Click to visit City Journal California

By Steven Malanga:

Shakedown: The Continuing Conspiracy Against the American Taxpayer

By Steven Malanga, Victor Davis Hanson and Heather Mac Donald

The Immigration Solution.

By Steven Malanga
The New New Left: How American Politics Works Today

City Journal

Steven Malanga
The Court That Broke Jersey
The state’s activist judiciary has forced taxpayers to finance unprecedented educational and housing regimes.
Winter 2012

Squelching rumors this past fall of a presidential run, New Jersey governor Chris Christie observed that he had lots more to do to fix a “broken” state. He wasn’t kidding: though already the nation’s most heavily taxed state, New Jersey can balance its budget only by ignoring billions of dollars in employee pension liabilities and by slashing aid to struggling local governments. Christie has pushed through reforms that cut spending and cap property-tax increases. But he has only begun to grapple with an institution that bears much of the responsibility for the state’s fiscal woes: the New Jersey Supreme Court.

Illustration by Arnold Roth
Illustrations by Arnold Roth

For half a century now, New Jersey has been home to the most activist state appellate court in America. Lauded by proponents of “living” constitutions who urge courts to make policy instead of interpret the law as written, the New Jersey Supreme Court has profoundly transformed the Garden State by seizing control of school funding, hijacking zoning powers from towns and cities to increase subsidized housing, and nullifying taxpayer protections in the state constitution. Its undemocratic actions have blown apart the state’s finances and led to ill-conceived and ineffective policies. If you want to understand what rule by liberal judges looks like on the state level, you need only look at New Jersey, which is teetering on bankruptcy though it remains one of America’s wealthiest states.

In January, Christie nominated two new members to the court, appointments that have the capacity to reshape the seven-member panel. But taming the court won’t be easy, even for the pugnacious Christie, whose initial efforts to reform it met ferocious resistance. “I don’t think the supreme court has any business being involved in setting the budget of the state government,” Christie complained last year. Yet it is involved, extensively—and that must change if Jersey taxpayers are ever to find relief.

New Jersey’s supreme court, charged with hearing cases brought to it from lower judicial levels, is the product of the state’s 1947 constitution, which replaced an unwieldy 16-member Court of Errors and Appeals with today’s seven-member body, appointed by the governor and confirmed by the state senate. A dean of New York University’s law school, Arthur Vanderbilt, served as the new court’s first chief justice. Vanderbilt is best remembered today for persuading President Dwight Eisenhower to appoint William Brennan, at the time also a Jersey justice, to the U.S. Supreme Court, whose liberal activist wing he led for more than three decades.

As chief justice for nine years, Vanderbilt helped forge the New Jersey Supreme Court’s expansive understanding of its role. For instance, he wrote the majority opinion in Winberry v. Salisbury, a decision that gave the court itself, not the legislature, the power to make rules for the state judiciary. That ruling set New Jersey’s judiciary apart from the court systems in most other states—as well as from the federal judiciary, which ultimately derives its authority from Congress. Some critics have even argued that Winberry violates the U.S. Constitution’s guarantee that every state must have a republican form of government. “Under the doctrine of Winberry v. Salisbury,” wrote New Jersey lawyer Anthony Kearns in a 1955 ABA Journal article, “we can only conclude that laws of practice and procedure are exclusively in the hands of men who are not elected.”

Since Winberry, the court has usurped the roles of the governor and the state legislature in many other areas, relying on questionable readings of the New Jersey Constitution to pursue its own views of justice. But nowhere has the court’s ambition had a bigger or more disastrous impact than in education policy, particularly with a series of decisions, collectively known as Abbott v. Burke, that have massively extended judicial control over the Jersey schools.

The Abbott cases initially resembled dozens of “fiscal-equity” lawsuits filed around the country beginning in the late 1960s. These suits challenged education funding levels for urban school districts, arguing that because schools were financed through local property taxes, wealthy districts received far more funding than less affluent ones did—especially as migration from troubled cities dragged down property values. This, the lawsuits contended, violated various provisions in state constitutions.

