GOP Tries Aping the Whitman Solution : Campaign: Candidates across country are pushing N.J. governor’s tax cut plan. They seek to benefit from the early success of her economic policies.

TRENTON, N.J. —  Perhaps the best evidence of New Jersey Gov. Christine Todd Whitman’s emergence as a national political force came this week when she became the target of an orchestrated campaign attack by a Democratic gubernatorial candidate-- in Maryland.

Maryland Democrat Parris Glendening is running hard against a woman who styles herself a “Christie Whitman Republican,” promising to copy the New Jersey chief executive’s enormously popular state economic policies, which are highlighted by steep income tax cuts. Recently, Glendening invited five New Jersey residents to a press conference to warn Maryland voters of nightmarish budgetary consequences for their state should they choose a Whitman clone.

Like the Maryland race, this fall’s elections in many states are turning to a remarkable degree into a referendum on the economic policies of New Jersey’s first woman governor--who narrowly defeated incumbent James J. Florio last year on a promise of tax and spending cuts.

At issue is whether the Whitman-style mix of immediate tax cuts and longer term spending reductions offers a formula for a Republican revival in the 1990s, or will boomerang into a repeat of budget-busting “trickle-down” Ronald Reagan economic policies.

So far, however, Whitman and her policies have proved hugely popular in her state and the 48-year-old governor is in constant demand as a speaker and fund-raiser for Republican candidates all across the nation, from Senate candidate Olympia J. Snowe in Maine to Gov. Pete Wilson in California. In fact, GOP operatives are already touting her as a potential vice presidential candidate in 1996.

Her success so far has prompted shameless copying of her economic agenda by Republican candidates in one state after another in this election season. In the process, she has helped put cutting taxes back at the top of the Republican agenda, helping the party move beyond the debacle of candidate George Bush’s failure to live up to his “read my lips” pledge not to raise taxes.

In New York, for example, Republican George Pataki is challenging Gov. Mario M. Cuomo with a Whitman-style tax cut platform, while tax cuts are at the heart of the gubernatorial campaigns of David Beasley in South Carolina, Frank Keating in Oklahoma and Ellen Sauerbrey in Maryland.

Whitman’s success also has bolstered the Republican commitment to make promises of steep tax cuts at the federal level a central element of the party’s campaign to win control of Congress as well. More than 300 Republican candidates have signed onto a controversial “contract with America,” which calls for a wide range of personal and business tax cuts, including a $500 per child tax credit, tax relief for married couples, expanded individual retirement accounts and a 50% cut in the capital gains tax for businesses.

More broadly, the popularity of Whitman’s economic agenda has underscored once again for the Republican Party that the winning formula for political victory is being fashioned at the state level by a new breed of moderate Republican governors--rather than in Washington. Whitman has joined John Engler in Michigan, William F. Weld in Massachusetts and Tommy G. Thompson in Wisconsin as leaders in an attempt to give new energy to their party.

“What we are doing here is what other Republican governors have been trying to do around the country in the last couple of years. I just may have defined the agenda a little more clearly and moved it more rapidly,” Whitman observed in a recent interview.

Whitman owes her high approval ratings in large part to her unique mix of conservative fiscal policy and liberal social agenda, highlighted by her stance in favor of abortion rights, thus offering what she hopes is a model for dominance by the GOP.

More concretely, though, she has begun to carry out her most controversial promise of the 1993 campaign. After pledging to cut income taxes by 30% over three years, she has pushed through a 15% tax cut in her first year in office.

But many analysts said that they believe her politically popular tax cuts represent a ticking fiscal time bomb that will lead to budgetary disaster for New Jersey--and political disaster for Whitman--raising questions about whether her policies really offer a solid model for her party.

