FAQ: How Gov. Christie's Property Tax Reform Would Work
A Patch guide to the proposals pending before the legislature.
The historic deal reached this weekend between Gov. Chris Christie and lawmakers over a new 2 percent property tax cap includes several exemptions. And lawmakers will be in session over much of the summer to consider a package of other legislation that could profoundly affect how local governments manage and pay their employees. We've prepared this guide to help you understand the cap, and the proposed legislation.
At the bottom, we summarize each of the 33 bills in Christie's proposed "toolkit" for municipal and county governments. The package includes legislation that would change arbitration and pension laws for local governments. Local and school officials have noted that they consider the toolkit necessary to help address the property tax cap.
What is the tax cap?
The property tax cap is the signature part of Christie's property tax relief proposal. It would cap property tax increases at 2 percent a year for local governments, but it includes certain exemptions (see below). It is a decrease from the current 4 percent cap, enacted during the administration of former Gov. Jon Corzine.
Is the 2 percent cap collective for the municipal, county and school governments or separate for each of the three entities that make up the property tax bill?
Separate. Each of the three government entities that comprise the property tax bill will be capped at 2 percent property tax increases, excluding the items exempted from the cap.
What are the exemptions allowed under this cap?
The property tax cap legislation negotiated by Christie and legislative leaders allows four exemptions to the cap: rising health care costs, pension payments, debt service payments and capital expenditures, including new equipment and public works projects. This is a decrease from the 14 exemptions allowed under the current 4 percent property tax cap. Emergency situations are exempted and Boards of Education are exempt from the cap if they experience a spike in school district enrollment.
What happens if a local government entity wants to go over the 2 percent cap?
The entity will need to hold a referendum seeking voter approval to go over the cap. Christie is touting this as a way for voters to control the future of property taxes.
Is this an amendment to the state constitution?
No. The deal struck between the governor and legislative leaders makes this a statutory cap and not a constitutional cap. The cap will be passed after Christie conditionally vetoes a property tax cap bill sent to him by legislative Democrats. The conditional veto will state the conditions laid out in the agreement. The legislature will then pass the new bill.
The constitutional amendment proposal is currently off the table given the deal struck by the governor and legislative leaders to implement a property tax cap by statute.
Can cap savings be banked?
Yes, for up to three years. Local governments that raise taxes under the cap can bank the difference between the two percent and the actual increase for up to three years. The local governments can then use banked percentages to raise taxes above the cap in a future year in the three year period.
Is the banking proposal different from other proposals?
Yes, legislative Democrats had proposed indefinite banking of savings of property tax increases under the cap.
Will this pass?
Democratic and Republican leaders in the State Senate were part of the negotiating team on the compromise, and Senate President Steven Sweeney (D-West Deptford) has promised passage in his chamber. Assembly Speaker Sheila Oliver (D-East Orange) said she did not participate in the negotiations and the matter is scheduled for consideration before the Assembly budget committee on July 7. Assembly leaders have said it will likely pass the chamber. Assembly Republicans played a role in the final negotiations.
When will this start impacting local government budgeting?
Immediately. The cap will take effect for the budgets starting in 2011. Most local and county governments start the budget process over the summer and with the cap, it will likely be under consideration with decisions starting immediately.
Will this have an effect on local governments?
Yes. The degree of the impact depends on whom you talk to. Proponents of the tax cap talk about the impact of controlling property taxes on the local level. Opponents, including the New Jersey Education Association, say it will cause a reduction in local government services and the layoffs of teachers, along with a reduction in teacher salaries.
What is the toolkit?
The toolkit is a 33-bill package Christie has sent to the legislature for consideration in a special session this summer. He and his allies argue that the package will provide budgeting tools to municipal, county and school officials for negotiating public employee contracts and handling other issues that affect budgets and tax levies. The governor said he is proposing the toolkit at the request of local leaders who have asked for increased ability to negotiate and handle budgets.
The package has gained opposition from public employee unions and trade associations, along with liberal bloggers. The unions, including the New Jersey Education Association, say the toolkit is "union busting" and would water down civil service provisions protecting public employees, hurt preferences for veterans in public employee hiring and hurt public education. The unions have centered several of their attacks on the arbitration proposals in the governor's package, which they say will shift the balance of power in favor of management and hinder the right of the unions to bargain.
Is the property tax cap part of the toolkit?
Yes. It is the first of the 33 bills.
What are the other 32 proposals?
