Legislature Advances Property Tax Relief Measures
Tuesday, February 06, 2007

OVERVIEW OF PROPERTY TAX MEASURES

PASSED BY THE LEGISLATURE

as of February 6, 2007

This summer Governor Corzine called the Legislature into special session and urged members of the Senate and Assembly to craft legislative proposals which would achieve real property tax reform. The Legislature worked for several months, and on November 15, four joint legislative committees responsible for providing suggestions issued reports containing a series of 98 recommendations for property tax relief.

Since the release of the joint committee reports, the Legislature has passed a number of bills that enacted only a portion of the recommendations released by the joint committees. Those initiatives are outlined below.

PROPERTY TAX CAP AND CREDIT LEGISLATION

Under A-1 (Roberts, McKeon, Burzichelli) / S-20 (Codey, Kenny), homeowners with varying income levels would receive property tax relief that would be directly applied to their bill. Those with incomes of less than $100,000 would receive a 20 percent reduction in their property tax bill; those earning up to $150,000 would see a reduction of 15 percent; and those earning up to $250,000 would pay 10 percent less in property taxes. Senior citizens will either receive a 20 percent reduction in property taxes or a $1,200 rebate, whichever is greater, while renters will receive a $150 credit. In the event that the Division of Taxation cannot get the direct credit program running this year, the new relief will temporarily be provided in the form of rebate checks. Seniors, however, will continue to receive rebate checks in 2007, and may elect to continue to do so.

A-1 (Roberts, McKeon, Burzichelli) / S-20 (Codey, Kenny) also places a cap of four percent on future property tax increases. This provision of the legislation drew a great deal of criticism by legislators on both sides of the aisle that said there were too many exceptions in the bill which would lead to property tax increases for the years ahead. The bill grants school districts and local government units a number of exemptions in order to accommodate unanticipated expenditures or drops in revenue for circumstances such as increased enrollment, reductions in unrestricted state aid, increases in health care costs over the next five years, debt service payments or certain pension contributions. Should a local government unit or school district encounter other extraordinary circumstances, they would be required to apply to the Local Finance Board or the Commissioner of Education, for a thorough review of the request before any additional exemptions would be granted, or they would have to receive the approval of 60 percent of voters in that jurisdiction. However, many unions and local governments opposed the local cap provision saying that such a cap would leave municipalities unable to pay for police officers, school teachers, etc.

While this measure was passed on January 29, the Senate was unable to deliver the 21 votes needed to pass the legislation on February 5. Senate President Richard Codey called the Senate into session the following day and the measure eventually passed with 28 in favor, 10 opposed. The bill now heads to the Governor's desk for his signature.

ESTABLISHMENT of a STATE COMPTROLLER

A-2 (Watson Coleman, Burzichelli) / S-15 (Kenny) establishes an independent Office of State Comptroller and consolidates financial audit and performance reviews of State and local government units. These routine, periodic, and random audits performed by the Comptroller would review actions of a variety of governmental entities including the Executive branch, public institutions, independent State authorities, and local government units and boards.

The bills passed the Senate on January 25 with a vote of 22 in favor and 17 opposed; however, the legislation faced some criticism in the Assembly when a vote was taken on January 29. Assembly Democrats voiced their concern over the fact that their Senate colleagues amended the legislation to removed land-use issues from the comptroller's purview. However, the measure passed the Assembly with a vote of 48 in favor, 30 opposed and one abstention. The measure now awaits action by the Governor.

The Chamber of Commerce Southern New Jersey supported this legislation and firmly believes that audits called for in these bills are necessary and will reveal the opportunities for government to perform more efficiently. The intent of the legislation is to increase and enhance government efficiency. Further, waste, fraud, and abuse do contribute to increased costs associated with state and local government spending. The establishment of a State Comptroller is imperative to ensure that appropriated funds are being utilized in a responsible manner. The Chamber supports any initiative which seeks to increase government efficiency in an effort to reduce government spending.

CONSOLIDATION and SUPERINTENDENT EMPOWERMENT

A-4 (Roberts, Wisniewski) / S-10 (Smith) is designed to encourage savings among local units of government through the use of shared services, joint meetings, and municipal consolidation. The legislation also attempts to increase the fiscal accountability of local officials by requiring “user-friendly” budgets and increasing public notice and awareness. In addition, the legislation moves school board elections to the date of the November general election.

The legislation also intends to give county school superintendents more responsibility to oversee local school districts. The bill changes the title of the county superintendent of schools to the executive county superintendent of schools, revises the terms of employment and the duties of the superintendent, and provides for the appointment of the superintendent by the Governor. The executive county superintendent is required to review all school district budgets and may disapprove a portion of the school district’s proposed budget if he / she determines that the district has not implemented all potential efficiencies in the administrative operations or if he /she determines that the budget includes excessive non-instructional expenses.

The measure was passed in the Senate on February 5 and awaits a vote in the Assembly.

