How plans for tax reform were pecked to pieces

Five moments illustrate N.J. leaders' inability to aid homeowners

Sunday, January 28, 2007

BY DUNSTAN McNICHOL, DEBORAH HOWLETT AND JOHN P. MARTIN

Star-Ledger Staff

The double-wide wooden doors of Room L-202 in the Statehouse were shut tight, but they couldn't muffle the heated conversation last Monday.

Inside, Senate Democrats battled over a proposal to establish a state comptroller, a cornerstone of the attempt at property tax reform.

After a few hours, the lawmakers emerged from the room and hustled down one flight to the Senate chambers. They passed a resolution honoring the Rutgers football team and approved a study to consolidate local government.

Then they went home.

It was six months ago today when Gov. Jon Corzine and state leaders pledged to "get serious" about reforming the system that led to runaway property taxes.

Corzine convened a historic legislative session, challenging lawmakers to attack the "sacred cows" that paralyzed tax relief. Legislators formed four committees, held dozens of public hearings and pounded out 98 proposals that filled more than 500 pages.

The goal was simple: Reduce most property taxes 20 percent. Make it possible by cutting bloated pensions and benefits; consolidating some of New Jersey's 1,182 governments and school districts; capping yearly local tax increases at 4 percent; retooling the school aid formula; and establishing a state watchdog against wasteful government.

But the proposals have taken a unusual route, even by Trenton standards.

Instead of facing public scrutiny and debate in legislative committee hearings, they were hustled into Room L-202. Also called the Senate Majority Caucus Room, it contains a 36-foot conference table surrounded by brown leather chairs under a trio of recessed skylights. There is also a sideboard where chicken and pasta from one of Trenton's top Italian restaurants are usually simmering in chafing dishes.

In that room, 22 Democrats, under pressure in an election year, whittled, molded and reshaped the bills for the Senate floor.

What has emerged from that room in recent weeks is a reform package that looks vastly different from the one that went in.

School district consolidation? Gone. A ban on pensions for part-timers? Forget it. An all-powerful comptroller? Hardly.

Property tax reform is not dead. But even some party stalwarts say the process has all but ensured that New Jerseyans won't see the dramatic change they were promised.

"Somewhere along the way, we lost our heart," Sen. John Adler (D-Camden), who chaired one of the four special committees, said last week. "On almost every reform effort we've deferred to special interests, and every time we've done that, we've hurt the public interest. We'll end up with higher property taxes, more homeowners leaving New Jersey, more businesses leaving the state and a bigger crisis next year."

There is no single point where the plan jumped the tracks. But a few key moments in the past seven weeks illustrate how and why reform has stalled.

DEC. 7: THE PENSION LETTER

Corzine called it a "breakdown in communication." It was early December and lawmakers were struggling to meet their self-imposed deadline to achieve tax relief. Among the most critical pieces required was one that attacked the underfunded state pension and benefits system.

Legislators had pitched 41 proposals, from raising the retirement age and hiking insurance premiums to banning dual-office holders and canceling pensions for part-time public employees. Together they would have cut costs to state taxpayers by hundreds of millions of dollars.

A bipartisan group of lawmakers backed the concept. Thousands of union members and government workers were making plans to rally at the Statehouse.

Then the governor, in a letter to legislative leaders, removed unionized government workers from the proposal, arguing the unions should be able to negotiate for their benefits. Senate President Richard Codey (D-Essex) and Assembly Speaker Joseph Roberts (D-Camden) said Corzine's action sent the wrong signal at the wrong time to lawmakers worried about controversial proposals as they entered an election year. Even allies in his party said reform was crumbling.

Piece by piece, pension reform fell apart. By late last week, the pension bill had shrunk from 131 pages to 64; and the number of proposals to 18. Democratic lawmakers retreated to L-202 to "duke it out" over what to do about the rest.

"What's left to duke it out over?" quipped Sen. William Gormley (R-Atlantic).

Missing were the plans to ban dual-office holders, curtail pensions for part-time employees, and raise the retirement age to 62.

"It serves no legitimate public purpose; it saves no money," declared Sen. Nicholas Scutari (D-Union), the chairman of the special reform committee. "I could not be more adamantly opposed to this bill."

Many of the proposals have been crippled by party's slim majority. Only by getting support from 21 of the party's 22 senators can Democrats spare a floor fight and win passage. A coalition of just two senators in Room L-202 can hold a bill hostage.

Said Codey: "I don't have a lot of margin for error in my caucus."

JAN. 8: LEASHING A WATCHDOG

Sen. Barbara Buono (D-Middlesex) realized Jan. 8, the first day back after the legislators' three-week holiday break, that the plans for a comptroller were in trouble.

Corzine had first advanced his idea for an elected state comptroller while campaigning two years ago. It was the centerpiece of his ethics reform agenda.

The state needed a comptroller, he said, to serve as a citizens watchdog over state and local government budgets.

Almost immediately, it hit a road bump. Within Corzine's first month in office, lawmakers made it clear they would not support an elected state official answerable only to voters. So Corzine agreed to make the job an appointed post, removable only for cause.

Even that was too much, Buono discovered. As Senate Democrats mingled in Room L-202 on Jan. 8, Buono overheard three colleagues from Hudson County discussing the bill she had sponsored.

"A terrible bill," they said.

Sens. Joseph Doria, Bernard Kenny and Nicholas Sacco, the mayor of North Bergen, believed local officials didn't need the state looking over their shoulders. Doria, who is also mayor of Bayonne, protested that local budgets are already scrutinized by other state agencies.

"It was just adding a layer of bureaucracy," Doria said.

Together, the three men wield enough power to halt -- or at least slow -- any bill.