Even Whitman’s aides conceded that a huge budgetary shortfall in a state with a balanced-budget law may mean that she will not be able to cut taxes again next year. That could force her to seek another huge tax cut at the end of her term, if she is to live up to her campaign pledge. And that could force her to indulge in bookkeeping sleight of hand or other gimmicks to make the budgetary math work. State Treasurer Brian Clymer already is scrambling to find ways to cover a deficit that could reach $2 billion next year in a budget that totals just $15.3 billion.

“This next budget is going to be the toughest,” acknowledged Whitman. “But really, the next three or four budgets are all going to be very tough.”

What’s more, economists and political analysts said that her policies already are putting pressure on local governments to sharply increase property taxes to offset shortfalls in state aid for schools and municipalities.

State funds account for about 30% of municipal budgets around the state. Although local property taxes have risen at a slightly slower pace in 1994 than they did in the last year of the Florio administration, analysts said that they expect the pressure to increase next year, when Whitman almost certainly will be forced to cut state aid to cities and towns to balance her budget.

“There is a direct correlation in New Jersey between state income tax revenues and local property tax rates and so people in this state are going to have an opportunity to see the trade-offs that have to be made as a result of her income tax cuts,” argued Florio, now an attorney in private practice.

“New Jersey has suffered under tax rates that are too high but the problem is she is conducting a tax shift rather than a tax decrease,” added Rep. Robert G. Torricelli (D-N.J.), who is considering a run against Whitman in 1997. “She has reduced income taxes and that will put pressure on state aid to towns and schools and that will put pressure on property taxes.”

Whitman dismissed such dire warnings, arguing that there is no direct link between income taxes and property taxes, even though local aid by the state represents a huge chunk of the New Jersey budget.

This year, Whitman was able to take a series of relatively painless actions to pay for her first round of tax cuts, while still presenting a balanced budget. Florio insisted that he left Whitman a $400-million budget surplus, which acted as a down payment on tax relief. In addition, Whitman came up with about $1.3 billion by reducing state contributions to the state employee pension fund and the state employee health care system.

Whitman said that those trust funds remain fully funded and that the state was previously putting too much money into them. Democrats and employee unions charged that she is eroding their financial stability, which will lead to higher state payments or reduced pension and health benefits in the future.

Those actions allowed Whitman to avoid severe cuts in the state budget this year and to enact $600 million in income and business tax cuts while reducing spending by just $200 million. State aid to municipalities and school districts was frozen, but overall was not reduced. One of the only spending cuts that has had a direct impact on voters came with her elimination of a state fund that helped stabilize tuitions at state colleges. With the fund in place in 1993, state tuitions rose an average of 3.6%. This fall, tuitions rose more than 6%.

State analysts said they doubt that Whitman can continue to find enough easy savings to avoid far more painful choices in her next budget, due in February.

She must find at least $1.4 billion to cover another looming deficit next year, not counting the $480-million costs for fiscal 1996 that she would incur if she cut income taxes another 15% next year. What’s more, Whitman faces the huge potential costs of complying with a New Jersey Supreme Court order for the equalization of state educational funding.

So as she scrambles behind closed doors to craft a new budget, most New Jersey Democrats are patiently waiting to see what she does.

“In her first year . . . she was able to defer the downside of her policies,” argued Henry Raimondo, a professor of public policy at the Eagleton Institute at Rutgers University. “The question now is, does she have any more rabbits to pull out of her hat?”

Profile: Christine Todd Whitman

Here is background on the 50th governor of New Jersey

* Age: 48

* Education: Bachelor’s degree in government from Wheaton College in 1968.

* Career: Began her career at the U.S. Office of Economic Opportunity, followed by a stint at the Republican National Committee. In 1982, she was elected to the Somerset County Board of Chosen Freeholders, and reelected in 1985. In 1988, then Gov. Thomas H. Kean appointed her president of the New Jersey Board of Public Utilities. She ran unsuccessfully for U.S. Senate in 1990 against Sen Bill Bradley. She is the state’s first female governor.

* Personal: Married to John Whitman, two children.

Source: Governor’s office.