Dear Mayor:

Today, Governor Corzine signed two bills, officially marking the end of the Legislature’s months long effort to end the property tax crisis. (Click here for press release) Our fellow citizens now will see just what their representatives in Trenton have accomplished.

The first bill is A-1, which provides a homestead property tax credit for New Jersey resident homeowners; provides for increased funding for residential tenants’ property tax rebates; and establishes a property tax levy growth limitation (“cap”) of four percent that is applicable to school districts, counties, municipalities, fire districts, and solid waste collection districts.

The credit program retains the current rebate program’s definition of income and provides a benefit based on a percentage of property taxes paid for the previous year.  The percentages vary based on three income levels: 20 percent for incomes up to $100,000, 15 percent for incomes over $100,000 up to $150,000, and 10 percent for incomes over $150,000 up to $250,000.  Taxpayers with incomes over $250,000 receive no benefit.  If a property tax bill is higher than $10,000, the benefit only applies to a percentage of the first $10,000 of property taxes paid.  The benefit amounts do not vary based upon a taxpayer’s age or disability status.

For homeowners who are senior citizens, blind or disabled, the bill retains the current calculation of property tax rebates as well as extending eligibility for the new credit, and provides whichever is the greater benefit.  Under the current calculation, the homestead benefit for the tax year equals the amount by which property taxes paid by the claimant in that tax year on the claimant's homestead exceed 5 percent of the claimant's gross income, with certain maximum and minimum benefits.  Most of these homeowners are eligible for a benefit of $1,200.  The new benefits may be provided to taxpayers in the form of a credit rather than a rebate.  However, the Director of the Division of Taxation retains the discretion to provide rebates when there is uncertainty that the benefit will be accurately provided to the correct taxpayer.  In addition, seniors will receive the benefit as a rebate in the first year, and may individually choose to continue to do so in following years.  Credits will be reflected annually in the August and November property tax bills beginning in 2007.  A taxpayer must reside in a homestead on October 1 of a tax year to be eligible for the credit.  The bill requires each property tax bill to show the taxpayer the amount of credit the taxpayer receives, and makes additional technical changes to statutes affecting the format and content of tax bills. Section 40 of this bill requires that for the fiscal year beginning July 1, 2007, the sum to be appropriated for homestead property tax rebates for residential tenants shall be not less than twice the amount appropriated for the same purpose in the prior fiscal year.  Amounts appropriated for this purpose are to be allocated in a manner prescribed by law.

The bill establishes a four percent cap on annual increases in the property tax levy for counties, municipalities, fire districts, and solid waste collection districts, with certain exceptions.  In the case of a county, this new levy cap applies in addition to the existing levy cap, with the more restrictive of the two prevailing.  In the case of a municipality, this new levy cap supplements existing limits on increases in municipal expenditures.  This bill further establishes a new four percent cap on increases in fire district and solid waste collection district tax levies; these local entities currently are not subject to any expenditure or levy growth caps.  The Local Finance Board would be authorized to grant cap waivers in certain circumstances.

It would permit local governments, including local boards of education, to modify, through collective negotiations agreements with their active employees, the payment obligations of the employer for active employee coverage under the State Health Benefits Program (SHBP).  The ability to negotiate the amount of SHBP premium or periodic charges to be paid by the employer has been available to the State since 1997, and to local governments with regard to their future retirees since 1999. The bill also permits all local units of government to establish cafeteria plans pursuant to section 125 of the federal Internal Revenue Code, 26 U.S.C.'125, to provide for a reduction in an employee’s salary, through payroll deductions or otherwise, in exchange for payment by the employer of medical or dental expenses not covered by a health benefits plan, of dependent care expenses as provided in section 129 of the code, 26 U.S.C.'129, and of such other benefits as are consistent with section 125 which are included under the plan.  The amount of any reduction in an employee’s salary will continue to be treated as regular compensation for all other purposes, including the calculation of pension contributions and the amount of any retirement allowance, but, to the extent permitted by the federal Internal Revenue Code, will not be included in the computation of federal taxes withheld from the employee’s salary. 

The second bill is A-4, which groups together certain components of the CORE proposal that was considered by the Joint Legislative Committee on Consolidation and Shared Services.

Article 1 contains the “Uniform Shared Services and Consolidation Act,” which includes provisions designed to encourage savings among local units of government through the use of shared services, joint meetings, and municipal consolidation; codifies the “Sharing Available Resources Efficiently” (SHARE) program of financial incentives for local units to investigate shared services opportunities and also empowers residents to promote shared service and consolidation opportunities; and provides methods for resolving Civil Service barriers to shared services and consolidation in situations where some participating local units have adopted Civil Service and some have not.

Article 2 of the bill requires preparation by municipalities and counties and other local units of government of “user-friendly” budgets in plain language summary format.

Article 3 reconfigures the office of the county superintendent of schools, by re-naming the position the executive county superintendent of schools, making the position a gubernatorial appointment, with Senate advice and consent, for an initial three-year term, with re-appointment contingent upon a satisfactory performance assessment, and revising the duties of the office.  In addition to assuming the current duties of the county superintendent, the executive county superintendent of schools is assigned expanded duties, including: promoting administrative and operational efficiencies and cost savings within school districts; recommending the consolidation of certain districts’ administrative services; eliminating of districts not operating schools, if appropriate; developing a plan to consolidate school districts in the county and require the affected districts to hold a referendum on the plan; promoting the coordination and regionalization of public and nonpublic pupil transportation services, cooperative purchasing of textbooks and other instructional materials; and monitoring the need for and delivery of services to special education students.  The article also provides that the executive county superintendent is required to review all school district budgets and may disapprove a portion of the school district’s proposed budget upon determining that the district has not implemented all potential efficiencies in the administrative operations of the district or that the budget includes excessive non-instructional expenses. Under the article, local school district may apply to the executive county superintendent of schools to have services including, but not limited to, transportation, personnel, purchasing, payroll, and accounting assumed by the office of the superintendent.

For further information contact Jon Moran at (609) 695-3481 ext. 121.

Very truly yours,

                                                                        William G. Dressel, Jr.
                                                                        Executive Director