some course corrections. Particular attention will be paid to hot topics such as hospital clo sures and town mergers. No governor's budget emerges from the process in June the way it was presented in February, and this one won't either.

But whatever the tinkering, one thing must remain constant: the bottom line. Corzine presented a budget that's just a tad over $33 billion. That's about $200 million less than was spent this year. It's quite an accomplishment, considering that normal increases in items such as health care and union contracts would have bumped the budget up by $2.7 billion.

Some lawmakers may not want to get rid of the three Cabinet-level offices that Cor zine proposes to scrap -- the Agriculture and Personnel departments and the commerce commission -- but to spare any one of them, legislators must come up with similar savings elsewhere. They may think cutting $190 million from municipal aid is too drastic, but if they opt to hand more to the towns, they must take it from someplace else.

And they should go about their budget writing with the same deliberation as did Cor zine and acting Treasurer David Rousseau. Programs weren't eliminated on a whim but rather after diligent review revealed they were duplicative or simply unnecessary. Jobs weren't slashed willy-nilly but rather after an examination of which positions were expendable.

Most important, Corzine's budget is not aimed at winning approval of his asset monetiza tion plan. Rather, the governor made cuts because they needed to be made. None is arbitrary or geared to get even with opponents.

That's not the case with the clamoring by some lawmakers who want significant reductions in aid to the so-called Abbott school districts. Or with other legislators' proposals to wipe out the public advocate. For them, the concern isn't what the department spends -- $20 million, a 14.2 percent cut in the new budget -- but rather what it does.

Budgets are more than a simple tallying of what the state collects and how it spends. A governor signals his priorities by what he includes and what he excludes. Corzine has done that and more. His budget lays out a new fiscal policy that forces the state truly to live within its means -- something leaders haven't been able or willing to do for a couple of decades now.

Lawmakers may nibble around the edges of his spend ing proposals, but they must not tamper with that policy.

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It must have been a bit eerie for the former CEO to return to his earlier private sector life for a half hour or so and deliver the sort of dismal news that his audience not only wasn't accustomed to hearing but never really wanted to hear.

His recommendation to abolish three Cabinet departments en route to cutting some $3 billion in spending from the state budget produced a rare legislative reaction, driving Republicans and Democrats into each others arms and agreeing in general with Corzine that taxpayers simply could no longer afford the cost of government.

Republicans who've been demanding spending cuts for years could feel somewhat justified by the Governor's proposal while Democrats have come to grudging acceptance of the harsh reality that the years of government expansion and the spending to support it have come to an end. While it may not be a bipartisan marriage, at least the two parties have taken up temporary residence in the same fiscal house.

The extremes, of course, quickly weighed in. Former Bogota Mayor Steve Lonegan, who unfortunately has become the statewide voice of the Republican Party, demanded that state government be shut down, while a spokesman for the environmentalist predicted that if the proposed cuts to the Department of Environmental Protection were implemented, more New Jerseyans would die before their time. Believability is neither one's strong suit.

But even as legislators offered conciliatory expressions of agreement, they kept a wary eye on the interest groups who immediately raised cries of anguish and predictions of disaster if the cuts were approved.

These groups, naturally, will all appear before the budget committees of the two houses to plead their cases to not only resist reductions in their appropriations but to increase spending.

Public employee unions are furious because the budget would result in layoffs and the loss of up to 5,000 jobs. Municipal governments fear the loss of hundreds of millions in state aid while hospitals see additional closings and denial of medical care to thousands in need if state reimbursement is reduced. Colleges and universities will warn of tuitions soaring out of the reach of New Jersey students making a college education a dream only, and arts representatives will predict that the state will become a hick town cultural backwater if funding for their programs is cut.

There are dozens of other groups and organizations whose representatives will appear before the committees and all will attempt to make a convincing case that, while they understand the need to economize, their funds should not be touched.

In the early going, however, it appears likely that the sympathetic legislative ear and the success these groups have enjoyed in the past will not be repeated.

It's taken a while to dawn, but there is now a recognition that taxpayer discontent has reached critical mass. People who've lived here all their lives, whose parents and grandparents have done so, and who want to stay here have been jolted by the realization they can no longer afford it. And, they've targeted a growing and expensive government as the culprit.

If nothing else, legislators are sensitive to rising levels of constituent anger and it seems the anger level has surpassed the level of political repercussion normally produced by cutting the state budget.

Whether one feels the Governor has gone too far with his recommendations or has not gone far enough, he deserves considerable credit for his courage in undertaking the journey and --- for the moment at least --- drawing the Legislature onto the road with him.

