There's big news out of New Jersey. No, Lebron James didn't sign with the Nets. Rather, on Saturday, Governor Christie and State Senate leaders announced a deal to cap annual property tax increases at two percent. According to news reports, the cap, which will be statutory as opposed to constitutional, has four big exceptions: health care costs, pension costs, increases in school enrollment, and capital expenditures. Currently, property taxes are subject to only a four percent cap and 14 exemptions.
The deal is a far cry from what either sides originally proposed. For his part, Christie sought an amendment to the state constitution that would cap property tax hikes at 2.5 percent annually, a limit that could be overridden by a 60 percent majority of voters. But the State Legislature's leaders balked at a constitutional amendment, proposing instead a statutory 2.9 percent cap with exceptions for public safety, health, and welfare. Both sides gave up some things to reach a deal that could become law.
We here at NTU strongly supported Governor Christie's original proposal. We believe that only a "hard" constitutional cap, similar to what Massachusetts enacted in 1980, will provide New Jerseyans with real relief from the nation's highest property taxes. Moreover, a constitutional cap will deliver tax relief without sacrificing quality of public services like education, as a recent study the Common Sense Institute of New Jersey and the Manhattan Institute has shown.
The inherent weakness of a statutory cap is that politicians, who cannot kick their addiction to spending, can raise the cap and, in doing so, taxes without voter approval, which is exactly what has happened in New Jersey according to my friend and colleague Paul Tyahla. Further, the exemptions baked into a statutory cap provide local governments with plenty of excuses to raise taxes on already overburdened New Jerseyans rather than forcing municipalities to be more fiscally prudent by holding the line on spending. In fact, the current exemptions are part of the reason why New Jersey has the highest property tax rates in the nation.
That said, a statutory cap is a step in the right direction because it's an indication that the Democrat-dominated legislature is beginning to see the need for serious fiscal reform. There is still much more that needs to be done to reign in high taxes that are the result of overspending by New Jersey's state and local governments, and build on what has happened under the Christie Administration. To date, Governor Christie has signed a $29.4 billion budget for Fiscal Year 2010-11, which is $3 billion less than last year's; he successfully vetoed a $600 million income tax hike the State Legislature wanted; he instituted the first serious reforms to the state's public employee pensions and health benefits; and, he has begun efforts to reshape the New Jersey Supreme Court, which has imposed spending mandates that have helped to tie the hands of lawmakers. In total, this is an impressive list of accomplishments given the political dynamics of the state.
Going forward, what needs to be done is to enact the remainder of Governor Christie's plan to reform New Jersey, which he calls his "33-point toolkit." The toolkit includes not only the property tax cap, but dozens of changes to collective bargaining, arbitration, and furlough requirements for public employees. Additionally, there are requirements for shared services, civil service opt-outs for municipalities, and allowances to take "last best offers" in contracting. These changes will help bring the size and scope of the state and local governments in New Jersey under control, which will reduce the demands for increased spending and higher taxes. We think these reforms are vital to ensuring that the newly-agreed upon gap isn't rendered toothless by its exemptions and we hope that the legislature will work to immediately enact them into law.
The property tax cap is only the beginning on the long road of reform in New Jersey. There's still much, especially in reforming spending and government, that needs to be done. Christie has done a lot already. Let's hope he continues on the path.