In 20 states, judges largely dismissed the suits as outside the scope of those constitutions. In 16 others, courts ordered states to come up with more equitable ways to finance the schools. This generally meant spending more money, often raised through sales and income taxes, in lower-income districts. New Jersey was one of the 16; in its case, the key constitutional phrase guaranteed state residents a “thorough and efficient system of free public schools.” At first, the New Jersey Supreme Court followed the path of other state courts and simply ordered extra spending in poor districts. But in 1976, when the state legislature didn’t comply, the court ordered the schools shut down until the legislature agreed to institute a tax to fund the new spending. The chief justice at the time was Richard Hughes, who had previously spent eight years as governor trying fruitlessly to get the state legislature to enact an income tax to boost education spending. “They didn’t want the income tax then? Well, they’ll want one now,” Hughes told the press. Years later, he admitted that he had wielded as much power as chief justice as he had in the governor’s seat.

But an advocacy group called the Education Law Center challenged the new spending. Merely giving urban schools new funding wasn’t enough to satisfy the “thorough and efficient” clause, the group argued; the state had to fund education in urban districts at a level that would enable them to compete with plush suburban districts. In 1985, the New Jersey Supremes agreed, and when James Florio took the governor’s office five years later, he complied by passing $2.8 billion in sales- and income-tax increases—the largest such hike in state history—to bring the city schools up to par. The court, still unsatisfied, quickly ruled that the state had to add yet more “supplemental” spending to poor districts to help offset the “additional disadvantages” that students in those areas faced. After the tax increase cost Florio reelection in 1993, his successor, Christine Todd Whitman, passed her own education financing formula, which sought to increase spending in urban districts to within $1,200 per pupil of what Jersey’s richest districts spent.

That was still not enough for the supreme court. In what became known as Abbott IV, the judges declared Whitman’s plan unconstitutional and ordered the state to fund poor districts generously enough that their per-pupil spending would be the same as in the state’s wealthiest districts—which were among the richest in the nation. The court also ruled that the state had to pay for a menu of new social programs for kids in poor districts (now called “Abbott districts”).

Over the next decade, as the plaintiffs returned to the New Jersey Supreme Court nearly a dozen times, the judges steadily transformed the nature of the case. No longer was it simply a matter of “fiscal equity”; rather, it morphed into what judicial analysts call an “adequacy” case, in which the court determines what constitutes an adequate education. Judges don’t merely determine levels of spending; they also initiate and monitor specific programs—policy details that, in most states, are left to elected officials. In short, the supreme court seized power in education policy.

It used that power in unthinking and expensive ways. For example, it ordered pre-K classes to be offered to all three- and four-year-olds in Abbott districts, even though the state constitution guarantees public education only for children “between the ages of five and eighteen.” Some studies have found no educational gain from such programs, while others suggest that only students in extremely expensive versions, with small student-to-teacher ratios, can make tiny gains, hard to replicate across entire school systems. “The evidence does not support instituting broad, full-scale programs,” conclude education scholars Eric Hanushek and Alfred Lindseth in their 2009 book Schoolhouses, Courthouses and Statehouses. The pre-K program would grow to cost New Jersey $500 million annually.

Meanwhile, the court ignored numerous examples of how some urban school districts were failing because they were run by corrupt, wasteful political machines whose main goals were patronage and power, not educational success. In 1986, the state described the Jersey City school system as “adrift, having a managerial structure which is a product of politics and patronage.” In 1994, after a long investigation, the state issued a damning report on the Newark school system, accusing it of being “at best flagrantly delinquent and at worst deceptive in discharging its obligations to the children.” At the time, the Newark system, thanks to the Abbott-mandated state aid, was spending $10,700 per pupil, significantly higher than the Jersey average of $8,571. In 2002, a similar state investigation into Camden schools found, as the Courier-Post of Cherry Hill summarized it, “a lack of planning, a chaotic budget process, too many employees in virtually every department and lack of spending controls.” At the same time, a state arbitrator working in another Abbott district, Asbury Park, wrote that “a crisis exists” because of “a pervasive feeling of educational corruption.”

The court’s typical solution to such corruption and waste was to spend more money. One striking episode took place a few years after the judges demanded virtually a top-to-bottom refurbishing of school buildings in Abbott districts. The state, determining that the cost of compliance would be an astonishing $6 billion, had floated a massive $8.6 billion bond offering, through a newly formed state construction authority, to pay for the work (and to finance some building in other districts). But it turned out that the authority could complete only half the job with the money. The reason, as investigations later revealed, was that the authority was riddled with patronage, waste, and inefficient management. The court’s response: ordering the state to borrow another $3.9 billion to finish the work.