As the trip progresses, the odds are he'll have to dust off his CEO credentials a few more times.

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Downtown Trenton is a far cry from Broadway. On Tuesday, Corzine was greeted with applause at the beginning and conclusion of his address. But in between there was nothing. Silence. You could have heard a pin drop or an approval rating fall.

The governor may be faulted for his delivery and lack of oratorical flourish. But he cannot be faulted for his message. It is not springtime in the Garden State. Winter has come with an icy blast.

The governor has spent the past weeks on the road, meeting with New Jerseyans in town-hall-style meetings, trying to sell the public on his road asset monetization plan. The key component of the plan is toll increases. The more the governor has explained the plan, the more opposition has grown. "Unpopular" is an understatement.

However, political naysayers would be foolish to underestimate Corzine's resilience. Sitting in a Newark coffee shop Thursday morning, he was pragmatic about the big lift ahead.

Corzine attributed the Legislature's big chill to two things: One, legislators were interested to see whether he really would do what he said he would do -- deliver a no-frills budget. And two, the budget is painful.

According to the governor, the reasoning behind it is simple. "We don't have the dollars," Corzine said. "The money isn't there."

I read polls as much as the next pundit, but judging by the walk-by traffic in Newark on Thursday, the public is less upset with Corzine than the polls suggest. Make no mistake, the public hates toll increases. But a half-dozen people in an unscripted environment made a point of interrupting the interview to praise the governor for the courage of his budget address.

The public wants cuts. And it will accept across-the-board pain, if it truly is across the board. And there's the rub. Special interest groups already are inflating pig balloons. Legislators and would-be legislators are clamoring for microphone opportunities to say what's wrong with Corzine's budget.

Corzine is open to compromise on cuts, but he is clear that "there has to be a general balance" to where the cuts are made. When asked if he was optimistic about the budget process ahead, he said, "I'm not optimistic about anything until I see it's done." The monetization road show has taught him a few things about New Jersey politics.

The tours probably will restart in mid-March with some new songs and dances. The public will expect Corzine to discuss the proposed budget, as well as show it a Plan B for monetization. Maybe that will include toll increases mixed with an increase in the gas tax. On Thursday, Corzine was keeping his options close to the sweater vest.

How all this will fare with the voting public in 2009 is anybody's guess in 2008. "It's not that I don't want to be reelected. I do," Corzine said. But he doesn't intend to focus on reelection until after Thanksgiving.

For now, it's all about the budget. I asked if he was ordering up a cot for his State House office in the event that there is no approved budget by June 30. He said he never got rid of the cot from the 2006 budget standoff.

It's unlikely it will come to that. Republicans cannot quibble that Corzine isn't cutting. If Republicans want more cuts, they can go ahead and propose them. Voters will love to hear, "We need more budget pain. More cuts. More pain." Democrats, in turn, do not get a free pass either. It's one thing to criticize higher tolls, but it's another to criticize anything and everything that is politically unpopular.

The slogan for state legislators should read: Put up, shut up or get up.

Voters expect Corzine to show them a Plan B for reducing state debt and to fund transportation projects. But when it comes to the budget, voters expect the Legislature to spread the pain evenly. The details of the budget need to be publicly vetted and, undoubtedly, changes will be made. Forget the calendar; it will be a very long winter.

In the budget address, Corzine said this was "cold-turkey" therapy. After years of a steady diet of fatty pork, the time has come for New Jersey to lower its fiscal cholesterol.

And as to the initial silent reaction to the budget, legislators should remember that by the final curtain, "Springtime for Hitler" was a critical success. It was a scheme of excessive borrowing that did the show in.

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The budget plan unveiled Tuesday represents a solution that the public and some lawmakers have long called for: Deep cuts in the state budget that would reduce the size of government. Corzine's $33 billion budget is down $500 million from last year's and requires $3.2 billion in cuts, since other costs are rising. There is pain all around: Thousands of employees eliminated. Property-tax rebates scaled back. Municipal and higher-education aid slashed.

This is unquestionably government made smaller.

Corzine's larger, sensible plan is to keep spending on a responsible path by requiring future budgets to meet recurring revenues.

Now begins the wailing and lobbying, as special interests threaten catastrophe and fight to restore proposed cuts. Understand that many of those special interests are not venal or self-serving. They are people concerned about the environment, worried about the poor, fighting to nurture the arts and higher education, worried about the effect of this budget on property taxes.

Lawmakers, however, must keep their eyes on a larger picture - solving the immediate budget crisis and putting the state on a responsible financial footing for the future. They should resist the impulse for divisive, partisan politics. Work together, folks. The public is fed up.