1. A constitutional amendment for a 2.5 percent cap on annual increased spending on state government operations excluding school aid, municipal aid and property tax relief.
2. Reforming the procedure for selecting arbitrators to resolve union contract disputes when negotiations fail.
3. Public arbitrators will be required to consider the impact of public employee contracts on property taxes. The current law does not require this.
4. Arbitrators cannot make awards that exceed the cap.
5. Eliminating participation in public employee pension systems by employees of non-governmental groups. Currently employees of such groups as the New Jersey League of Municipalities can participate in the state government employees pension system.
6. Cap the sick leave and vacation carry over time of current public employees. The current system allows public employees to carry over unlimited time.
7. Shared services reform including eliminating certain civil service protections when services are shared. Christie's office is saying that current laws mandating the buying out of public employee contracts, bumping and other civil service protections do not allow for efficiency in shared services. (According to the governor's office this proposal is actually two bills covering different aspects of the law.)
8. Allow local governments to institute public employee furloughs.
9. Allow counties and municipalities to opt out of the civil service system either by ordinance or a referendum initiated by 15 percent of registered voters.
10. Changes many public employee offenses to "minor" to reduce the hearing process and cost.
11. Changes many police officer offenses to "minor" to reduce the hearing process and cost.
12. Changes many firefighter offences to "minor" to reduce the hearing process and cost.
13. Revises the appeal process for public employee hearings to reduce costs.
14. Revises the public employee layoff rules in order to reduce the bumping of less senior employees who are deemed more essential to the organization.
15. Gives the chairman of the state civil service commission more control over the day-to-day operations of the agency. The governor's office said this would be similar to the powers the commissioner of the state Department of Personnel had before the department was changed back to the commission.
16. Increases the testing and appeal fees for civil service tests.
17. Allows the chairman of the state civil service commission to make seasonal appointments for up to nine months.
18. Allow municipalities to offset property tax refunds against state income tax refunds.
19. Expands who can bring appeals to the state Council on Local Mandates. Currently only individual municipalities can bring appeals to the council. This proposal would allow groups of municipalities or the state League of Municipalities to bring appeals. The council was formed by state legislation in the 1990s, sponsored by former Assemblywoman Maureen Ogden (R-Short Hills) and signed by former Gov. Christie Whitman, in order to address what Ogden, a former Millburn mayor, found to be unfunded mandates from the state to municipalities. The "state mandate, state pay" legislation requires the state to pay for any mandates it places on local governments. Local governments can appeal a state law if they believe it is a state mandate where the state is passing the cost on to local governments. Former Summit Mayor Janet Whitman is a member of the council.
20. Future teacher contracts and other school district public employee contracts cannot exceed the cap.
21. School districts can impose last/best offer contracts under certain circumstances.
22. The executive county superintendent of schools will be required to approve all contracts with school district unions and superintendents of schools. The county superintendent would not be allowed to approve a contract that goes above the cap. This legislation would shift control over the final contracts from the local school district to the state Department of Education. The county superintendent is appointed to the post by the state education commissioner and governor and serves as an agent of the state for the geographic region of the county.
23. The executive county superintendent of schools will be required to implement the sharing of business functions across school districts. This would allow for more sharing of the business office functions and shared services across districts including payroll, transportation and human resources to name a few. Currently several school districts have similar programs including the shared business administrator between the Clark Township and Garwood Boards of Education. In addition, districts utilize shared services agencies including the Morris Union Jointure Commission on certain shared services.
24. Changes the formulas used for determining the contracts for public higher education employees.
25. Designates state colleges and universities as the employer of record for certain collective bargaining agreements.
26. Allows state colleges and universities to hire faculty members for probationary periods. This would change the traditional tenure track vs. non-tenure track rules that govern higher education faculty hiring in the United States.
27. Remove classified employees of public higher education institutions from the state civil service system and move to the personnel system of the institution.
28. Create a separate workers comp system for public colleges and universities.
29. Require that county clerks send a single sample ballot to each household and not one per voter.
30. Move elections for Boards of Education and fire district commissioners to the day of the November general election. This move has been opposed by those saying it would make the non-partisan offices more political. The estimates provided by the state say $4 million a year can be saved by moving the school elections from April to November. It would also increase voter participation in the traditionally low voter turnout elections.
Where does the toolkit go from here?
The toolkit will be debated by the state legislature in a special session over this summer. The governor and legislative leaders continue to negotiate over the package. Christie has indicated he would like the bills to pass during the summer session.