Local officials appeal to budget committee for restoration of energy tax revenue
By Darryl R. Isherwood | March 5th, 2012 - 11:08am
State League of Municipalities and local mayors told the Assembly Budget Committee this morning they believe the state should restore $271 million in state aid cut in fiscal year 2011.
The aid money was cut by the administration Gov. Chris Christie and is collected by the state in the form of Energy Tax Receipts. Municipal leaders say the money is rightfully theirs and is a small fraction of the more than $3.4 billion they say has been diverted by the state over the past decade to its own general fund.
Calling the money “aid” is incorrect, they say, as it is more accurately local money that has been diverted for state use.
“It’s important to remember, keeping the money in the state budget doesn’t save one taxpayer one dime” said Jon Moran, senior legislative analyst for the League of Municipalities. “It only changes the level of government that spends the money. And it also changes the purpose for which the money is spent.”
The budget committee was hearing discussion of the revenue, which league and local officials say has been diverted in ever increasing amounts since 2003.
The energy tax receipts in question are made up of several revenue streams, including sales tax on energy, corporate business taxes and TEFA – the transitional energy facilities assessment. The revenue streams took the place of the Public Utility Gross Receipts and Franchise tax, which was originally collected by municipalities to reimburse for rights of way containing energy towers and infrastructure within their borders.
In the 1940s, the state became the collection agent for the tax, with the understanding that the money would continue to be forwarded to municipalities.
Once the state began collecting the money, league officials charge, it became fair game and beginning in the 1980s was diverted in ever increasing amounts to the state’s general fund. The result was a drop in what was once considered untouchable municipal revenue.
In 1997, energy deregulation led to a change in the structure, and a law passed at the time codified the state’s entitlement to some of the money while at the same time capping the skim. A 1999 law required the state to phase in an increased payout to municipalities and added an inflation boost each year. The law also required that aid levels never drop below the amount paid in 2002. The law included a “poison pill” that required the state to meet its requirements or forfeit the right to collect the money.
But instead of steadily increasing aid to municipalities, what actually happened is the state began siphoning money from another pool – CMPTRA aid – to increase the energy tax receipts. Because the CMPTRA aid was not protected by the poison pill, it was targeted by governors seeking to side-step their obligations on energy tax receipts, league officials and local mayors charge. The result was a steadily shrinking CMPTRA pool that has dropped from $786,932,761 in fiscal year 2000 to a proposed $207,486,291 in fiscal year 2013. That number represents a $297.9 million transfer from CMPTRA to the energy tax pool in the upcoming budget.
During that time the energy tax receipts paid out as state aid rose from $750 million to $1.086 billion while the state skim has risen from $246.9 million to a proposed $735 million in the upcoming fiscal year, a fact which enrages some league and municipal officials.
Officials say they understand that expecting the full amount is not realistic, but going back to 2011 would make only a small impact on the state’s budget.
“For the state to balance their budget on the backs of the municipalities is unfair,” said Edison Mayor Toni Recigliano. “The message is that you are bigger therefore you can take what rightfully belongs to us. We are willing to abide by the 2 percent cap, although it is difficult. Our residents should not be forced into foreclosure or leaving our towns because they cannot afford the taxes. We are only asking for the restoration of this year’s $271 million and that every town be brought back to their 2009 CMPTR/Energy Tax Receipts level.”