Municipal officials who squawk that aid cuts mean property-tax increases need to revise their thinking. It's up to municipalities to find ways to cut costs and keep property taxes down. Lawmakers should also give municipal officials whatever tools they need to do that and should revisit the recommendations for property-tax reform that were discarded or watered down in the face of special-interest opposition.

The Legislature should be cautious of some of Corzine's proposals - including an early-retirement program that could balloon the amount the state must budget for retirement benefits in the future and a few cuts that could prove unwise, like those to struggling hospitals or to the state's poorest residents. Still, if any savings are lost from Corzine's plan, lawmakers must cut elsewhere without resorting to the kinds of budget gimmicks that helped get us into this mess.

The budget does not anticipate revenue from Corzine's overly complex toll-hike plan. There is little support for the governor's idea to refinance half the state's debt and pay it back through a series of draconian toll hikes. Still, the Legislature needs to consider some form of toll hikes and gasoline-tax increase this spring to finance road and bridge improvements. Some way must be found, as well, to fully fund the state's underfunded obligation for future pension and health-care costs - and to lower these costs in the long term.

The Legislature has a big job ahead. Corzine has delivered what everyone says they want - an austere budget that trims government. Now, let's see if lawmakers - and the public - have the stomach to follow through and not engage in politics as usual in Trenton.

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In his annual budget address to the Legislature, Mr. Corzine declared that unless New Jersey made hard choices, it would fall into a “deeper fiscal swamp.” He outlined deep budget cuts — “cold-turkey therapy” — that would eliminate three cabinet departments, 3,000 state jobs and squeeze aid to hospitals, colleges and universities. Even if the Legislature agreed to all of the cuts, Mr. Corzine asserted, it would still have to find a way to bring in more money.

More than 20 states, including New York, are facing budget shortfalls next year, due at least in part to the economic downturn, according to an analysis released this week by the Center on Budget and Policy Priorities. The report said a few states — most notably, Arizona and California — face even bigger deficits than New Jersey.

New Jersey’s problems are magnified by a long history of irresponsible borrowing and spending. In a self-destructive gimmick, the state seriously underfunded its pension plan and used the money to pay for current spending programs. As a result, Mr. Corzine said, the state’s annual debt service now exceeds what it invests in higher education.

Mr. Corzine and legislators of both parties have ruled out increasing the state’s income or sales taxes. But there is no way New Jerseyans can escape real pain. Mr. Corzine has called for a significant jump in turnpike and parkway tolls. Several legislative leaders have suggested a combination of raising the state’s gas tax — one of the lowest in the nation — a more modest increase in tolls, and a merger of some of the state’s tiniest towns.

The Garden State’s woes should serve as a warning to other states, whose lawmakers might be inclined to use budget gimmickry to deal with shortfalls in revenue and get through immediate fiscal troubles. As New Jerseyans are learning the hard way, that is likely to lead to much bigger trouble in the years ahead.

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The federal government reported a budget deficit of $349 billion for fiscal year 2007, and re cently released data suggest that this number will climb as the stimulus package is implemented and supplemental appropriations are authorized for the wars. Furthermore, the comptroller general of the United States points out that this number does not reflect the deficits in Social Security and Medicare -- $52 trillion -- not to mention the $11 trillion federal debt. The comptroller says the "current fiscal policy of the federal government is unsustainable."

In New Jersey, the state contends with similar problems, albeit on a smaller scale, including a structural deficit of $2.5 billion; debt in excess of $30 billion; un funded liabilities debt by another name -- in the pension and health retirement funds of $85 billion; insufficient revenue for the transportation trust fund beyond 2011; excessive reliance on the property tax; a government that has lost control over large portions of the budget due to court mandates, contractual obligations and federal rules, and impending fiscal problems of major cities that require significant state aid to keep them from insolvency.

For more than a decade, New Jersey's budgets have not been truly balanced with current revenues. Shortsighted policy decisions have created structural flaws in the funding of pension and health care costs, among other significant areas. In two decades, the state has tumbled from the gold standard in fiscal strength to near collapse.

Policy specialists might disagree as to the correct solution, from an increase in taxes, to deep budget cuts, to a revision in the tax struc ture. Regardless of the philosophy or approach, the need for action is obvious. To the governor's credit, he is not avoiding the problem. Instead, he is explaining to residents the state's dire fiscal condition. He has explained how the severity of the problem calls for immediate and difficult action, most notably in the form of the asset monetization plan and the attendant toll increases, and, even more important, significant cuts in the budget.

