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Dear Mayor:
As you know, the four Joint Committees of the Special Legislative Session for Property Tax Reform released their reports, yesterday. The reports and Governor Corzine's Address at the League of Municipalities Annual Conference can be accessed at our website in the Special Session section.
We commend all legislators and staff involved in the special session process. We have always held that, when it comes to meaningful revenue reform, the Legislative process is best at incremental change, not substantive progress. These recommendations confirm us in that opinion. This is the best we could expect from the Legislative process. But our first impression is that this is not enough. The recommendations will become bills, which will have to go through the legislative process. There will be multiple opportunities to amend the bills. This will give some the opportunity to weaken the property tax relief potential of the recommendations. It will also give us another opportunity to advocate changes that could do more to lessen our dependence on regressive property taxes.
In order to evaluate the recommendations, we return to the charge given to the Special Session by Governor Corzine in his July 28 speech. Therein, the Governor identified the apocalyptic ‘four horsemen’ of New Jersey property taxes.
“First, we have an over-reliance of this regressive tax to disproportionately fund government and school costs. Second, we have failed to control spending at all levels of government or to give the public a meaningful voice in budget decisions. Third, we have far too many layers of government delivering too many similar services. And fourth, the fragile foundation of state finances has prevented the state from increasing aid to local school districts and governments.”
In order to unseat these horsemen, the Governor identified “five broad areas of reform.” They are: pensions and benefits; shared services; debt reduction; modernization of the tax structure; and sustainability.
Based on our preliminary analysis, and given the limits imposed on the State by statute and collective bargaining agreements, it appears that the recommendations will generally help to limit future pension and benefit costs.
We believe the Special Session needs to go beyond the Committee recommendations, particularly with regards to the burden imposed on property taxpayers by the generous benefits available to PFRS members. We wish the Committee had recommended a way to better enforce the moratorium of new benefits. (Possibly a Constitutional Amendment to require a super-majority in the Legislature to pass a benefit enhancement that was rejected by the Pensions and Health Benefits Review Committee.) We hope the recommendations took into consideration the benefits of being able to hire certain State certified municipal professionals on a part time basis (de facto ‘shared services’). With regards to the proposed ban on dual elective office holding, we reject this limitation on the voting rights of the people. If the goal is to reduce pension costs, this can be accomplished without denying our citizens the right to elect whomever they judge to be the best person for any given office, and without making local elected officials second class citizens, denied the right to sit in the Legislature.
Based on our preliminary analysis, it appears that the recommendations regarding shared services have diverged from the Governor’s call “to provide a substantial budget carrot.” Instead, the Special Session is heading in the direction of denying relief to local taxpayers in certain instances. Of course, the “substantial carrots” would involve State expenditures. And that would involve new or redirected revenues. (See our comments above and below, regarding meaningful revenue reform.)
We look forward to learning more about, and ultimately working with, the “BRAC-like” Efficiency Commission and we hope it is adequately supported with funding and staff. We reject the proposal of tying some property tax relief funding to compliance with the subjective judgment of a group of individuals, basing that judgment on an un-tested and potentially arbitrary measurement of ‘efficiency.’ We are concerned about the Commission’s possible recommendations concerning county or regional administration of certain municipal services. (How will ‘efficiency’ be objectively evaluated and who will act the recommendations? Will local voters and taxpayers be given a chance to decide what is best for them?) We hope DCA is adequately supported in its new and augmented duties. We intend to carefully study the recommended changes in property tax assessment and will provide extensive comments, after we review the particulars.
With regard to debt reduction, maybe it’s in there, but we have not yet found any recommendations on this.
With regard to a modernization of the tax structure, the Joint Committees have recommended replacing the homestead rebate with a new system of tax credits that would reduce residential property taxes by 20% “for as many taxpayers as resources allow.” And they have called for an increased State investment in public education. But we have been unable to identify the funding sources or sources for these recommendations. Maybe it’s in there, but we haven’t found it yet.
In his speech, the Governor told the Legislature that, “we are kidding ourselves if we pretend we can fundamentally alter the property tax equation entirely on the spending side. … The goal of modernization is to capture revenues that can be used to provide local aid and reduce property tax pressures.…” Accordingly, we need more assurances of the long-term stability and ‘inflation adjustability’ of the funding. Particularly regarding the "20%" reduction, more detail is needed. When we hear 20%, knowing the average bill is about $6,000, we figure about a $1,200 reduction, on average. But when we read the phrase “as resources allow,” we worry. For the past five years, resources have not “allowed” the State to honor its statutory promise to adjust municipal and school district property tax relief funding to account for inflation.
That brings us to the final area of reform listed by Governor Corzine – sustainability. And, here again, questions abound. The first and foremost being, “Sustain what?”
BASED ON OUR PRELIMINARY READING OF THE REPORTS, WE DO NOT YET KNOW IF THE ENACTMENT OF THE RECOMMENDATIONS WILL REDUCE NEW JERSEY’S HIGHEST IN THE NATION 46% RELIANCE ON PROPERTY TAXES TO ANYWHERE NEAR THE NATIONAL AVERAGE OF 30%.
The cause of property tax reform, through a special legislative session process, now enters its most crucial phase. As the bills move through standing committees they can be strengthened, where needs be. But, they can also be weakened, or even derailed. We intend to remain actively involved in the process. And we intend to hold State policy makers to their promise to produce real and lasting property tax reform, by the end of the year, OR to move a citizen’s convention to the top of the agenda in 2007, if they don’t.
We hope to be able to provide you with a more detailed analysis of the recommendations and on the bills that would implement them very soon. If you have any questions, call Jon Moran at 609-695-3481, ext. 21.
We will be holding a Statewide POLICY SUMMIT ON THE PROPERTY TAX RECOMMENDATIONS on Tuesday, December 12th at the National Guard Armory from 8:30 a.m – 1:00 p.m in Lawrenceville, New Jersey. For more information see our website www.njslom.com or call Sue DeLany at (609) 695-3481 ext. 11.
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