On Tuesday, New Jersey Gov. Chris Christie signed a property tax cap compromise into law. It caps the growth of local property taxes at 2 percent annually, but exempts spending on cost-drivers such as public employee pensions and health care, natural disasters, and debt payments.
The compromise is a diluted version of the governor's initial proposal, a constitutional amendment that capped property tax growth at 2.5 percent and only allowed debt payments to be exempted. Democratic leadership in the state legislature would not accept it. But it is a serious step forward from the previous "cap" signed by Gov. Jon Corzine in 2007, a 4 percent limit that included 14 exemptions, rendering it meaningless.
Jersey's next task is to get the exempted spending under control. Yesterday state government announced a projected 12 percent increase in public employee health costs. The tax cap compromise allows property tax increases to pay for this spending growth.
Thankfully, the governor has put forth a serious plan to deal with rising costs at the local level. His 33-point "tool kit" that would limit spending growth, giving teeth to the property tax cap. Most notably, it includes a 2.5 percent cap on public employee compensation increases, including health benefits. Local spending has continued unchecked for far too long, giving way to the largest per capita property taxes in the country. It is clearly time for restraint; the governor's took kit achieves that end.
ATR President Grover Norquist wrote a letter to the New Jersey Legislature urging them to adopt the 33 reforms. To see its full text, see below. For a PDF copy, click here.
July 15, 2010
After passing a budget that cut spending over 8 percent from its predecessor, the legislature has begun to tackle New Jersey’s tax problem, taking the first step toward real reform by passing a 2 percent cap on local property tax growth. But while this moves the state in the right direction, it exempts spending on some of the major drivers of budget growth. I urge you to act swiftly in implementing provisions of Gov. Christie’s 33-bill “tool kit” that will curb the growth of exempted spending such as public employee compensation and health benefits.
The last property tax cap in New Jersey was signed by Gov. Jon Corzine in 2007. It limited annual property tax growth to 4 percent, but included 14 spending exemptions. The current compromise, signed by Gov. Christie this week, reduces the cap to two percent and drops the number of exemptions to four.
That progress noted, the exemptions under the current cap – for bond payments, public employee health costs and pension obligations, and natural disasters – still allow for ever-increasing property taxes. These costs, particularly public employee compensation, are major drivers of the expansion of government and a major reason property taxes rose 72 percent in New Jersey between 1999 and 2009. Removing them from the strictures of the cap will allow property taxes to continue to rise virtually unchecked.
Thankfully, Gov. Christie has proposed measures to curb the growth of public employee compensation. This will not only dampen the effect of the exemptions to the property tax cap, but also will relieve cost pressures local governments face after cuts in state aid to municipalities. Most notable is the 2.5 percent cap on the growth of public employee compensation, including health benefits. If this measure is adopted, the spending exempted from the tax cap compromise will still allow for a meaningful reduction in the growth of New Jersey’s property tax burden.
The Garden State is finally on the right track, but there is work left to be done. I urge you to enact the meaningful reforms contained in Gov. Christie’s 33-point tool kit in order to bring serious, lasting property tax reform to New Jersey.
ATR hopes to be helpful in this ongoing process. Please contact me or state affairs manager Joshua Culling at (202) 785-0266 with any questions or concerns.