Asset monetization, which would address transportation funding after 2011 and reduce excess state debt to provide budget lee way, has been the recent focus, but two very significant budget propos als will soon grab most of the state's attention.

The decision to freeze the budget at current levels might sound straightforward until one recognizes that commitments by the state require an increase of al most $2 billion for next year's budget -- specifically, $550 million in school aid; $400 million to $1.1 billion in pension payments (de pending on whether the state chooses to meet the actuarial funding requirement); $450 million for health care, including Medicaid; $100 million for debt service, and $170 million for salary contracts. And this list fails to account for higher education, transit subsidies, state aid and a host of safety-net program needs for our most vulnerable residents.

And even with asset monetiza tion and expected significant budget cuts, there is yet no announced program to deal with the $85 billion deficit in the pension and retirement health care ac counts.

The governor's second proposal, that in future years spending not exceed revenues, promises to encounter similar hurdles and will re quire further budget cuts in subse quent years. Without question, the next few budgets will involve pain in many programs, and yet there will still be issues that must be addressed to bring the state to full solvency.

The governor will release his budget tomorrow, and the results of these budget policies will soon be known. These reductions will be very painful to many segments of our society -- especially in areas like higher education, state aid to municipalities, property tax re bates and Medicaid and health care -- but alternatives are few if the governor is to address the long- term structural deficit.

What options exist? The monetization proposal and the very significant budget caps and cuts, as unappealing as they might appear to some residents, require careful study, not reactionary dismissal, particularly in the absence of a viable alternative. If, after consideration and analysis, one does not favor the initiatives, at the very least, the governor deserves praise for opening the dialogue on how the state begins to get out of its long-term fiscal downward spiral -- in contrast with his counterparts in the federal government, who do not discuss the dire fiscal condi tions facing the country.

The governor will have made one proposal. Others can counter with an option to increase taxes or a different set of budget reductions or criticism with no solutions.

The next few months will be one of the most critical times in the state's history. The people, if they are to believe in their government, deserve an honest debate and real solutions for the entire range of problems facing the state.

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When Jon and I were partners (he as the firm's senior partner), we were on opposite sides of the most important decision of our Goldman careers. I, like many Goldman Sachs partners, vehemently op posed Jon's plan to take Goldman Sachs public. When Jon first took the idea to the partners, it wasn't popular or well-received. In the opinion of many of the partners, we did not need to do something so dramatic, so complicated and so risky to ensure the firm's continued success.

We worried about the short- term pain we would endure as the firm transformed itself, and we did not ascribe significant value to the long-term benefits of the plan.

But Jon knew this step had to be done to protect the long-term interests of the firm he loved. He met the skepticism head on, and he stayed at it, working partners individually and in groups until he eventually succeeded in convincing a majority. His "victory," however, came at great personal and professional cost.

A funny thing happened in the years following our IPO -- it be came increasingly clear that Jon had been right and those of us who had opposed him were wrong. He correctly anticipated the chaotic financial conditions that were to come and the unpopular, complicated, seemingly unnecessary transformational event that he championed was, indeed, very necessary to survive. And since going public, Goldman Sachs has not just withstood the changes of globalization. It has prospered.

Guess what. He's at it again with a master fiscal plan that is complicated, painful, far-reaching and is either long overdue or well ahead of its time. For those of us who witnessed Jon's leadership at Goldman Sachs, the resemblances are eerie.

Once again, he is advocating bold change to protect the long- term interest. Once again, oppo nents are seeking safety and refuge in the known commodities of the status quo. And once again, Jon has put his personal and professional ambitions aside for what he sees as the greater good of the people he leads.

Ten years ago, I opposed him. This time, I am completely with him. Our state is in desperate condition. A bipartisan culture of financial gimmicks, gross mismanagement, borrowing from the future to fund today and an appetite for spending that is almost indescribable have left us in the sorry condition that is today's New Jersey.

And along comes Jon Corzine. He is holding a mirror up to us, and we don't like what we see. The state's debt burden, its pension and health care deficits, its tax rate and a crumbling infrastructure are all measurable, tangible signs of its demise. New Jersey is no longer AAA-rated or in possession of any rainy day funds. We are bloated, expensive and somehow broke all at the same time. Our future prospects are limited, absent some very bold, real and dramatic changes.

The governor's financial restructuring and debt reduction plan is both real and dramatic. Its boldness is why it is eliciting such strong reactions, both positive and negative. It will end the out-of-control borrowing done without approval of residents. It will dramatically pay down the debt that has snowballed into an unbearable burden. And it will cut spending, not just freeze it. What has gotten lost in the debate is that to "flat fund" this year's budget will require several billion dollars in spending cuts. Make no mistake, when the governor talks about freezing the budget, that already means billions in spending cuts that many will find unpalatable.

