On Tuesday, New Jersey Governor Chris Christie unveiled his administration’s first budget for 2011 and the proposal is chock full of spending reductions and tax reform proposals that are long overdue in the Garden State. The proposed $29.3 billion budget cuts spending by 9 percent (or $2.9 billion) by reducing aid to municipalities and school districts and through a variety property tax reforms.
Christie’s budget would spend $820 million less on public schools next year, with each of the state’s nearly 600 districts seeing a 5 percent reduction to their current budgets. Note that per pupil spending rose by a whopping 8% last year alone. I wonder if your child’s read and math scores rose by such margins. He also plans to trim $445 million in other redistributed state aid to a whopping 566 municipalities, representing a cut of about 23 percent, to $1.46 billion.
To address the state’s ever increasing property taxes, Christie has also proposed a constitutional amendment limiting annual property tax increases to 2.5 percent. The new cap on municipal, school, and county property taxes would be all encompassing, without exceptions for essential services. Currently, the property tax cap is 4 percent; however municipalities and school districts can exceed the limit by applying for a waiver. Christie’s plan scraps this waiver, calling for local voter referendum to permit tax increase above 2.5 percent. The state also would be barred from increasing spending on state services by more than 2.5 percent per year. In addition, Christie wants to eliminate property tax rebates and replace them with a tax credit on homeowners’ tax bills.
These property tax reforms are welcome news to the state with the highest state/local property tax in the country – at $2,485 per man, woman, and child every year. This is also welcome news given the utter failure of the state’s income tax to control property taxes, which is why it was enacted in the 1970s to begin with. Today, New Jersey has the 3rd highest income tax rate in the nation. So much for using a tax hike to lower taxes.
The governor also wants to save millions more by laying off some 1,300 state workers, rolling back a 9 percent pension increase for state employees, and privatizing state operations. Christie recently put together a task force to identify savings from privatizing parts of the state workforce, which estimated that some 2,000 positions could be eliminated.
All told, Gov. Christie’s proposals represent a huge step forward for a state with the highest overall tax burden in the nation, and which raised taxes under the failed governorship of Jon Corzine by billions last year alone. It also signals an end to the poorly executed tax redistribution scheme that has allowed an unnecessary number of municipal governments (and the state) to operate without regard to fiscal responsibility for years. We hope the legislature takes this as a wakeup call that the days of raising taxes to throw money at ever-worsening problems are over.
photo credit: Hoboken Condos