State Aid to New Jersey Municipalities Frozen for Third Consecutive Year

Christie’s proposed budget keeps funding at $1.5 billion for towns despite 4 percent inflation rate since 2011

New Jersey municipalities would see no increase in state aid for the third year in a row under the $34.4 billion budget proposed last week by Gov. Chris Christie.

While the $1.5 billion being distributed is better than the aid cuts municipalities had to absorb in 2008, 2009 and 2010, Christie’s first year in office, it does nothing to help communities keep up with inflation, which averaged about 4 percent between 2011 and this year, according to the U.S. Bureau of Labor Statistics. And the aid amount is nowhere near what municipal officials say the state owes them.

“It’s about what we expected,” said Jon Moran, senior legislative analyst with the New Jersey State League of Municipalities. “Still, we’re disappointed the state is not committed to returning some of the energy tax money to municipalities.”

One form of aid that towns receive is energy tax receipts. Originally, all of this money was earmarked to aid municipalities, Moran said, but after the state started collecting it, it began keeping some of the money. Between 2008 and 2010, the state held back more of the money, resulting in a loss of about $331 million to municipalities.

While Christie did not mention municipal aid in his budget address, state Department of Community Affairs Commissioner Richard Constable touted the stable aid levels in a press release, saying it is one of “the tools to make property tax relief a priority.”

But salaries and other costs keep rising, Moran noted, adding, “Local officials have done a stalwart job to keep things together these last six years.”

Public schools are also feeling the aid crunch, but Christie’s budget plans calls for some increase in funding for schools – the average hike in aid amounts to .4 percent, or the equivalent of about $20 more per student.

The state’s municipal aid formula has nothing to do with population — in fact, one of New Jersey’s smallest towns, Walpack in Sussex County, would get the most on a per capita basis: $7,388 per person for a total of almost $37,000. The largest municipality, Newark, will get $101 million, but that amounts to a more modest $366 per person. On average, the state distributes $169 per New Jersey resident. South Harrison, in Gloucester County, gets only $41 per person for about $130,000.

Public schools get close to $6,600, on average, per pupil.

Moran said municipalities used to get one form of aid based on population but historical aid categories have been combined into the Consolidated Municipal Property Tax Relief (CMPTRA) and Energy Tax Receipts (ETR) categories. Additional aid is given from the Garden State Preservation Trust Fund and to offset watershed lands.

“You can make changes to the municipal aid formulas, but you need to consider why they were put in place originally,” he said. “At least the state, from time to time, has looked at the education formula. There hasn’t been an increase in municipal aid for so long and there were significant cuts.”

The typical municipality stands to get 20.5 percent less in aid this year than in 2009.