Is his plan exactly the way that each of us would do it? Of course not. People in New Jersey, whether residents or legislators or even former Goldman Sachs colleagues, don't have to agree 100 percent with Corzine. But the issue isn't whether we agree 100 percent with what the governor has proposed, rather that we all be 100 percent engaged in a constructive dialogue about doing something to alter the current course.

It is easy to criticize, hunker down in the status quo and proclaim party-line votes to gain parti san advantage. That may be good politics, but it's 20 years of good politics that put us in this bind. New Jersey doesn't need more politicians in search of an advantage. We need courageous leaders in search of a solution.

A Republican president, Teddy Roosevelt, who was not afraid of a battle, once said, "It is not the critic that counts; not the man who points out how the strong man stumbled or where the doer of deeds could have done them bet ter. The credit belongs to the man who is actually in the arena; whose face is marred by dust and sweat and blood"

Goldman Sachs 1998; New Jersey 2008. Ten years ago, Goldman Sachs had more options than our state has now, but the common ground is striking -- more of the same and more of the familiar vs. change, anguish and, ultimately, a better and securer future. I did not give Jon the benefit of the doubt many years ago. I do now. He, alone, is in the arena offering ideas and fighting for our state's fiscal future.

Philip D. Murphy is a principal of Murphy Endeavors, an investment firm in Red Bank, and is the finance chairman of the Democratic National Committee. To comment on his essay, go to NJVoices.com.

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The only consolation is that the first step toward recovery and resumption of economic growth requires facing up to the depth of our problems.

Our situation in New Jersey bears some resemblance to the current global meltdown. For decades, our political leaders have smooth-talked us and bamboozled us into one fiscal gimmick after another, building our state debt to $32 billion, one of the highest per-capita burdens in the nation. We granted pension and health insurance to teachers, policemen, and other public employees without setting aside the money that will be needed to pay for them.

The total long-term obligations of the state -- debt, unfunded pensions, and post-retirement medical costs -- have reached $45,000 per household. We have "enjoyed" growing aid to local governments even though our state budget became chronically dependent on financial tricks and stunts to paper over the simple fact that we spend more money than we raise.

That lack of foresight has also degraded the physical condition of our state. When we look at our infrastructure, too much of what we see is ancient and crumbling. Many of our bridges raise obvious safety issues -- a whopping 700 of them are considered structurally deficient. And even if we could live with the traffic jams that pollute our air and slow us from reaching our destinations -- and we can't -- we surely cannot prosper unless we make basic transportation improvements.

I take no comfort in the notion that we are not alone in our predicament. In the next fiscal year, at least 24 states are projected to have budget shortfalls. California alone faces a gap of $14 billion.

It's a grim picture but there is reason to hope in New Jersey. We remain a wealthy state, near the very top in family income and educational attainment. We have a location that can't be beat, whether for starting a business or raising a family. We have a bumpy road ahead, but it's not a dead end. It can lead to a restoration of our good credit rating, a resumption of our past practice of fiscal prudence, and the ability to realign our priorities.

After a year of research, I have proposed a four-point plan to lead us down that prosperous road: 1) freeze spending in next year's state budget at the current level; 2) limit growth in future budgets to the rate at which state revenue grows; 3) subject all state borrowing not supported by dedicated revenue to voter approval; and 4) lease the state's toll roads to an independent, non-profit organization that will sell bonds to turn our financial ship around.

Those bonds will be the responsibility of the non-profit, not the state. The proceeds from those bonds will paid to the state, enabling us to pay off half of our debt and fund crucial transportation infrastructure improvements for generations to come. The needed construction projects will be statewide, but with a concentration in the counties whose residents use the toll roads most heavily: Middlesex, Monmouth, Hudson, Ocean, and Bergen.

There is enormous value embedded in our toll road network -- value that, if unlocked, can help us claw our way back to fiscal responsibility. More small pecks around the edges might buy us a little time, but at the cost of even bigger shortfalls later. My plan has been endorsed by both business and labor groups -- not because they want to raise tolls, but because the entire package, including the future restraints on spending and borrowing, will clean up our financial house. It is the best of many unpleasant alternatives.

Quite naturally, the part of the plan that has received the most attention involves the toll increases that will help us pay off debt and improve transportation statewide. Even though a large share of the tolls will be paid by out-of-state traffic -- about 46 percent of all toll-road drivers are from out of state -- the new rates will be painful for many New Jersey citizens. A lot of people have suggested we use a different method to raise the revenue.