The Hudson delegation spent much of the next week negotiating with the governor. Late last Thursday, the Senate passed a retooled version, one that specifically says local governments do not need pre-approval to sign developer contracts, and one that limits auditing of local government entities.

Doria and Kenny hailed the change as improvements. Corzine also endorsed it, saying, "It has all the powers of anything I had asked originally."

Buono said the law "emasculates" the comptroller's authority. She not only withdrew her name as the sponsor, she bucked her party and voted against it.

JAN. 11: THE LOOSE-FITTING CAP

Three days after Democrats returned from their break, Corzine stood before a packed room at the Kelsey Theatre on the campus of Mercer County Community College.

Dozens of people had lined up behind microphones to quiz the governor about his tax plan, specifically the proposal to cap annual increases in property taxes at 4 percent.

The average New Jersey taxpayer had seen his or her bill balloon 6 to 7 percent each year -- more than twice the rate of inflation.

Corzine had been adamant about the need for a cap, even during his annual address to lawmakers that week. He and lawmakers decided to package the cap proposal with the least controversial reform provision -- a 20 percent tax credit -- so it would have a better chance of success in Trenton.

Many of the people waiting to quiz the governor weren't angry taxpayers looking for relief -- they were municipal or school officials looking to keep revenues coming. They wanted to be spared from the new limits.

"We struggle every year to put together a budget," Princeton Township administrator Jim Pascal told the governor. "We had to cut four police officers last year, when there was no cap."

For the first time, the governor acknowledged there would be exemptions so some towns and school districts could raise taxes as needed.

"This won't be a hard cap," Corzine said. In fact, he went on, "I'm fearful that it is going to be so holey we won't get the savings we're looking for."

By last week, Democrats had identified 27 categories for exemptions. After squeezing out the comptroller legislation Thursday night, Senate Democrats returned to L-202, sat down over pizza and began considering how to expand the list.

JAN. 17: SCHOOL PLAN

Sen. Stephen Sweeney (D-Gloucester) expected opposition, but not like this. More than 2,500 parents, schoolteachers and administrators packed into Washington Township High School, most of them enraged by the prospect of school consolidation.

As part of their tax reform plans, legislators had proposed establishing a "pilot program" consolidating school districts or services in one unnamed county. With it, they hoped, would come the elimination of hundreds of school administration jobs, and possibly the saving of hundreds of millions of dollars. With 48,000 students in 28 separate districts, Gloucester was among the 11 counties considered for the pilot.

The plan had received a lukewarm reception in the Statehouse. In early December, a planned vote on the proposal was quietly withdrawn when it became clear it lacked support. Some blamed the teachers union.

"It just shows the NJEA is still powerful," said Sen. Bob Smith (D-Middlesex), sponsor of the short-lived bill, referring to the New Jersey Education Association.

Critics were mobilizing people on the street. School administrators issued dire warnings about the impact of a countywide school system.

"I walked into a convenience store and a woman's yelling at me: 'How could you possibly take busing away from disabled children?' said Sweeney, who is also Gloucester County freeholder director.

In Trenton, Democrats had hoped to resuscitate the pilot program by letting county residents vote on whether to participate. The meeting at Washington High changed that.

Sweeney told the assembled crowd that the bill could still be amended, but they hadn't come to listen. They taunted him and shouted him down. "A public lynching" was how state Assemblyman Paul Moriarity, also the Washington Township mayor, described the scene.

The next week, Sweeney and Sen. Fred Madden (D-Gloucester) returned to L-202 and told their colleagues they could not support the pilot program provision. Without their two votes, Democrats lacked the majority to push the legislation through.

Its death was complete.

A second bill to target towns and school districts for elimination through consolidation got further. But by the time it passed the Senate last week, the authority to do anything more than propose which towns and school districts might be ripe for consolidation had been gutted.

Sweeney now questions if homeowners really want reform.

"What I found out with that countywide school thing is that people actually like the government they have," he said. "They just don't like what it's costing them."

JAN. 26: SYMBOLIC REFORM

Reining in school costs was supposed to be a critical part of the reform. Commodore Barry wasn't.

John Barry was a hero of the American Revolution and founder of the U.S. Navy. On Friday he achieved another honor: He became a symbol of the tortuous path that lies ahead of any attempt to cut school spending and thus ease taxes in New Jersey.

Property taxes, the largest tab by far for New Jersey homeowners, generate $11 billion for the state's 618 districts. The state chips in an additional $7 billion.

Which districts get how much has long been a focal point of the tax debate.

The Joint Legislative Committee on Public School Funding Reform was one of the four special committees established last summer. Its members promised results by December.

No formula has been proposed. And one of the reform bills to make it to the governor's desk was rejected, partly in deference to Commodore Barry.

The bill would have given school districts the option not to commemorate five patriotic holidays during the year -- a gesture that some supporters said would spare cash-strapped districts a small expense. When Senate Republicans complained about a slight against Flag Day, the proposal ended up back in L-202.

With Flag Day reinstated, Senate Democrats pushed the bill through the chamber and sent it to the governor.

He wouldn't sign.

Corzine used a conditional veto, instructing Senate leaders to reinstate Memorial Day, Veterans Day, Columbus Day, Presidents Day and, yes, a day for Commodore Barry. Each, the governor said, "serves as needed recognition of the many great leaders who have helped form this nation."

One lobbyist said the governor's veto proved the reform efforts have become a joke.

"This was a well-intentioned mission, looking to reduce mandates, made a laughingstock," said Lynne Strickland, executive director of the Garden State Coalition of Schools, a lobbying group that represents dozens of moderate and high-income school districts.

"The bill that emerged was simply symbolic to begin with. In the end it's symbolic of the way the process has gone and the way the property tax reform session has gone in general."

Staff writer Joe Donohue contributed to this report.