Christie Drops Demand for ‘Cap 2.5’ Amendment, and Now the Dealing Begins

Senate president now 'more than willing' to negotiate exemptions and adjustments with the Governor

After months of grand talk about state budget priorities and property tax reforms, welcome to a sleepier summer of Statehouse hearings and testimony on tax cap “exceptions” and “adjustments.”

Gov. Chris Christie yesterday may have effectively taken the big issues off the table, when he announced in an address to the special joint session of the Legislature that he would accept a 2.5 percent property tax cap by statute, not constitutional amendment.

Credit: NJ Spotlight
Assembly Speaker Sheila Oliver, with other Democratic leaders, speaks to what's next after Gov. Chris Christie's address to the Legislature.
Nothing is settled yet though, as Christie still wants the cap at 2.5 percent while state Senate President Stephen Sweeney and the Democratic-controlled legislature have proposed a cap of 2.9 percent.

So as the Senate and Assembly start their hearings on Christie’s proposals this morning, the big differences now rest in the details of the various exceptions, exemptions and adjustments to that cap.

In other words, time to bone up on the intricacies of health insurance premiums, school enrollment trends, pension costs and capital debt service.

Democrats Eager to Negotiate

“I’m more than willing to go through these exemptions with the Governor,” Sweeney (D-Gloucester) said at a press conference inside his office afterward. “That’s where the negotiations will be.”

Assembly Speaker Sheila Oliver (D-Essex) led a press conference of Democratic leaders immediately after the speech and also said much work remains in hammering out the details.

“There were many elements of his plan were music to our ears,” she said. “I think it gives us a starting point.”

In his “Cap 2.5” proposal, Christie has pressed for a 2.5 percent limit on increases in local and county property taxes that could be adjusted only for debt service. He added all capital expenditures yesterday, including debt service.

And during his 15-minute speech to a packed Assembly chamber, Christie repeated his emphasis that it could be overridden only by local voters, although did not mention a 60 percent super-majority. Christie also said he would allow local communities to temporarily adjust for payroll costs in existing labor contracts, although that would end once the contracts expired.

“This is less than a constitutional cap but much more than we have now,” Christie said. “A hard cap, at 2.5 percent, with just those limited exceptions and the ability for voters to determine their own tax fate in their own town — these are the principles of Cap 2.5 and these are my principles.”

Concern About Healthcare Costs

Sweeney’s proposal would allow for exceptions and adjustments for a half-dozen variables, including health insurance and pensions. He would also allow local school districts and communities to apply to the state for specific waivers to meet state standards for schools, and the citizens’ “health, safety and welfare” for municipalities.

These are not small items, by any stretch, with local communities especially fearing the continued rise in healthcare costs. The Senate president yesterday said he expected next year’s costs under the state’s own health insurance plan could rise as be as high as 20 percent. This year’s rate for an active public employee with a basic family plan rose 18 percent from 2009.

“We as a state haven’t been able to manage it,” Sweeney said. “How do we expect that of a local mayor?”

Still, even with these exceptions and more under existing law, property taxes this year rose just 3.3 percent, Sweeney said.

The Democrats could get some ammunition a week into the legislature’s summer session, when the rate recommendations for 2011 are presented on July 14 to the state Health Benefits Commission and the School Employees’ Health Benefits Commission.

In the meantime, the legislature will be back to work bright and early today, as the Senate Budget and Appropriations Committee is scheduled to meet at 8 a.m. Christie called the legislature into session today as well as tomorrow.

Sweeney said the committee would lead the deliberations over the summer and meet every Thursday to consider Christie’s proposals not just on tax caps, but also reforms in collective bargaining, civil service and other pieces of his 33-bill “tool-kit” for municipalities and school districts.

Three committees of the Assembly will also meet today, and Oliver has divided the 33 bills among 12 committees to devise recommendations over the summer for a final vote in the fall. Beyond today, a schedule of those committees’ meetings has not yet been set.