The following letter was sent to the Chairs of the Senate and Assembly budget committees, with copies to all members. These are the League’s concerns with Governor Murphy’s proposed budget.
Dear Senator Sarlo and Assemblywoman Pintor Marin:
As you review the Governor’s proposed FY 2020 budget and put together a final Appropriations Act, please consider the impact that your decisions will have on New Jersey municipalities and local citizens and businesses. From our perspective, municipal property tax relief funding is of paramount importance.
We thank the Governor for an appropriate increase in Transitional Aid and appreciate the end of the diversions from the Affordable Housing Trust Fund (a $59 million restoration), and on Clean Energy ($70 million) funding programs. More needs to be done to address the affordable housing crisis in New Jersey municipalities. But this is a welcome first step toward the State reentering the playing field to develop a statewide, rational housing policy.
Unfortunately, the proposed budget does not seek to end the diversion of Municipal Property Tax Relief, as well.
Regarding that, the Governor has proposed level funding for combined Energy Tax and Consolidated Municipal Property Tax Relief Assistance (CMPTRA) property tax relief. After 10 years of reduced relief, we had hoped to see these funding sources restored to their previous levels. If the Governor’s proposal is not changed, FY 2020 funding for Energy Tax and CMPTRA property tax relief will be $190 million lower than it was before the Recession of 2008. And if the $71 million shift, which occurred between 2015-2018, from Transitional Aid to CMPTRA, is discounted, the statewide gap grows to over $260 million.
The Energy Tax and CMPTRA are all 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. But things have gotten worse, since the State slashed funding in the years after the 2008 financial collapse.
In 2007, NJ municipalities divided $1.63 billion in general property tax relief distributions. On average – and no town is average – that was about $2.9 million, per town. It worked out to about $188, per capita. For 2020, the Governor asks for only $1.44 billion in municipal property tax relief. $190 million less than was distributed before the Great Recession. On average, that would be about $2.5 million, per town, or about $161, per resident.
After over a decade of this failure to honor the State’s statutory promise to local taxpayers, the time has come to recognize the fact that there is a connection between property tax relief funding and property tax relief.
That connection is obscured by the continuation of last year’s decision to open the ETR ‘lock box,’ which has always been funded through taxes (Sales and Corporate) levied on energy suppling utilities. Instead, the budget would, again, deliver level funding with Income Tax dollars. This ‘accounting change’ shakes the foundations of the Energy Tax Receipts Property Tax Relief Fund (ETR), which, for more than twenty years, has delivered reliable and significant property tax relief to municipal home- and business-owners, all around our Garden State.
We want to commend a couple of other initiatives that the Governor mentioned in his speech or that are, otherwise, included in the proposed Budget. Negotiated public employee health benefit reforms are projected to provide a total of $400 million in savings, for local employers participating in the State Health Benefits Program or the School Employees’ Health benefits Program. We are anxious to learn more about how these savings are to be achieved.
Further, we appreciate that the budget would allocate $2 million for outreach for the 2020 Census. And, in addition to $9.8 million in Federal funding, the State will put $10.8 million toward election access and security.
In addition to our advocacy on the matters already mentioned, League members must ask for a permanent fix to the telecommunications business personal property tax problem that costs more communities more tax revenues every year. The problem began in 2008, when Verizon informed a handful of municipalities that it had decided to exempt itself from payment of taxes on all of the cables and electronic equipment it houses in local switching stations. In the years that followed, similar decisions by Verizon have led to cases affecting taxpayers in hundreds of other New Jersey municipalities.
After a court case that dragged on for 10 years, Hopewell Borough finally prevailed over Verizon. But that win only required Verizon to meet its obligations to the citizens of Hopewell for one year. And we have recently learned that Verizon has appealed even that. Absent legislative action, every effected municipality will be faced with mounting legal bills in every year that Verizon claims an exemption.
A few years ago, Senator Smith and Assemblyman Caputo introduced legislation that would address this matter. We hope to see remedial bills again this year. And we hope, this time, to see them passed.
We would welcome the opportunity to meet with you, or any other members of the Senate Budget and Appropriations or the Assembly Budget Committee, to discuss our concerns with the proposed budget. Please ask your staff to contact Michael Cerra, the League’s Assistant Executive Director, to make the arrangements.
Thank you for your consideration.
Contacts: Jon Moran, Sr. Legislative Analyst, firstname.lastname@example.org, 609-695-3481 x121.
Mike Cerra, Assistant Executive Director, email@example.com, 609-695-3481 x120.