2.5 Percent Cap on Government Spending Debated

By Tom Hester Sr.
NewJerseyNewsRoom.com
April 14, 2010

The state Community Affairs commissioner and the Democratic chairman of the Assembly Budget Committee Wednesday debated the worthiness of Gov. Chris Chirstie's proposal to place a 2.5 percent spending cap on the budgets of cities, towns, counties, and school districts.

In an appearance before the committee in Trenton to review the Department of Community Affairs' proposed 2010-11 budget, Commissioner Lori Grifa described the proposal as "at the heart of the governor's plan'' to attempt to get a grip on local government spending and high property taxes.

The proposal stems, in part, from a 2.5 percent spending cap Massachusetts placed on local government.

"We believe the proposition can work in New Jersey just as it's done in Massachusetts, which went from having the third highest property tax burden in 1977 to 33rd highest in 2005 after voters approved the measure in 1980,'' Grifa said.
Assemblyman Louis Greenwald (D-Camden), the committee chairman, argued the cap initially worked in Massachusetts because the state government provided increased state aid. As part of his proposed $28.3 billion 2010-11 budget Christie wants to cut aid to local government by $445 million.

Greenwald said he supports the cap proposal and would like to see a lower one but he added that the state needs to provide aid to local government if it is going to succeed. "If we are going to go down that road, that needs to be a factor,'' he said.

Greenwald expressed concern that a 2.5 percent spending cap would hinder the operation of governments and schools in the state's 31 poorest cities and lead to court action that could overturn the spending reduction effort.

He also said the Christie administration's decision not to make a $3.6 billion contribution to the state's financially-struggling pension system in 2010-11 will hinder any effort to hold down government spending.

The cap is part of a package of government spending reform bills Christie is preparing to ask the Democratic-controlled Legislature to approve before it recesses for the summer by June 30. If approved by legislators, voters would also be asked to approve the cap as a constitutional amendment on the Nov. 2 ballot. The proposal would allow local governments to exceed the 2.5 percent cap only is approved by local voters.

Grifa told the committee Christie's proposals will also include requiring local government employees to make contributions to their health benefits that equal or exceed the contributions required by state employees, capping payouts for accrued sick leave at $15,000 for current and future public employees, and allowing local governments to opt out of Civil Service standards, which she said would make it easier to initiate job furloughs or layoffs and pursue shared public services' agreements with neighboring towns.

"I want to repeat this point because it is an important one,'' Grifa said. "We do not believe a cut in state formula aid automatically means or should mean an increase in property taxes. Municipalities must find ways to cut the cost of government. They must set budget priorities and conduct rigorous reviews of their services and programs.''

Grifa said the the reduction of $445 million in state aid to local governments means no municipality or county will receive an aid increase in 2010-11, but she did note that the aid loss could mean an average property tax hike of $250.

"The calculation placed each (of 566) municipality into one of nine groups based on low, medium, and high equalized tax rates and wealth,'' the commissioner said. "Each group was reduced by a different percent, based on the wealth/tax burden. For example, the highest tax burden/lowest wealth group was reduced 14.45 percent while the highest wealth/lowest tax burden group received a 26.45 percent reduction. All reduction were limited by capping the increase in property taxes to the average residential property owner in each municipality at $250.''

Grifa said, "For those towns that are not making a good faith effort to curb property tax increases, the proposed budget gives them an incentive to reconsider the lack of effort. Any attempt by a municipality to use cuts in state formula aid as a reason to go above the 4 percent property tax cap currently in place will result in a decrease of remaining formula state aid by a like amount. Good faith efforts must be documented and will be scrutinized by the department in consideration of any waivers to the cap law.''

Grifa also said, "... Given the state of the economy and the difficult financial situation in which we find ourselves, Governor Christie and I are asking municipalities to do more. We understand the level of sacrifice we are asking towns to make, but we are confidant they will not only overcome it, but emerge from the experience better able to tackle any challenge with which they are presented.''

After the hearing, Greenwald said, "The administration seems very unfamiliar with the experience of Massachusetts and its 2.5 percent cap on property taxes. That should be a great worry to all New Jerseyans. I personally am very interested in a cap on property taxes, but we also must fully understand what we're doing. We need to understand that Massachusetts increased state aid with its cap, while Governor Christie is proposing a drastic cut. We need to understand that the cap in Massachusetts has helped lead to a growing disparity between wealthy and poor communities. Most of all, we need to work in a bipartisan fashion to solve these problems, even when the questions are tough."

Heavy criticism of Christie's budget by Democrats on the committee and their questioning of cabinet members, has drawn the ire of Assemblyman David W. Wolfe (R-Ocean).

“Governor Christie’s administration is making the tough choices needed to place our state on sound financial footing while proposing necessary reforms to make sure the mistakes of the past are not repeated, but some Democratic legislators have been singularly focused on bullying and haranguing his cabinet members in an obvious attempt to score cheap political points with hopes that people forget that their failed policies are why such a draconian budget was needed,'' Wolfe said after Grifa's appearance before the panel.

“Budget Committee Chairman Greenwald has allowed these budget hearings to devolve at times into an embarrassing spectacle,'' Wolfe said. "It is disrespectful and doesn’t move us any closer to a more affordable state. It would be more helpful if he abandoned the tired partisan sniping that contributed to New Jersey’s fiscal mess and heeded Acting Commissioner Grifa’s mantra to put ‘taxpayers first’ to solve this budget crisis. If the chairman were so concerned about the state’s bankrupting retirement funds, he should have done something about it over the past decade when the budgets he crafted turned a fully-funded pension system into one that’s underfunded by $46 billion.”

Greenwald responded to Wolfe's criticism.

"Assemblyman Wolfe claims Governor Christie is making tough choices with his tax-laden budget plan, but I wonder how the assemblyman is able to make that determination considering he has never asked a tough question during budget hearings,'' Greenwald said. "Assemblyman Wolfe would serve his constituents better by actually engaging in questioning and debate, rather than accepting with hardly a word the governor's proposed tax increases.

"We ask tough questions year after year of both Democrats and Republicans, and will continue to do so,'' Greenwald said. "It would be more helpful if Assemblyman Wolfe, in fact, abandoned his tired partisan sniping and actually joined our discussion in a relevant manner.