The court also seemed oblivious to the fact that, no matter how much money the state spent, educational “adequacy” in the Abbott districts would remain a casualty of widespread family breakdown. In Newark and Camden, about 70 percent of children grow up in homes without fathers—which, research shows, frequently leads to dismal academic performance and high drop-out rates. “While many of the mothers and grandmothers were making a tremendous effort with their children, the consequences for most of the fatherless kids were devastating,” wrote Saul Cooperman, the state’s former education commissioner, in a 2002 op-ed. Assessing the likely effectiveness of the supreme court’s education mandates, Cooperman was blunt: “Until dramatically more fathers as well as mothers raise their children in our cities, we may be disappointed with the results.”

The New Jersey Supreme Court’s education mandates have produced some of the most extravagantly funded school districts in the nation. Since 1998, the state has sent more than $40 billion to Abbott districts, which receive the vast majority of their funding from outside their municipalities. The Newark School District’s current $809 million operating budget receives only $110 million of that total, about 14 percent, from local taxes; most of the rest comes from state aid, with some federal and private grants on top. In Asbury Park, local taxpayers contribute just $6.2 million of the system’s $62 million operating budget; the state provides $54 million. Local sources contribute $10.8 million—just 4 percent—of the Camden district’s $290 million budget, with the state on the hook for $267 million. And so on.

These court-ordered state contributions have blasted per-pupil spending into the stratosphere. The Asbury Park district leads the way, spending an astounding $29,797 per student, according to the latest U.S. Census figures. Camden spends $23,356 per pupil, while Newark spends $21,895 and Jersey City $20,366. (Official New Jersey Department of Education spending figures are slightly lower because the court requires the state to exclude certain aid in reporting its education spending.)

The spending has depended, of course, on a massive redistribution of wealth, which has left many towns big losers. In Jersey these days, as in most states, even non-needy school districts get some funding from the state. But of the state’s nearly 600 municipalities, 166 get back ten cents or less for their schools for every dollar in income taxes that their residents send to Trenton, according to data compiled by state senator Mike Doherty. In 2010, three affluent towns—Millburn, Livingston, and Bernards—each sent more than $100 million in income taxes to Trenton, yet Millburn and Livingston got back no money for their schools, and Bernards got just $850,000. Middle-class towns do little better. East Rutherford, where the average household income is $64,500 (about $4,000 below the state average), gets only five cents of education aid for every income-tax dollar that it sends to the state.

The tens of billions of dollars spent on Abbott districts have yielded almost no significant educational gains. Last June, the National Assessment of Educational Progress (NAEP), whose tests are considered the gold standard in education assessment, issued a study of Hispanic and white scores in math and reading. The study showed that the gap in combined scores between whites and Hispanics remained about the same in Jersey—where about half of all minority students live in Abbott districts—as it was nationally. Among black students, according to a similar NAEP study from 2009, the lack of progress was even more pronounced. In fourth grade, the reading gap between whites and blacks was virtually the same in Jersey as in the nation as a whole; but by eighth grade, Jersey’s black kids were 31 points behind their white counterparts, compared with a 25-point gap nationally. Several years ago, the head of the Education Law Center essentially admitted the stunning failure of all the court-ordered spending, arguing that student performance on tests shouldn’t be the criterion for judging the effectiveness of the court’s actions.

The very communities that the New Jersey Supreme Court set out to help have grown frustrated with its simplistic, money-solves-everything approach. Several years ago, the Black Ministers’ Council of New Jersey, exasperated with many urban school districts’ resistance to education reforms, endorsed school vouchers for inner-city students. “For the 26 years I have been in New Jersey, there have been a host of public school reform proposals, a multitude of major state supreme court rulings, and billions of dollars spent to achieve parity and improve test scores,” the Reverend Reginald T. Jackson, the group’s executive director, said. “Yet the fact remains that with few exceptions, urban schools and most minority students still do not meet minimum state standards or receive a quality education.”

Illustration by Arnold Roth

New Jersey’s constitution says nothing about affordable housing, but that hasn’t stopped the New Jersey Supreme Court from imposing a costly housing regime every bit as ambitious as its dictates on the schools. The housing mess began back in the early 1970s, when the NAACP sued Mount Laurel, charging that the town’s zoning laws—which set minimum lot and dwelling sizes for new residential construction—were illegal because they excluded the development of high-density, low-income housing.

In its 1975 ruling on the case, the court argued that affordable housing was essential to the general welfare of the Jersey population and therefore a necessary concern of government. “There cannot be the slightest doubt that shelter, along with food, are the most basic human needs,” the judges observed. Further, the fact that residents of similar wealth chose to live near one another—something that residents in most of the United States and, indeed, in almost every industrialized country choose to do—was evidence that municipalities were conspiring to keep lower-income people out, the court said. Municipalities therefore had to alter their zoning laws to ensure that they had a “fair share” of affordable housing—and that included small towns like Mount Laurel, which at the time had only 11,000 residents.