Well, we've done the math: to halve our debt and pay for long-term transportation improvements would take a 20-percent, across-the-board increase in the income tax, or a 30-percent increase in the sales tax, or a 45 to 50-cent increase in the gas tax...or some combination thereof.

Most people I talk to across the state don't like those alternatives. So the most common suggestion I hear is that we should slash state spending even more than the nearly $2.5 billion it will take to freeze the budget next year. But this figure is not insignificant at a time when costs are growing up to 10 percent per year -- as New Jersey business owners know very well -- and when we are court-mandated to spend on certain programs.

In reality, spending cuts are the backup quarterback of politics: they're always better until you trot them out on the field. Our state government primarily funds schools, property tax relief, municipal aid for struggling towns, Medicaid, children's health insurance, charity care for hospitals, higher education, programs for the developmentally disabled, public safety, and corrections. Tough things to cut, as will become clear in the coming weeks, when I detail a budget proposal that is likely to be painful.

The numbers are plain: no amount of possible spending cuts can come close to accomplishing the goals of the financial restructuring and debt reduction plan. But we will make very difficult cuts.

This plan is bitter medicine, and I'd rather be serving the equivalent of candy and ice cream. But that's the kind of irresponsibility that plunged us steadily into this mess. I don't like it; you don't like it; but this is the financial state we're in. I know this: we're way overdue to put aside the fiscal fantasies of the past. Any responsible action we will take will involve some pain. So now, for a change, let's take action, and let's do it right.

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Raising tolls has garnered much of the attention since Corzine revealed his plan to "restructure" the state's finances. Tolls would increase by 50 percent starting in 2010 an d grow by 800 percent at the end of the 75-year schedule.

But the three other elements of the governor's plan -- if enacted -- could have an even greater impact on the state's financial situation in the years to come. So far, they have stirred up far less controversy than the toll roads idea, and some have been advocated by lawmakers -- Democrat and Republican -- for years, which bodes well for their passage in one form or another.

"All in all, if the plan is put in place in its entirety, it would address many of the concerns that revolve around New Jersey's general obligation credit rating and its fiscal operations," said Mark Tenenhaus, a vice president at Moody's, which provides credit ratings, research and financial information to capital markets.

Corzine has said the plan would prevent the state from backsliding into "bad habits." Those bad habits have allowed New Jersey to slide into a precarious financial situation, including $32 billion in bonded debt, $25 billion in unfunded pension liabilities and an estimated $58 billion in future health care costs for state retirees.

Today, New Jersey residents have one of the highest debt burdens per capita nationwide.

In the current fiscal year, New Jersey is spending about $4.8 billion of its $33.5 billion budget on those three items alone. Moreover, financial analysts say the state sho uld really be contributing about $9.8 billion, or nearly a third of the budget.

To prevent a future fiscal mess, Corzine would:

Freeze spending in the next state budget at the current year's level.

Require spending in future budgets to be below certified recurring revenue growth. That would mean non-recurring revenues or surplus could only be used for debt, capital investments or to pay off items such as unfunded health care or retirement liabilities.

Require voter approval for any future debt that does not have a dedicated source of revenues.

Last week Corzine said he plans to pursue these three measures regardless of whether the toll roads plan goes through.

Freezing the state budget for one year may not look like a big step, but it has the potential to have a significant impact.

That's because some costs over which the state has no control -- such as health care for state employees and retirees -- will likely grow far faster than the rate of inflation . And Corzine has already pledged a $530 million increase in state aid to schools and an additional $300 million over six years to expand preschool programs. Together, those factors mean that other areas will need to be cut much more just to keep the budget flat.

Some experts cautioned that while a freeze on spending might be a good idea in principle, the state should take care to avoid unintended consequences. "You have to be very careful that the most vulnerable people in the state are not hurt as a result," said Iris Lav, deputy director of the Center on Budget and Policy Priorities in Washington, D.C. "If there is a freeze, it needs to be applied intelligently so vulnerable people and critical programs are protected."

On the measure to limit future spending to recurring revenues, Corzine apparently intends to get the state out of its habit of using one-time injections of money -- from, say, legal settlements or the state's unemployment insurance trust fund -- to patch budget holes.

Governors of both parties have used so-called "one-shots" to pay for operating expenses, a practice that is typically frowned upon by policy experts because it leaves the state with another budget hole to fill the following year.