CONVICTED PUBLIC EMPLOYEE BENEFIT FORFEITURE

S- 14 (Adler, Karcher, Codey) provides for the mandatory forfeiture of retirement benefits and mandatory imprisonment for public officers or employees convicted of certain crimes.

The Chamber supported this measure and believes that individuals who betray the public trust by engaging in illegal behavior should not be eligible to receive state pensions and benefits. Misconduct by those at all levels of government that serve the public should not be tolerated. Furthermore, these individuals should not be rewarded for betraying the trust of the public by receiving benefits funded by those very taxpayers. Requiring the forfeiture of these benefits sends a clear signal that hardworking New Jerseyans will no longer tolerate such egregious behavior.

In New Jersey, State and local government are currently feeling the pinch of providing pension and health care benefits to its employees. It is unfair that that convicted public officials can collect benefits at the expense of the taxpayers; therefore measures such as this are necessary in assisting government in controlling their expenses. While further reforms to the pension and benefits system are needed, S-14 (Adler, Karcher, Codey) seeks to right some of the wrongs and address abuses in the current pension system.

The measure unanimously passed both houses of the Legislature in late January. The bill now awaits approval by the Governor.

LOCAL SHARED SERVICES and CONSOLIDATION

A-15 (Wisniewski, Gordon)/S-12 (Smith, Sweeney) seeks to establish measures that promote efficiencies in local government. The bill establishes a "Local Unit Alignment, Reorganization, and Consolidation Commission." It would be the duty of the commission to develop a proposal to review the consolidation of, and sharing of services among municipalities, fire districts, and other taxing districts in the State.

The bill also requires the Local Finance Board to adopt rules and regulations establishing performance measures to promote cost savings in the delivery of services by municipal governments. Within two years of enactment of the law, the Local Finance Board must develop a municipal report card, indicating the municipality’s performance and how its efficiency changes over time. Finally, the bill creates the Municipal Efficiency Promotion Aid Program to reward municipalities that meet State-established performance measures to promote cost savings in the delivery of services by municipal governments.

The measure passed the Senate on January 22 with a vote of 35 in favor and two opposed. On January 29, the Assembly voted on the measure and it was approved by a margin of 69 to 8, with two members abstaining. The legislation now heads to the Governor’s desk for approval.

ELIMINATES CERTAIN SCHOOL MANDATES

A-17 (Watson Coleman, Conaway) eliminates the requirement for specific reporting to the Director of the Division of Local Government Services. The bill states that when a board of education decides not to take advantage of a state contract because the board can purchase that item at a price at least 10 percent below that available under the State contract, the board would not be required to follow the current reporting procedures.

This bill also eliminates the requirement that school districts conduct exercises or instruction to commemorate two specific holidays: Arbor Day and Commodore Barry Day. These provisions concerning curriculum are designed to provide school districts more flexibility. This measure was passed in the both the Assembly (January 29) and the Senate (February 5) unanimously. The bill now awaits action by the Governor.

INCREMENTAL PUBLIC EMPLOYEE BENEFIT REFORM

S-17 (Codey, Karcher, Pou, O'Toole) would make a number of changes to the benefits offered to elected or appointed public officials. These include moving newly-elected or appointed public officials to a defined-contribution retirement program, and increasing the annual income threshold required to trigger retirement benefits. The bill would also cap the amount of sick and vacation leave that can be carried forward by public employees, and would provide incentives for employees to waive State Health Benefits coverage if they are already covered under a spouse's health plan.

Contention over this bill arose between the Senate and Assembly regarding eliminating dual office holding by elected officials. The Assembly already voted on a ban with an effective date of February 1, 2008; whereas, the Senate announced February 6 that the legislation was amended in that house to remove the ban dual office holding, so that the they could pass broader prohibitions in a stand-alone bill.

The Chamber of Commerce Southern New Jersey supports the reforms contained in S-17 as a small step toward controlling the costs associated with providing benefits to State and other public employees. While we believe that a defined contribution plan should be available to all public employees, we do support the provision of S-17 that requires elected and appointed public officials to enroll in a defined contribution plan. However, we believe the base salary threshold of $1,500 for participation in a State or local pension fund is still too low.

CCSNJ supports other reforms contained in this bill, including investigating end of career compensation increases to prevent tacking, and prohibiting independent contractors from enrolling in PERS. The Chamber also supports limiting accumulated sick time payouts to local government and school board employees, and limiting vacation time carry-forwards for these same employees consistent with State employee limitations. Finally, we support providing limited financial incentives to local employees who waive coverage under the SHBP if they are eligible for other health care coverage.

The bill passed the Senate on February 6 and now awaits a vote in the Assembly.

NEW SCHOOL FUNDING FORMULA PUT ON HOLD

With the focus on immediate property tax relief for New Jersey residents, Governor Corzine has said that efforts to craft a new school funding formula have been put on hold. Governor Corzine recently remarked that he will work with the Legislature to craft a new formula; however, those efforts are likely to take place next year.