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Philadelphia Inquirer - The Mass. model: Is property-tax cap a good fit for N.J.?
‘What if NJ Gov. Chris Christie's proposed tax cap had been around for 10 years?’ The Statehouse Bureau
Philadelphia Inquirer - The Mass. model: Is property-tax cap a good fit for N.J.?
By Adrienne Lu
Inquirer Trenton Bureau
Gov. Christie wants to throttle the steady rise of property taxes in New Jersey - already the highest in the nation - by following Massachusetts' lead.
That state's property-tax cap, known as Proposition 21/2, has helped keep property taxes in check since it took effect in 1981.
But experts warn that Massachusetts' experience also holds critical lessons for any state considering a similar approach.
"New Jersey can't say, 'Look, it works in Massachusetts, and it will work here.' It's not the same thing," said Iris Lav, a senior adviser at the left-leaning Center on Budget and Policy Priorities in Washington. Lav, who has studied Proposition 21/2, briefed Garden State legislators Thursday about her findings.
On Monday, Christie formally proposed a constitutional amendment, which would require voter approval, to cap local property-tax increases at 2.5 percent annually. Voters in each town could vote to exceed the cap, and the only other exception would be for debt service.
New Jersey now has a 4 percent cap on property-tax increases and much more wiggle room for exceptions.
In Massachusetts, voters approved Proposition 21/2 in 1980 through a ballot initiative. As in Christie's proposal, local voters may override the 2.5 percent cap. Proposition 21/2 also mandated that property-tax revenue not exceed 2.5 percent of the assessed value of a town, something Christie is not suggesting.
Lav said Massachusetts in 1980 looked very different from New Jersey today.
Massachusetts' economy was booming - so much so that it was called the "Massachusetts Miracle" - while school enrollment was dropping, for example. New Jersey is just starting to recover from a deep recession, and school enrollment is more stable.
The intent of Proposition 21/2 was to keep property taxes in line, not necessarily to reduce government spending, Lav said.
After Proposition 21/2, Massachusetts directed additional state funding to towns to make up for some of the property-tax restrictions and help prevent some cuts in services.
But during tough economic times, including the latest recession, Lav said, state aid has not kept up and towns have had to cut services, including laying off teachers, police officers, firefighters, and other employees; closing fire stations, libraries, senior centers, and recreation centers; and trimming school programs.
"The principal lesson learned is that it works only if the state is willing to give additional assistance to cities and towns," said Michael J. Widmer, president of the Massachusetts Taxpayers Foundation, a nonpartisan public-policy research organization. "A state thinking about this needs to do it with its eyes open to the reality that it means reduced services at the local level because recessions are inevitable. There's no magic here."
Christie has not proposed increasing state aid to municipalities. His budget proposal for the next fiscal year would cut state aid by $446 million, or about 23 percent.
Mary Forsberg, research director of the nonpartisan New Jersey Policy Perspective, said property-tax caps didn't encourage efficiency so much as they resulted in smaller government, which inevitably means reduced services.
"Caps in general are a lazy person's way of doing government," Forsberg said.
In Christie's March budget address, he said Massachusetts had the third-highest property taxes in the nation in 1977, three years before Proposition 21/2 was approved. By 2005, the ranking had dropped to 33d, the governor said, citing figures from the conservative Americans for Tax Reform.
The Associated Press, citing census figures, reported that the impact of Proposition 21/2 had been much less dramatic, with Massachusetts dropping from third in property tax per capita in 1981 to eighth in 2005.
Proponents of Proposition 21/2 say it has accomplished exactly what it set out to do: Slow the growth in property taxes.
Frank Conte, director of communications at the Beacon Hill Institute, a free-market think tank at Suffolk University in Boston, said Proposition 21/2 had helped keep the growth of property taxes reasonable, but only because the state had increased local aid over the years.
Chip Faulkner, associate director of Citizens for Limited Taxation, estimated that had property taxes continued to rise at their pre-Proposition 21/2 rate, they would be at least double what they are.
"It's worked out very well in Massachusetts, and it can work in New Jersey," Faulkner said.
He said complaints about service cuts had been overstated.