A few years later, the supreme court issued Mount Laurel II, a ruling that not only reaffirmed the “fair share” principle but also required municipalities to use incentives—subsidies to developers and parcels of land specially set aside for the purpose—to guarantee that the housing got built. Then the court added a startling twist: a “builder’s remedy,” which empowered developers to sue towns to force them to comply with the affordable-housing decrees. A trial lawyer’s dream, the builder’s remedy swiftly became a nightmarish burden on communities. Within just two years of the decision, builders had launched housing lawsuits against 140 Jersey municipalities. Lawyers specializing in the housing cases helpfully created a website that listed towns for builders to sue. The lawsuits forced some municipalities to spend up to $1 million in legal fees trying to defend themselves.

An even worse consequence was the way the lawsuits transformed many towns forever—especially after further judicial rulings encouraged the construction not only of low-income units but of market-rate housing, too, some of the profits of which would be used to offset the costs of the subsidized housing. Quiet Jersey towns were remade into sprawling suburbs, whether residents wanted that or not. In West Windsor, a tiny township near Princeton, a lower court approved a massive 1,100-unit development after a builder sued under Mount Laurel II, increasing the number of residences in town by 15 percent. Builders used the courts to get a green light for a 450-unit development in Oakland, boosting the town’s residences by 10 percent. (A Jersey environmental group later singled out that development as the state’s worst example of suburban sprawl.) Yet more supreme court decisions ordered municipalities to increase their stock of affordable housing as employment grew, the idea being that people should live near their workplaces. This new construction sparked commercial development to serve the new residents, which generated even more housing requirements.

The court-driven frenzy of building has weighed heavily on towns and taxpayers. In 1991, the court ruled that towns couldn’t tax the subsidized housing units at the same rate as other residences in their communities; the towns then raised property taxes on existing residents to pay for the extra services necessitated by the new construction. After the population of rural Clinton, for example, sharply increased as a result of the court-ordered housing construction, property taxes there doubled.

Seeking to bring some certainty to the frenzy of housing lawsuits and zoning battles that the supreme court had unleashed, New Jersey created the Council on Affordable Housing (COAH) and told it to figure out how much affordable housing the state needed and what each locality’s “fair share” was. In 2002, COAH estimated that the court’s mandate had resulted in the construction of 45,000 units of affordable housing across the state. Not enough, the council concluded: 118,000 was the target number. COAH then set about determining every town’s “fair share” of that load, a task that has proved nearly as controversial as the builder’s remedy and has provoked more suits and countersuits. The estimated cost in new taxes to complete COAH’s affordable-housing goals: $10 billion. Small wonder that towns continue to contest the mandates.

Illustration by Arnold Roth

The New Jersey Supreme Court hasn’t satisfied itself with imposing unbearable costs on Garden State taxpayers. It has also allowed Trenton to ignore restrictions that the state’s constitution places on borrowing and spending—essentially nullifying these protections against profligate government. In 1991, a Wisconsin Law Review article concluded that no other state court had gone as far in ignoring such protections. “The response of the New Jersey courts to that state’s constitutional debt limitations is easy to summarize: the New Jersey Supreme Court has effectively read the limitations out of the constitution,” the authors noted.

That tradition has continued into the new millennium. When the court ordered the state to spend all those billions to upgrade Abbott school facilities, the state didn’t get taxpayer approval to establish the independent authority that borrowed the money. A group headed by Bogota mayor Steven Lonegan sued, claiming that the move violated the state constitution’s requirement that voters sign off on government debt. The court ruled against the group in 2002, accepting the argument that the construction bonds weren’t covered by the constitutional requirement because they, unlike most state bonds, were guaranteed not by taxpayers but by the state legislature. Of course, that distinction is a fiction, since the legislature gets most of its money from those very taxpayers.

Two years later, Governor James McGreevey and the Democratic majority in the legislature decided to borrow nearly $2 billion to close the state’s budget deficit and finance a staggering 17 percent spending increase. Lonegan and Republican legislators sued to stop the debt raid, pointing out that the state constitution unambiguously banned government borrowing to pay for everyday operating expenses. The court acknowledged that the plan was unconstitutional—but then let it go forward because it didn’t want a “disruption” in state government.

