In the weeks since delivering his $29.8 billion budget proposal, Gov. Jon Corzine has faced criticism for what one New Jersey radio station has described as "the death of the middle class."

Gov. Jon Corzine Much of the backlash stems from the proposed elimination of property-tax rebates for households earning above $75,000, and proposed increases in certain taxes and fees.

Speaking to a group of community newspaper reporters last week, Corzine said that in cutting $3 billion to balance the budget, he had to make difficult choices, but he defended the overall package as one that protects the middle class. The median state income, he noted, is $65,000. So, despite a $500 million cut in the homestead rebate program, two-thirds of New Jersey families will still receive the rebates. The budget, Corzine added, also expands the senior property tax freeze.

"Certainly for working families, we think this is a budget that's tough, but it works," he told reporters gathered at Drumthwacket, his residence in Princeton.

All residents, he said, will benefit from the budget's $304 million increase in K-12 school funding, noting that this is money that will not have to be paid through school taxes.

"If you're putting money into schools, you're doing more to dampen property taxes than anything else you can do," Corzine said.

The governor stressed that his budget supports his administration's core values of educating and nurturing children — it provides $25 million for preschool expansion — honoring seniors and protecting those hit hardest by the national economic crisis, with funding provided for food banks, charity care and worker retraining.

On property taxes, Corzine said this year will see the lowest rate of increases in 10 years, down to 3.7 percent from 7 percent during his first year in office. When asked if he would support reforming the tax structure to move the bulk of school funding away from property taxes, Corzine did not express confidence in any particular alternative.

"I suppose we could go to an all-income tax system, but given the structure of income tax that already exists, that might be prohibitive to do that. It might be extraordinarily damaging," he said. He noted that 40 percent of taxes in New Jersey are paid by the top 2 percent, or the richest population. He feared that, with income tax rates already high, such a system could wind up "running folks [with the highest income] out of state," and the burden would fall more on the middle class. Corzine spoke at length on the issue of consolidation at the municipal and school levels in order to save on property taxes. In the immediate future, he said, he plans to address the 16 or so school districts that have administrators but no students attending schools, to try to combine services. He said the budget continues "study money" for municipalities to study consolidation. When a reporter mentioned that local officials are sometimes unwilling to consider merging towns due to the likely backlash from town employees or from the community, Corzine said residents have to elect leaders who will stand up for their beliefs.

"There has been a historic failure of political courage to stand up and potentially be recalled or take political heat," he said. "... It is the challenge of a democratic society, and it will only change if people are convinced by their political leadership that this is in the best interest of their community."

Corzine also addressed this year's optional pension payment deferral by towns. He said that municipalities can defer for one year, and then make up their payments over the next 15 years, ultimately requiring a payback of 1/15 per year. He said that bonds, the stock market, revenues and state aid could turn around by next year, possibly making this a benefit for certain towns.

"This is not my favorite option. It is only the way I feel, given the restraints, that we can operate," the governor said. "The only way is to give some backstops to towns that need it.

Corzine said he hopes that with current economic conditions, municipal and school officials follow the state's example on workforce issues. The proposed budget would save $400 million in personnel costs through a wage freeze and furloughs for employees. State government, he said, has been reduced by 7,000 employees in the past three years, and employees are now required to contribute to the cost of their health care.

With revenues off 12 percent on the year, Corzine said his budget makes many "unattractive" choices but funds his priorities.

"We have to respond to the reality of what the income of the state is, and we've tried to do that with value-based choices," he said.