"Despite their cries of doom and gloom, we're doing fine in the state," Faulkner said. "Police, fire, roads, highways - everything is fine."
Some communities in Massachusetts have suffered more than others.
The wealthiest towns have voted to override the 2.5 percent cap much more frequently than less-wealthy towns, widening the disparity between the towns, according to several experts.
"As a general matter, the wealthier communities, of course, have been more likely to pass overrides, but a city like Boston has never even attempted one, and [it] wouldn't pass if they did," said Widmer, of the Massachusetts Taxpayers Foundation.
Some observers argue that because Massachusetts has directed state funding to the poorest communities to protect them, middle-class communities have suffered the most, rarely approving overrides but not receiving enough new state funding to offset the caps.
When Christie introduced his cap proposal last week, he said he expected critics to argue that education in New Jersey would suffer.
"This is absolutely wrong," he said. "Massachusetts has accomplished this astonishing drop in property taxes while maintaining the No. 1 K-12 achievement in America."
But, Lav says, Massachusetts' enrollment in kindergarten through 12th grade fell 21 percent between 1980 and 1989.
"If there had been a level number or increasing number of children, it would not have been possible to implement Proposition 21/2 without massive budget cuts, even if the local aid increases," said Geoffrey Beckwith, executive director of the Massachusetts Municipal Association.
Later, in 1993, the state overhauled its education-funding system to increase state aid overall and direct more dollars to urban areas.
Beckwith warned that New Jersey should consider a property-tax cap with caution.
"The only way Proposition 21/2 was implemented without causing major fiscal chaos was because the state stepped in and increased local aid substantially," he said. "If the State of New Jersey is not prepared to do that, then the cap would likely trigger much greater fiscal distress than people are envisioning."
Contact staff writer Adrienne Lu at 609-989-8990 or alu@phillynews.com
‘What if NJ Gov. Chris Christie's proposed tax cap had been around for 10 years?’
Tuesday, May 18, 2010
BY JOHN REITMEYER Statehouse Bureau (Record, Star Ledger)
Property tax bills in New Jersey would be
lower — $1,600 on average — if Governor
Christie's proposed 2.5 percent cap on tax
increases had been in place 10 years ago,
according to a Record analysis of state
Department of Community Affairs tax data.
Those projected savings for taxpayers would
have offset the loss of the $1,000 property
tax rebate checks Christie plans to cut this
year to help balance the state budget during a
recession.
And the billions the state has spent on
property tax rebate checks this decade
would have been freed up for other needs if
the cap had been in place. Money could have
gone to schools and municipalities — two
areas Christie also wants to cut this year,
which could lead to layoffs of teachers,
police officers and other public employees.
But critics — teachers, public workers and
legislators — insist the caps would do more
harm than good by forcing towns and
schools to cut essential services. Christie
and his supporters, however, contend that
property tax increases would become
reasonable and predictable.
The 2.5 percent cap on tax levy increases is
part of a larger reform agenda the governor
put forward last week, calling his 33
proposed bills a "tool kit" for lower property
taxes. Christie is pushing the Legislature to
pass the reforms before it breaks for the
summer at the end of June — something that
would put the tax levy cap on the ballot this
November.
"People of New Jersey need to decide,"
Christie said last week during a State House
news conference. "Do they want to know for
sure that their property taxes will increase no
more than 2.5 percent a year or do they want
to continue to engage in the game of Trenton
roulette, where the amount of increase
depends on which slot the ball falls in, which
special interest is going to be catered to,
which tax is going to be increased that year?
"I don't think the people of this state want
roulette anymore," he said. "I think they want
a degree of certainty to what's going to
happen with their expenses, especially in
these extraordinarily difficult times."
But any projected savings — like that
estimated $1,600 a year for the average
property taxpayer if the 2.5 percent cap were
in place a decade ago — would not have
come without some sacrifices.
Christie's critics say those sacrifices will cost
taxpayers well beyond any savings if the tax
cap becomes law.
Education cuts
Barbara Keshishan, the president of the New
Jersey Education Association, said Christie's
tool kit is "an official attack on the very
future of public education." Advocates for
public schools say the caps would force
districts to cut such expenses as teachers
and after-school programs.