But Gregg Edwards, president of the Center for Policy Research of New Jersey, warned that unless the measure is adopted in the form of a constitutional amendment, New Jerseyans can expect it to erode over time. "A statutory cap always has that problem, because the next law always has greater effect than the one that preceded," Edwards said.

On the issue of voter approval for debt, the governor is apparently hoping to prevent the state from winding up in the same place it is today.

Of New Jersey's $32 billion in general obligation debt, only about $3 billion required the approval of voters. The state constitution already requires voter approval for debt, but the state has managed to find loopholes by using authorities. Authorities, such as the Port Authority, can issue appropriation-backed debt, which means the Legislature approves the repayment of bonds through the annual budget.

Senate Minority Leader Leonard Lance, who has long pushed for a constitutional amendment to require voter approval for debt, acknowledged future lawmakers may find yet another loophole.

"The minds of clever men and women know no bounds, but certainly the intent is to make sure that this can never happen again," Lance said. "I can imagine courts would recognize my intent, the intent of the Legislature and the intent of the people themselves. I would hope that courts could never permit deviously clever persons to circumvent this."

But some ask if this measure, too, could have unintended consequences.

"Part of the reason you sometimes establish the authorities is to take the political process out of the mix, so those authorities can respond like private market concerns," said Henry A. Coleman, an economist at Rutgers University's Bloustein School of Planning and Public Policy. If Toyota or General Electric had to receive the approval of their shareholders every time they wanted to borrow money, Coleman said, they might have trouble running their businesses.

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After being briefed by the governor and his staff at a New Jersey State Chamber Platform for Progress meeting, it was obvious to the business and labor leaders in the room that this plan has been developed with much expertise and conviction.

To many this plan seems to be a far reach, but it is the kind of plan only someone with the experience of dealing in billions of dollars can conceptualize. Lets face it, even successful businesspeople have a hard time understanding what the impact of a hundred billion dollars of debt really is. It seems almost surreal, and that's why we have allowed this to perpetuate to this point; most people just don't understand the severity of New Jersey's debt.

The governor, however, knows full well what the impact is. I saw it in his face that evening at Drumthwacket.

The conviction in his eyes told me this was not your typical political posturing but a genuine concern to accomplish something enormous for the people of New Jersey.

It is never easy for the leader of a business service organization to support tax increases and fees that will in any way stifle business or add to an already unfriendly business environment in New Jersey. However, there are times when we cannot simply sit on the sidelines and shout "No!" We all have a stake in the health of New Jersey, and we are all obligated to put our political allegiances aside at a time like this. I can tell you without doubt that the fate of the Meadowlands regional economy, now and in the future, rests on our ability to address the mass transit and road infrastructure issues that this plan could alleviate.

The plan calls for a spending freeze – it's about time. It calls for future budgets to not exceed recurring revenue growth -- prudent. It calls for voter approval for all future debt that does not have a dedicated revenue source – wise. And finally, it calls for the asset monetization plan of establishing a Public Benefit Corporation to oversee the business of the toll roads with a predictable toll increase to forecast future revenues and finance the plan -- clever.

While there are many details that still need to be addressed to make this plan better and more palatable, the basic concept of eliminating the politics and setting in place a business-centric plan that will restructure the state debt and financial health is courageous and commendable. Let's look at ways to lessen the burden on frequent users of the toll roads and reduce negative consumer effects. Let's put bipartisan minds together to implement safeguards and transparencies in the PBC to ensure its success. Let's join former Rep. Bob Franks to help the public understand just what is at stake here.

Keep in mind, we never calculate the lost opportunity costs when we are presented with plans such as this. I can assure you the lost opportunities of a crumbling New Jersey economy will far outweigh the costs of these toll increases. So let's not simply throw stones. Let's help the public understand the plan, let's build upon its premise and let's let the governor and his team use their financial experience to set a new course for New Jersey. That is what New Jerseyans elected him to do.

Jim Kirkos is chief executive officer of the Meadowlands Regional Chamber of Commerce.

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New Jersey is drowning in $32 billion in debt, a legacy in large part of previous governors and legislators who approved generous public-employee contracts, and other costly programs, without paying for them. The state also faces critically important transportation needs, including widening the traffic-clogged New Jersey Turnpike. In a high-tax state like New Jersey, coming up with additional revenue is never easy.

Mr. Corzine has called for raising tolls by 50 percent every four years between 2010 and 2022. One mitigating factor for New Jersey residents is that about half of the turnpike’s drivers are from out of state. The average drive on the turnpike is only two or three exits and far cheaper than the full fare. There also may be discounts for low-income drivers and commuters who use the highways frequently. Still, it is a whopper of a toll increase.

