Budget & Finance

N.J. Property Tax Cap Sparks Funding Concerns

By Lesli A. Maxwell — July 12, 2010 3 min read
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Some education officials in New Jersey are warning that a new legislative agreement that would cap annual property-tax increases could further erode already-tenuous budgets for the state’s public schools.

Republican Gov. Chris Christie struck a deal earlier this month with Democratic leaders in the legislature to impose a 2 percent cap on growth in local property taxes that the governor said would deliver “long-overdue relief” to residents who pay some of the highest property taxes in the nation. The state Senate was expected to approve the cap late last week, and members of the Assembly were due to take up the measure early this week.

That agreement followed closely on the heels of Gov. Christie’s signing of a $29.4 billion budget for fiscal 2011 that carves deeply into spending on public schools and aid to cities and towns, and postpones the state’s $3 billion contribution to pension funds for public employees, including teachers. Those cuts help close an $11 billion gap that the governor insisted be done without raising any taxes.

All told, public schools will see a $1.3 billion reduction over fiscal years 2010 and 2011, though, according to the governor’s office, most of that drop is due to the drying up of federal stimulus dollars. Total state aid for public schools in fiscal 2010 was just over $11 billion, according to the state education department.

That reality, coupled with the new, stricter limits on raising revenue through local property taxes, would be challenging for local school leaders.

“We’re looking at some very tight financial times,” said Frank Belluscio, the spokesman for the New Jersey School Boards Association.

Limiting Increases

Under the deal on property taxes, a 2 percent cap on growth will replace the current 4 percent cap. The current cap allows for more than a dozen exceptions, which Gov. Christie has referred to as “Swiss cheese.”

The new cap, according to the governor’s office, can only be exceeded in limited circumstances: to keep up with rising health-care and pension costs for public employees; to pay for capital expenditures and required debt service; and for expenses that result from a state of emergency. The cap may also be exceeded when a simple majority of voters in a local community approve doing so.

In striking the agreement with state lawmakers, Gov. Christie relented on his earlier insistence that any new cap on property taxes be placed on the ballot as a constitutional amendment.

Members of the New Jersey School Boards Association were relieved that health-care costs would be an exception to the cap, especially as those are expected to rise as much as 25 percent next year, Mr. Belluscio said. School districts are already reeling from health costs that shot up 20 percent to 25 percent this year, he said.

But other rising costs—such as those associated with special education and increasing student enrollments—should also be part of the compromise, he argued.

“Being able to adjust for health-care costs is critical, so we are happy that those are in this compromise,” Mr. Belluscio said. “But districts have extraordinary special education costs, like out-of-district placements, that they have no control over. Clearly, we feel there should be an exception for those.”

Teachers’ Union Responds

While the school boards’ association has generally been supportive of some sort of property-tax cap, the New Jersey Education Association, the statewide teachers’ union, has argued vigorously against changing the current limit.

Union leaders and the first-year governor have been battling since his campaign last year over everything from his selection of well-known school choice advocate Bret Schundler for state education commissioner to the state’s application to compete for the federal government’s $4 billion Race to the Top competition. But fiscal issues have sparked the biggest fights.

After Gov. Christie announced the new property-tax-cap agreement with Democrats in the Senate, the teachers’ union put out a statement that called the consequences of the deal “grave.”

“It contains no exception for rising special education costs in local districts, so parents of students with special needs should prepare for fights with districts over the services their children need,” the National Education Association affiliate said. “It contains no exception for inflation, including the cost of fuel, textbooks, or supplies.

“As school budgets, which have already been slashed this year, are stretched tighter, deeper cuts in staff and even larger class sizes are inevitable,” it said. “Parents should prepare to see extracurricular programs eliminated and higher fees imposed on previously affordable activities.”

A version of this article appeared in the July 14, 2010 edition of Education Week as N.J. Property-Tax Deal Prompts Fresh Concern About School Funding

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