N.J. budget gap forces state to withhold $20.7M in aid payments to towns

By Claire Heininger/Statehouse Bureau

November 30, 2009, 7:40PM

TRENTON -- To help close an unexpected budget gap, the state plans to withhold $20.7 million in aid payments to municipalities, a move that could force cuts in services or higher property taxes, according to three legislative sources briefed on the move.

The decision to place the final aid installment in reserve rather than distribute it to towns is expected to be announced by the Corzine administration Tuesday along with other budget-trimming moves, according to the sources, who requested anonymity because they were not authorized to discuss it.

The payment represents 5 percent of the total annual aid authorized for municipalities under the Consolidated Municipal Property Tax Relief Act. But that is enough to throw into turmoil the budgets of more than 400 towns that prepare their budget on the calendar year schedule, forcing them to scramble for last-minute cuts, said William Dressel, executive director of the state League of Municipalities.

“There are towns that are going to be confronted with a serious cash flow problem,” said Dressel, who fears that other municipal aid accounts could also be cut. “I’m very much concerned that this is just the first salvo of many more to come.”

Spokesmen for Gov. Jon Corzine and Treasurer David Rousseau did not return calls seeking comment today. Corzine has asked his departments to deliver $400 million in cuts by Tuesday.

One key lawmaker, Sen. Paul Sarlo (D-Bergen), said the decision is poorly timed, because the towns left with a year-end deficit will have to build tax increases into their budgets for next year. Sarlo, the incoming chair of the Budget and Appropriations Committee, said he’s also concerned about the state’s legal obligation because it has approved the municipal budgets and certified their state aid.

“You could kind of equate it to a taxpayer not paying his bill,” Sarlo said, though he added that towns could not expect to be totally spared as the state confronts a budget hole of $1 billion in the current year. “Municipalities are going to have to beware.”

Sen. Barbara Buono (D-Middlesex), the current budget committee chair, echoed the need for dire cuts. The administration has said it may slice funding for schools, municipalities, higher education, hospitals and pension plans. “As our fiscal situation continues to deteriorate, the remaining choices left to fill the deficit are distasteful but necessary,” Buono said.

Of the 421 towns that adopt budgets on the calendar year schedule, 243 receive more than $100,000 annually in CMPTRA aid, Dressel said. The city expecting the highest payment Tuesday is Newark, at $3 million, Dressel said. A spokeswoman for Newark Mayor Cory Booker declined to comment last night.

David DelVecchio, mayor of Lambertville, said the state was abandoning the promises made to cities and towns.

“The state made a commitment, and the state’s walking away from the commitment,” said DelVecchio. “This has never happened. We’ve had aid go up, aid go down, but we’ve never had aid cut back once it was committed.”

Statehouse Bureau reporter Lisa Fleisher contributed to this report.