This time, last year, the four special joint committees of the Legislature’s historic Special Session for Property Tax Reform were preparing their final reports. They, thereby, set the stage for final action on a number of important bills. The Special Session deserves much credit. The tremendous concentrated efforts of legislators, the Governor and all of their staffs have yielded a solid foundation for future progress towards property tax reform. But much still remains to be done.
Every taxpayer understands New Jersey’s chronic over-reliance on property taxes. When we look at the statistics, the scope of the problem can be intimidating.
According to the 2000 Census, New Jersey’s median property tax bill ($4,047) was the highest among the 50 states – more than one-third higher than second-place Connecticut ($2,961). According to New Jersey Future, we are second in over-all reliance on property taxes (46.1% of total state and local revenue) – topped only by New Hampshire. Among States that collect sales, income and property taxes, only in New Jersey do property tax collections exceed sales and income tax collections, combined.
A constellation of inter-connected public policy actions and inactions, by officials at all levels of government, brought us to this point. And no simple answer will solve this complex crisis.
Elected officials at the local level have been dealing with the property tax crisis on a daily basis for many years. Their fellow citizens rely on them to deliver vital life enhancing and life sustaining services. Yet the only reliable revenue source allowed to them by the State of New Jersey is the property tax. We have known that we have needed reform for a long time. And we had appealed for action, time and time again, to a long series of State Administrations and Legislatures.
It was only after decades of inaction on real, sustainable property tax reform, that we came to call for a Citizens Convention for Property Tax Reform. But in lieu of that, State policy makers opted for the historic Special Session.
Developments in municipalities, which surfaced over the Summer, highlight two of the shortcomings of that option.
First, we have seen one of the unintended consequences of the Special Session’s widely touted 4 percent levy cap. That legislation arbitrarily limits the amount of revenue that school districts, counties and municipalities can raise through the property tax. It fails, however, to account for – let alone limit – increasing costs beyond the control of local elected officials. One of those costs is the State imposed, and enforced, obligation that requires a municipality with a local public library to annually dedicate a sum equal to $0.33 (thirty three cents) per $1,000.00 of the total assessed value of all local properties to the municipal library.
True. The 4 percent levy cap will slow the growth of the property tax burden. And the $0.33 (thirty three cents) per $1,000.00 of the total assessed value mandate will assure a generous level of funding for the local library. But taken together, they will limit the investment that local elected officials can dedicate to public safety, public health, youth programs, senior services and other vital priorities. In future years, in certain cases, the rate of growth for mandated library contributions could exceed the rate of growth of the levy cap. And that would compel actual disinvestments in other life sustaining and life enhancing local public programs and services.
Second, we have seen the results of insufficient “State Aid” on property taxpayers. On one level, it directly relates to the State’s decision to reduce its commitment to “Extraordinary Aid” by $9 million, this year. Extraordinary Aid is annually awarded, based on need and the availability of funding. Every year, applications for such aid exceed available resources. The $9 million cut will, therefore, mean that fewer municipalities will get any of this emergency funding and that those who do get funding are more likely get less than they need.
And on another level, the same story relates to the failure of the Special Session to grapple with the difficult ‘revenue’ side of the property tax crisis. A large percentage of municipal, school district and county spending is mandated by State law. The underlying demand for local public services continues to increase, and the costs continue to rise with inflation and population growth. Without commensurate increases in alternative funding, increases in property taxes are inevitable.
No matter how much you think government should spend; no matter where you think money is needed or money is wasted; no matter what the appropriate level of revenue local elected officials need to meet their responsibilities to their fellow citizens; the simple fact of the matter is that there has to be a fairer way of raising it.
In some areas, such as the ‘cap’ issues, remedial actions are needed to deal with the unintended consequences of some popular initiatives. There are things that the Special Session did that could have been done much better.
But the central concern of New Jersey taxpayers remains that tough revenue issue, which was not addressed. In addition to a new school funding formula, our State’s leading policy makers still need to deal with that, to fulfill the promise of truly progressive property tax reform.
By William G. Dressel, Jr.
Executive Director,
New Jersey League of Municipalities