New Jersey is hardly the only cash-starved jurisdiction to look on tolls as a possible salvation. Indiana and Chicago have leased some toll roads to private companies. Pennsylvania is considering such an arrangement, and California is scrambling to find revenue sources to repair its highways and bridges. Mr. Corzine is avoiding the mistakes of the worst of these plans.

Rather than handing the state’s roads to an unaccountable private entity, as Indiana did in a hugely controversial 75-year lease, he is proposing to turn the highways over to a highly regulated public corporation. It would sell $38 billion in bonds, which would be paid off by toll revenue. Almost half the money would pay down the state’s debt. The rest would go to transportation, including a large chunk for mass transit.

Mr. Corzine says the legislation, which has yet to be unveiled, would prohibit governors from meddling in operations or reducing the toll increases. These are necessary safeguards. The proposal also calls for a public oversight board — to be appointed by the governor, with input from the State Legislature.

The Legislature, controlled by Mr. Corzine’s fellow Democrats, will have to sign off. Legislators need to make sure that there are sufficient guarantees that the public corporation will work in the public interest. They should also work with Mr. Corzine on the other part of his proposal: putting in place measures to end the irresponsible spending that produced this financial mess.

The toll increases will hit many residents of New Jersey hard. But if the details of the plan come out right, including the protections for those least able to pay, they will be worth the pain, and New Jersey’s remedy could become a standard for other fiscally troubled states.

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You probably also ought to know that back in the 1970s, I was state treasurer at a time when our state had a Triple-A bond rating and very low outstanding debt (no short-term debt at all, in fact). Enough with the preliminaries. I'll also dispense with a recapitulation of the awful fix we have made for ourselves. Anybody who's been paying attention knows that we have been burning through credit limits like a submortgage originator.

It's Corzine's fate to be stuck with the due bill. And it's his character and expertise that make him try to fix our finances rather than just buy time, hoping the final crisis will be on somebody else's watch.

His financial restructuring package has four elements: strengthened limits on future borrowing, a state budget freeze, restricting future expenses to the level of revenue increases and refinancing the state's major toll roads.

The focus of political attention has been on the last one, and I'll discuss it in minute. But first take note that it is adherence to the other three that will make the greatest difference in our future financial situation. In fact, the dollars realized from the highway refinancing are important because they give us the breathing space to return to the balanced budget approach of the past.

A lot depends on doing this right. Most of the state budget goes to state aid to school districts and municipalities. Property taxes would skyrocket if those flows were interrupted. Current state programs of direct property tax relief also are at risk. In fact, the small portion of the budget that goes to direct state expenses is mostly mandated — by the courts, the federal government, contractual obligations and debt service.

Given those long-term issues, why is the road refinancing so important? For one thing, it can enable us to cut the state's outstanding debt almost in half. Without that relief, the pressures to raise other taxes simply cannot be resisted. We owe the money. We have to pay it back!

And a large share of the tolls will come from out-of-staters using our roads and paying about the lowest tolls in the East. In addition, the refinancing plan allows the state to pay for critical statewide transportation needs.

The plan keeps ownership of the roads in the hands of state residents. While driving on these highways is going to cost more, it's not like everyone else is getting a free ride. For years to come, we will be living on a diet. Pressures on budgets will continue. In other words, fixing a situation of this magnitude will involve plenty of sacrifices to go around.

Rebalancing the budget is the bedrock of restoring some trust in government. But why should New Jerseyans trust leaders enough to believe that it is worth paying higher tolls today to be better off tomorrow? Well, what's the alternative?

Government is the way we make decisions as a society as well as investments in our future — physical ones like bridges and airports as well as research, training and education.

Renewal of confidence in government will take time; the sources of public anger are deeply rooted and well justified.

It won't be easy, but it starts with a serious dialogue about our problems and various solutions. Let's agree, however, that we will have little patience with the snake oil salesmen who pretend the crisis can be wished away.

Oh, some will claim that the Corzine plan can be replaced by cutting waste, fraud and abuse. Ah, would that it were so. But it is not. And it is dishonest to argue the contrary. There are other ways to fix the problems (a giant increase in income and sales taxes is one), but nobody will argue for that. Instead critics will say that Corzine is unwilling to make the hard choices required to cut the budget even more than the billions he has in mind.

There is no political spin quite as disingenuous as this one — that it takes guts to cut taxes (read: do the popular thing) and it is craven to raise taxes or tolls (read: take the heat for doing something painful and unpopular). If you buy that, I have a bridge that you'll love — with no tolls to boot.

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