Dear Mayor:

Yesterday, in Trenton, Governor Corzine delivered his annual State of the State address. Property tax relief and reform provided the primary – and almost exclusive – focus of the remarks. In his July speech opening the Special Session, the main message that the Governor sent to the Legislature was “The time has come.”  In yesterday’s speech, the main message he sent to the people of New Jersey was, “The time is coming.”

He indicated that he and Senate President Codey and Speaker Roberts had reached conceptual agreement on many components of a plan for meaningful relief and reform. He, further, declared that he would not agree to any new funding, unless he was certain that the relief would be sustainable for years to come. He expressed his hope that this process will end prior to the Legislature’s receipt of his budget proposal for our State’s next Fiscal Year. And he again indicated his commitment to a Citizens’ Convention, should this process not succeed in reducing New Jersey’s chronic over-reliance on regressive and excessive property taxes to fund essential government programs and services.

The Governor emphasized his support for a 4% cap on the property tax levy.  Missing in the address was support for the tools for local governments necessary in reigning in health insurance, personnel and pension costs.  The Governor did mention that his Administration was in the middle of good faith negotiations with the state’s public sector unions.  The Governor stated that, “…structural changes need to be negotiated through good faith bargaining and discussions -- and soon.”

We could only hope as that the debate about a cap begins that the local governments will be empowered to negotiate such structural changes -- and soon!

His comments on some specific areas in need of reform follow.

PENSIONS AND BENEFITS
We agree with Governor Corzine that costs of pension and health benefits are unsustainable. All across the State, municipalities are facing unprecedented budgetary challenges, spurred in large part by escalating pension and health benefits costs. The Governor emphasized respect for the integrity of the negotiation process in his call for structural reform through good faith bargaining. The glaring difference is the Governor is focused exclusively on State government.  Local government must deal with many elements in its quest for true reform.

It does not matter how successful the Governor may be in collective bargaining negotiations with state employees, this will not help local government employer’s one iota unless laws that govern the State Health Benefits Program are changed.  Local governments must be granted the same flexibility as the State to negotiate in good faith with its employees on health benefits issues, including employee sharing of premium costs, incentives to waive duplicate/multiple coverage and variations in levels of coverage. Local governments are prohibited from placing any health benefits related issues on the bargaining table.  Moreover, all pension systems are not equal. To achieve any semblance of pension reform and cost containment, changes to the most expensive local pension system are necessary. The financial impact of PFRS benefits on the property tax, state mandates, binding arbitration, etc. are issues that demand immediate attention, not some time in the future.  We are curious on how these issues will fit within the purported 20% property tax cut.

SHARED SERVICES AND CONSOLIDATIONS
There was no movement or consideration of the BRAC bill in either House of the Legislature on Monday. A-15 has passed the General Assembly last month and is at 2nd reading in the Senate, joining its companion legislation S-1, which includes the penalty provisions, and S-38.  

In his address, the Governor did state that support for “incentivizing” the “voluntary” sharing or consolidation of services.  The Governor continues to cite shared services and the consolidation of services (at all levels of government) as a key funding source.  

SCHOOL FUNDING
Citing New Jersey’s best-in-the-nation public school statistics, the Governor called for a new funding formula that would meet State Constitutional standards, be student-based (as opposed to district-based), account for social, psychological and economic need and provide property tax relief to more people in more places, throughout our Garden State.

STATE FISCAL REFORM
Based on the State’s sorry record of cutting or ‘freezing’ municipal property tax relief funding, in order to ‘solve’ its own budgetary problems, back in July Governor Corzine asked the Legislature to address the structural deficit. “Asset monetization,” meaning the sale or lease of such State assets as the Turnpike, has become the preferred means to this end. The Governor indicated that this would only be pursued if it was certain that it would yield significant long-term benefits to the public.

Beyond ‘asset monetization,” proposals include negotiated pension and benefit reforms and the creation of an Office of the State Comptroller to root out waste, fraud and abuse. The General Assembly approved A-2, which would create the position of Office of the State Comptroller.   The bill now heads to the Senate for consideration, where it is likely to be amended.    Media reports indicate that the Senate will amend to remove the requirement that he comptroller conduct regular reviews of any agency that spends more than $100 million, among other potential amendments.  The Senate is expected to deal with the Comptroller bill (A-2/S-2) on January 22.   For more on this bill, please see our letters of January 4 and January 3. 

PRPOERTY TAX RELIEF FUNDING
The governor seems to have bought into the 20% tax credit plan, recommended by the Special Session’s Joint Committee on Constitutional Change and a Citizens’ Convention. His only concern seems to be the reliability of a funding source or sources. We await the details of this proposal, which we fear may be too little for senior and middle income property taxpayers, who are most in need of relief. We also share the Governor’s concern regarding sustainability. We will, however, reserve judgment, pending release of a specific proposal.