‘Everybody talks about the weather,’ said a great American philosopher. ‘But nobody does anything about it.’
The same could easily be said about almost everybody involved in State-level government, and New Jersey’s chronic property tax problem. Through the years, there’s been plenty of discussion about how to reduce the overreliance and burden placed on our taxpayers. Unfortunately, there hasn’t been enough action.
For many reasons, local officials have been forced into a growing over-reliance on regressive property taxes. New Jersey local officials make difficult choices to keep the lid on property taxes every year. But 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 relief funding, increases in property taxes are inevitable. And, in addition to exercising exclusive power over tax policy, State-level legislators and administrators now control the flow of municipal property tax relief funding.
Over the last century, many taxes that had been collected by municipal governments were either abolished or became state taxes. In most cases, when these changes were made, the state promised to reimburse municipalities either the amount they had been collecting or the amount that the state would collect. But that commitment has rarely been scrupulously honored.
Energy Tax and Consolidated Municipal Property Tax Relief Aid (CMPTRA) represent “municipal property tax relief,” and not “State aid.” The Energy Tax Receipts Property Tax Relief program was created in 1997 to replace Public Utility Gross Receipts and Franchise Taxes, which had been, for decades, the single largest source of municipal property tax relief funding. The Consolidated Municipal Property Tax Relief was created by the enactment of the State’s 1996 Fiscal Year Budget when the State decided to ‘consolidate’ a number of previously discrete municipal property tax relief programs. Many of those parts were, like Energy Taxes, the lineal descendants of taxes that had once been assessed and collected at the municipal level.
The Energy Tax and CMPTRA are, or were municipal revenue replacement programs. They are not, properly speaking, State aid. They were not meant to make things better for municipal property taxpayers. They were only intended to keep things from getting worse.
And things did get worse when the State slashed funding in the years after the 2008 financial collapse.
Policymakers in Trenton need to recognize the fact that there is a connection between property tax relief funding and property tax relief.
New Jersey local governments need significant, dependable, sustainable sources of revenue, other than property taxes. We need to move away from our over-reliance on excessive, regressive property taxes. And only action at the state level – the level that establishes New Jersey tax policy - can make that a reality. The time has come for State policymakers to recognize how funding cuts and inflation and population growth impact New Jersey’s over-reliance on property taxes.
New Jersey State government needs to prioritize municipal property tax relief.
Sources: DCA DLGS (for property tax and ETR/CMPTRA figures); US Census Bureau (for population figures); US Department of Labor Inflation calculator (for inflationary adjustments).
The Legislature could make a good beginning on that bypassing S-51/A-274. These companion bills would require the State to begin a phased-in restitution of the $331 million, which has been annually diverted from dedicated municipal funding programs – the Energy Tax Receipts Property Tax Relief Fund (ETR) and the Consolidated Municipal Property Tax Relief Aid (CMPTRA) – for the past twelve years. During every year since the 2008 Recession, this funding has been used to address State budget concerns. S-51/A274 would, incrementally, over the next five years, bring funding for all municipalities back to 2007 levels.
We thank the bills’ sponsors, Senators Troy Singleton and Declan O’Scanlon and Assembly Members Jay Webber, Herb Conaway, Parker Space, Valeri Vainieri Huttle, Joann Downey, Marlene Caride, and Vincent Mazzeo, for their efforts to restore property tax relief funding that continues to be diverted to the State budget. Senator Singleton, who chairs the Senate Community and Urban Affairs Committee, has championed this initiative for the past several legislative sessions.
When testifying on behalf of the League and her colleagues in all New Jersey municipalities on this issue, League Past President and Energy Tax Task Force Chair, Mayor Janice Mironov of East Windsor, has stated:
“Taxes on gas and electric utilities were originally collected by the host municipalities, and when the State made itself the collection agent for these taxes, it promised to return the proceeds to municipalities for property tax relief. Just as municipalities collect property taxes for the benefit of school districts, counties and other entities; the State is supposed to collect Energy Taxes for the benefit of municipal governments. For years, though, State officials have diverted funding from Energy Taxes to plug holes in the State budget and to fund State programs. The restoration of this funding is long overdue.”
The Mayor then asked the sponsors to consider one amendment to the bill. Section 1 would require any restored funding to be subtracted from the municipality’s adjusted tax levy. Mayor Mironov has said, “Respectfully, we request that the bill be amended to delete the proposed requirement in Section 1, which would deny locally elected and locally responsive Mayors and municipal governing bodies the ability to determine the best use for the local property tax relief revenues that the bill would restore.”
With that amendment, the passage of this bill would demonstrate the Legislature’s willingness to do more than just talk about the property tax issue.
Contact: Jon Moran, Senior Legislative Analyst, firstname.lastname@example.org, 609-695-3481 x121.