The supreme court’s spending mandates have left taxpayers in Jersey groaning under the nation’s highest tax burden: more than 12 percent of income produced there goes to state and local taxes, according to the Washington-based Tax Foundation. Residents’ income taxes pay for court-ordered spending in far-off urban school systems, as well as for a state government that, thanks to the court, is untrammeled by constitutional limits on spending. Meanwhile, the property taxes that residents pay to finance their own school systems and local government must rise to pay for the court’s local housing schemes.

Jerseyites have slowly come to understand the price that they’ve paid for America’s most activist court. A 2009 survey by the Polling Company, Inc. found that only 28 percent of the state’s voters gave the court a favorable rating. “If the members of the Supreme Court want to legislate, then they have the right, like every other citizen, to run for the Legislature,” state senator Doherty wrote in an op-ed for Newark’s Star-Ledger last May. “In doing so, they can place their agenda before the voters and the voters will decide. That’s democracy. What we have now is judicial tyranny.”

In at least two ways, the New Jersey Supreme Court will complicate Governor Christie’s battle to fix the state’s out-of-control spending habits. For one thing, the court probably will block some of the reforms that Christie wants—such as a revamped distribution of state education aid in which every school district would get the same dollar amount per pupil, a change that would fund essential services in poorer districts without bankrupting middle-income taxpayers. Christie also wants an affordable-housing regime that concentrates building in areas of the state with the preexisting infrastructure—mass transit, for example—that can support the new housing, another reform that the court is likely to stymie.

Second, the court will make it harder for Republicans, who tend to support Christie’s fiscal reforms, to win control of Jersey’s legislature. That’s because legislative redistricting in the state, which takes place every ten years, is handled by a bipartisan commission of Republicans and Democrats who are frequently deadlocked. The chief justice of the New Jersey Supreme Court gets to select a person to break the deadlock, and in 2001 and 2011, he selected a Rutgers University professor who sided with the Democrats. As the New York Times observed, redistricting ten years ago was crucial to the Democrats’ seizing control of the state legislature, while last year’s redistricting helped them maintain legislative control despite Christie’s personal popularity.

The obvious solution is to reform the court itself, but that won’t be easy, as Christie has already learned. Judges serve an initial seven-year term and then routinely get reappointed for a term that lasts until the mandatory retirement age of 70. In 2010, Christie tried to shake up the court by not reappointing Justice John E. Wallace, Jr., whose initial seven years had run out. The state senate, under Democratic control, refused even to consider voting on the replacement suggested by the governor—well-regarded lawyer Anne Patterson—and left a vacancy in the court. The press, meanwhile, claimed that Christie was trying to politicize the judiciary: the New York Times denounced his decision not to reappoint Wallace as a “national disgrace,” while the Philadelphia Inquirer called it an “error in judgment” and the Star-Ledger claimed that Christie had “cast a shadow” on the court. Only later, when another justice, Roberto Rivera-Soto, stepped down, did the senate confirm Patterson.

This year, Wallace and another justice will turn 70, giving Christie two more appointments. In January, Christie nominated to the court Bruce Harris, a Republican African-American mayor of Chatham Borough, an affluent suburban town, and a former lawyer at the same firm where Patterson served. Christie also tapped Phil Kwon, a Korean immigrant who worked under the governor when he was the U.S. attorney for New Jersey. Neither nominee has served on the bench previously, so they have no record of decisions, but Christie said that he was intent on appointing judges who would interpret the law, not legislate from the bench. He’ll still have to take into consideration a Democrat-controlled legislature that’s often happy to dodge responsibility for heavy spending by letting the court mandate it.

One thing is clear: somehow, New Jersey needs to rein in its judiciary if it hopes to get its house in order. The state will never be able to solve its fiscal problems until its highest court sticks to interpreting the law, not inventing it.

SHARE
respondrespondTEXT SIZE
More by Steven Malanga:
If you liked this story, you may also be interested in:
This story was cited in:
If you enjoyed
this article,
why not subscribe
to City Journal? subscribe Get the Free App on iTunes Or sign up for free online updates:

View Comments (49)

Add New Comment:

To send your message, please enter the words you see in the distorted image below, in order and separated by a space, and click "Submit." If you cannot read the words below, please click here to receive a new challenge.

Comments will appear online. Please do not submit comments containing advertising or obscene language. Comments containing certain content, such as URLs, may not appear online until they have been reviewed by a moderator.