Jan. 17 (Bloomberg) -- Jon Corzine, the former head of Goldman, Sachs & Co. who today becomes New Jersey's governor, must now deliver on a campaign pledge to use his Wall Street experience to expand the state's economy and help close a $5.1 billion budget deficit.

The Democrat, who will give up his U.S. Senate seat when he's sworn in at noon, said in his campaign that economic growth is the only way to avoid tax increases and generate the billions of dollars needed to end chronic deficits, rebuild decaying highways and reduce the highest property taxes in the nation.

New Jersey is among the most affluent U.S. states, ranking second in household income behind New Hampshire, according to the U.S. Census. That affluence is at risk because the state's economy isn't generating high-paying jobs at the rates it did in the 1980s and 1990s, said James Hughes, an economist and dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University in New Brunswick, New Jersey.

``We depend on high-income residents to pay 80 percent of the income taxes in the state,'' Hughes said. ``I think the governor realizes he really does have a problem.''

New Jersey was once the leader in telecommunications, and it still has more jobs in drugmaking than anyplace else in the world. It could lose dominance in those industries because of job losses in the last few years, Hughes said. AT&T Corp. and Merck & Co. are among the large employers in New Jersey that have shed thousands of workers for years because of mergers and failed business plans.

New Jersey's share of national pharmaceutical and medicine employment has fallen to 13.8 percent in 2004, the most recent year for which data is available, from 20.2 percent in 1990, according to the state Labor Department. Its share of telecommunications jobs fell to 3.9 percent from 5.8 percent.

Lagging

The New Jersey Business and Industry Association, which represents 23,000 companies, said in a December report that private-sector job growth in the state was near the lowest level during any economic expansion of the last 50 years. The state ranked 41st in private job growth among states in 2004.

Corzine, who campaigned on a promise that New Jersey would ``invest, grow and prosper,'' plans to provide money to attract high-paying businesses even as he may be forced to raise taxes and cut spending on programs for the poor and middle class.

While trying to plug the projected $5.1 billion gap for the fiscal year beginning July 1, Corzine also must find an estimated $800 million to keep the state's highway and mass transit system running and $500 million to $600 million more if he keeps a promise to boost property tax rebates.

Stresses and Strains

Former New Jersey Governor James Florio, who lost the 1993 election after closing a deficit with a $2.8 billion tax increase, said he had an easier time pushing his agenda than Corzine will.

``Politics has become very risk averse,'' said Florio, a Democrat. ``It's never been designed for profiles in courage, but it's more difficult when the magnitude of the financial problems amplifies the stresses and strains and divisions.''

Corzine, 59, has said he will increase taxes only as a last resort and will instead ``scrub the budget'' to find money for economic development that will boost revenue from corporate and personal income tax collections. On Jan. 13, he nominated former Goldman colleague Bradley Abelow to be state treasurer. Abelow will end ``hand-to-mouth, year-to-year decision making'' in budgeting, Corzine said.

Abelow, who said he expects to have a budget ready by February, wouldn't comment further. Corzine's transition team has declined to comment on budget plans.

Development Bonds

The new governor's economic platform during the campaign included a referendum to win voter approval of a bond sale for the Edison Innovation Fund, which invests in companies that may profit from developing fields such as stem cell research and nanotechnology.

He also plans to combine economic development programs now run by 16 different state agencies into one office, and provide incentives for development of ports and urban areas.

Business owners say the state needs economic stimulus. Association President Philip Kirschner says a November survey of members found confidence in the state's economy plunged in 2005, with 18 percent predicting conditions would improve, down from 31 percent a year earlier. Only 28 percent of business people said New Jersey is a good place for expansion, down from 50 percent in 2001, the survey found.

Expensive State

To lure new companies, Corzine must counter an impression that New Jersey is an expensive place for business expansion, and that its poor budget management may lead to further tax increases, said Bill Dowd, New Jersey analyst for Moody's Investors Service Web site Economy.com.

``The governor has a formidable task ahead of him,'' Dowd said.

New Jersey borrowed more than $5 billion, raised taxes on corporations and the wealthy by $1.85 billion and boosted fees and fines by more than $1 billion to balance budgets and increase spending under former Governor James McGreevey, who resigned in November 2004.

Governor Richard Codey, who took over for McGreevey, delayed pension payments and restrained spending. Legislative budget officers estimate Corzine will need at least $5 billion if he decides to make up for pension shortfalls, cover increased payments on debt, and avoid cuts in employee benefits and health programs such as Medicaid.

`Mess'

Corzine has said he won't rule out an increase in the gasoline tax or leasing the New Jersey Turnpike or other state toll roads to private developers to raise money.

``The state is in a financial mess,'' said Republican state Senator Diane Allen, a former candidate for U.S. Senate. ``Governors in other states are celebrating surpluses, while New Jersey considers ideas such as raising the gasoline tax or selling the Turnpike to bring in more revenue.''

Solving budget problems will be difficult without angering Corzine supporters, who include public employee unions and advocates of higher spending, said David Rebovich, a political science professor at Rider University in Lawrenceville, New Jersey.

``Corzine will quickly find himself having to say no to scads of New Jerseyans who just a few months ago he was asking for support,'' Rebovich said.

To contact the reporters on this story: Andrew Pratt in Trenton, New Jersey, at apratt@bloomberg.net; Stacie Babula in Trenton at sbabula@bloomberg.net.

Last Updated: January 17, 2006 00:12 EST