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Real N.J. property tax reform takes more than caps and cuts

Dressel122109_optBY WILLIAM G. DRESSEL, JR.
COMMENTARY

Facing an unprecedented revenue gap this year, Gov. Chris Christie introduced, and the Legislature passed, a budget that cut funding for municipal property tax relief by about $450 million from last year's already reduced totals.

Difficult times demand difficult choices. And New Jersey policy makers had few alternatives.

But let the record be clear. With these cuts, New Jersey once again has balanced its budget with municipal revenues.

In order to avoid increasing state-administered taxes, the Trenton establishment has used municipal property tax relief funding to bridge the gap.

In fact, most of the Consolidated Municipal Property Tax Relief Act and all of the Energy Tax Property Tax Relief funding is revenue replacement funding. It is supposed to replace revenues that originally were collected by municipalities for local use.

Those alternative revenues delivered municipal property tax relief for a long time, before various "reforms" took them away from our cities, towns, townships, boroughs and villages — always accompanied by the statutory vow that local property taxpayers would be "held harmless."

Further, pursuant to a 10-year-old state law, which has long been honored more in the breach than in the observance, CMPTRA and the Energy Tax are supposed to be annually adjusted to account for the effects of inflation. Instead, they were cut by $271 million in the new state budget.

Realizing that a 20 percent cut in revenue replacement funding, instead of a statutorily required increase, would present a serious challenge to local budget makers, Christie intended to provide local officials with meaningful tools to limit the otherwise devastating impact of the cuts.

The governor's "Tool Kit to Meet Today's Fiscal Challenges" was supposed to provide "long-overdue mandate relief and regulatory flexibility for beleaguered towns and schools."

It was supposed to include new tools to accomplish six objectives: collective bargaining reform, pension and benefits reform, civil service reform, management reform, a constitutional cap on increases in spending for direct state government services and a constitutional cap on property tax increases.

With the cuts assured in the state's new budget and with bipartisan agreement reached on new property tax caps, mayors from all around the state are still waiting for Trenton policy makers to enact meaningful local government cost-containment reforms. And little mention is made of a cap on state spending.

The governor was right when he said, "New caps without the tool kit are unworkable." Having put the cuts and caps in place, the Trenton establishment needs to get serious about the struggle against oppressive, regressive property taxes.

Real reform takes more than caps and cuts, neither of which do anything to address New Jersey's property tax burden — the worst in the nation. The caps only will slow the growth of the burden. They will not reduce it. And the cuts are no help at all.

Yet once again, just as happened following the 2006 Special Session for Property Tax Reform, caps and cuts have gained bipartisan support. But management reforms, mandates relief and a commitment to honor the promise of revenue replacement funding have been deferred, pending further discussion.

No elected official ever wants to raise taxes. But the state sets tax policy for all New Jersey governments. And only state action can provide true local property tax reform.

Local officials need real solutions to real cost-drivers, whether they are inside or outside any arbitrary cap. They need to know that the state will honor its promise of property tax relief revenue replacement funding. Absent cost-containment initiatives and an end to the diversion of municipal revenue replacement funding, these new caps do nothing but shift the burden of deciding whether to slash vital municipal services or increase property taxes from local elected officials to the citizens who elected them.

Only real reforms can provide immediate and sustainable property tax relief. Only the state can deliver real reforms.

William G. Dressel, Jr. is the Executive Director of the New Jersey State League of Municipalities.

ALSO BY WILLIAM G. DRESSEL, JR.

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New Jersey again balancing budget with municipal revenues

 
Comments (2)
2 Wednesday, 28 July 2010 13:31
Simpleton
The caps and cuts highlight the fiscal irresponsibility of our towns, counties, and state officals. While I believe the statement that "no elected offical ever wants to raise taxes", there is a pretty simple answer:
Pass a balanced budget (absent tax increases and borrowing).
Increased spending and borrowing over the past years (attributable to both political parties) has driven taxes up.
Hard decisions need to be made, but the solution itself is simple.
1 Tuesday, 27 July 2010 23:41
Justin
I was intently reading the above thinking I had something to learn when all of a sudden, there it was...."No elected official ever wants to raise taxes."
I knew right there it was a ruse- I had been taken for a long ride.

Oh well, live and learn!

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