Today the State Assembly passed the latest version of New Jersey’s newest attempt at a property tax limitation: a 2.0 percent hard cap on property tax levy increases that provides just four exemptions for exceeding the limit – health care costs, pension costs, debt and unforeseen crises. The bill represents a compromise worked out between Gov. Christie and Senate President Steve Sweeney.
The Governor had been pushing for a 2.5 percent cap that would be written into the state constitution, which would virtually guarantee the cap would never be changed. The Governor also wanted to allow for only one exemption (for debt service) and wanted a 60 percent voter referendum to override the cap.
The amended legislation lowers the cap to 2.0 percent, but includes the additional exemptions listed above and requires a simple majority to override the cap. It also would be a statutory change, not a constitutional amendment – making it more likely that adjustments can be made if unforeseen problems arise.
This bill has moved like lightning. In typical New Jersey fashion, no fiscal analyses have accompanied the cap discussions. And there has been little acknowledgement that the state currently has a 4 percent cap enacted in April 2007 in a bipartisan vote. The current cap law was enacted for budget years after July 1, 2007 and was due to sunset on June 30, 1012. Written into the law was a requirement that the New Jersey Tax and Fiscal Policy Commission report on its effectiveness in controlling property taxes and make recommendations to the Governor and the Legislature on or before January 15, 2005.
In the frenzy of activity surrounding the Governor’s proposed Cap and Tool Kit, everyone has conveniently forgotten the months of hearings, public testimony, research and analysis that accompanied the 2006 special legislative sessions. There is more interest in rigid limits than in making changes that can result in rational policy changes. The lack of transparent policy analysis is what got New Jersey to where it is today; this cap bill is no different.
Discussions of this bill on the Senate floor last week centered on bringing “predictability and control” to property tax bills. And one part of the cap is predictable. The average tax bill in New Jersey is $7,281 on a house assessed at $290,502. A 2 percent increase in that bill is $145.62, payable at $12.14 in a mortgage over a 12 month period. What remains unknown, however, is what will happen when municipalities privatize garbage collection services; or when schools raise fees for sports or other extracurricular programs; or when municipal court costs go through the roof because of the increased traffic violations given out as revenue raisers.
The cap is the first shoe in the governor’s proposal.
Over the next few Monday Minutes, NJPP will analyze Gov. Christie’s “tool kit,” a bundle of 33 bills he is promoting as the second phase of his property tax strategy. Lawmakers are expected to hold public hearings on that legislation through the summer.