Local governments could also order
cutbacks, bringing smaller police forces or
less frequent trash pickups.
Charles Wowkanech, president of the state's
AFL-CIO, called Christie's reforms "a
jackhammer, destroying the delivery of
essential services and workers' rights."
Still, if the 2.5 percent cap on annual tax
increases had been in place since 2000, the
more than 60 percent increase in average
property tax bills over the last decade would
have been cut in half, according to the
Record analysis of tax data for the past
decade.
Property tax bills that averaged $7,281
statewide in 2009 would have risen last year
to just $5,668, at most, according to the
analysis.
A cap on tax hikes such as the one proposed
by Christie is not a novel idea: Indiana is in
the process of enacting one and
Massachusetts and California already have
similar caps.
New Jersey has been capping local
government tax increases at 4 percent since
2007 under an initiative backed by former
Gov. Jon Corzine — a change that has
curtailed tax bills.
Average property tax bills were growing by
more than 7 percent in 2005, but the
increases recorded in 2008 and 2009 were
both less than 4 percent.
Christie wants to take Corzine's cap further
by lowering the threshold on annual tax levy
increases and eliminating several cap
exceptions, loopholes that lobbyists for local
governments and public employees fought
hard for in 2007.
Under the cap Christie envisions, the only
exception would be made for debt payments.
And the only way a school board, town or
county government could get around the cap
would be through public approval at the
ballot box.
"Having a 2.5 percent cap, what that does is,
it gives the ultimate trump card to the
voters," Christie said during the news
conference. "I think the people of New Jersey
know and understand that they no longer
want to leave their property taxes in the sole
discretion of the politicians."
Sen. Joseph Kyrillos, R-Monmouth, took the
first step toward getting the cap in place by
introducing legislation on Thursday that
would authorize a referendum on the cap in
November.
But opponents of caps such as the one
enacted in Massachusetts note that state
government there was forced to increase aid
to local governments to make the cap work.
And Indiana had to raise the state sales tax
recently to ensure funding for local schools
remained in place.
Christie's budget would cut aid to schools
and municipalities and does not raise any
major taxes, leading to fears that New Jersey
towns and school boards, operating under a
hard cap, would have to turn to layoffs and
service reductions because many of their
costs, such as employee health insurance,
continue to rise.
Senate Budget and Appropriations
Committee Chairman Paul Sarlo, D-Wood-
Ridge, made that point during a budget
hearing last week.
"As the governor pushes a hard property tax
cap, two of the biggest drivers are your
police salaries and your health benefits for all
of your employees," said Sarlo, who is also
the mayor of Wood-Ridge. "How do you live
within this cap when you have this massive
increase in state health benefits?
Haves and have nots
Assembly Budget Committee Chairman Lou
Greenwald, D-Camden, issued a different
warning after the cap came up during
another budget hearing.
"We need to understand that the cap in
Massachusetts has helped lead to a growing
disparity between wealthy and poor
communities," Greenwald said.
But state Sen. Steve Oroho, R-Sussex, said
the cap is needed to protect property owners
who are not seeing their incomes increase
every year as much as their tax bills.
"We have a segment of our population that
already do live on caps, our senior citizens,"
Oroho said.
And others argue the cap wouldn't
necessarily result in service reductions if
governments work together by sharing
services and working on other consolidation
efforts.
A Quinnipiac University poll conducted late
last year found that 73 percent of those
surveyed favored merging school districts
and municipal governments as a way to
reduce property tax bills.
But Sarlo, Greenwald and other Democratic
lawmakers say Christie's "tool kit" does
nothing to balance the current state budget
plan, which must be done by June 30. They
put forward their own proposal last week,
calling for a new tax on incomes over $1
million to help save property tax rebates for
seniors.
"I think it is incumbent upon the Legislature
at some point to draw a line in the sand," said
Assembly Speaker Sheila Oliver, D-Essex.
Christie's response: "Everybody is tired of
doing this."
"Everybody is tired of seeing taxes go up and
up and up, and seeing the answer from the
