Deep Cuts to Homestead Tax-Relief Program Courtesy of Christie’s 2018 Budget

Seniors and disabled homeowners could see their tax-relief rebates cut by almost half, with no funding to restore them in Murphy’s 2019 budget plan — at least not yet

seniors in garden
Many New Jersey homeowners are facing increased property tax bills this spring, after the state Legislature cut the Homestead tax-relief program during last year’s budget battle between lawmakers and former Gov. Chris Christie. Homestead tax credits and rebates will generally be about half of what they were in 2017.

More than 600,000 lower- and middle-income New Jersey homeowners, including senior citizens and the disabled, have become used to Homestead credits and rebates to take some of the sting out of high property taxes in the state. A notice was posted online by the Murphy administration last week that offered new details about the reduced Homestead relief that’s being provided under the budget inherited from Christie’s administration. For senior citizens and disabled homeowners, Homestead credits that have averaged $515 in past years will instead be worth $259 on average this year, the notice said. For other homeowners making up to $75,000, the credits are shrinking on average from $401 to $202 this year.

The reduced tax relief is sure to be a bitter pill for homeowners to swallow this year, since it comes after yet another increase in New Jersey property taxes, with the average bill going up last year by $141, to $8,690. But another big concern for homeowners is whether this year’s reduced Homestead funding could become the new normal for the longstanding tax-relief program.

Murphy’s budget proposal for the 2019 fiscal year doesn’t restore the Homestead program’s prior funding level, even as it would increase spending on another property-tax relief program that tends to help the state’s wealthiest residents more than others. Treasury officials offered no assurances when asked by NJ Spotlight on Friday if homeowners should expect this year’s Homestead cuts to be reversed in the final version of the fiscal 2019 budget.

No secret to legislators

State lawmakers were well aware of the predicament they helped create last year as disputes with Christie over funding for K-12 education, legislative add-ons, and the then-governor’s push to ramp up regulations on Horizon Blue Cross Blue Shield, the state’s largest health insurer, ended up pushing agreement on the fiscal 2018 spending plan beyond the state constitution’s June 30 budget deadline. In fact, the deal Christie, a Republican, ultimately reached with Democratic legislative leaders wasn’t finalized until the early morning hours of July 4 — after photos of Christie sitting in a beach chair with his family on Island Beach State Park, which was closed to the public as a result of the shutdown, went viral and became national news.

In the final budget deal, funding for K-12 education was boosted by more than $100 million, with much of that extra revenue sought by the Democrats being used to address school-aid inequities caused by enrollment caps and other arcane regulations. But the extra education funding came at the expense of the Homestead program, as the final budget resulted in Christie’s original proposed allocation of $332 million being effectively cut in half in the final agreement.

Language in the budget documents that were drafted last year suggests lawmakers were ultimately counting on a new gubernatorial administration to push funding for the Homestead program back over the $300 million mark to ensure no one would get hit with a higher bill this May, which is when the credits are typically paid out. Under the envisioned scenario, the state would have simply reimbursed municipalities this July, after a fiscal 2019 spending plan is adopted, for paying out in May the full credit that has traditionally been provided to homeowners. In fact, the framework of such a budget maneuver was first suggested by Christie administration officials as they were facing a sizable budget shortfall last May.

Same old, same old

But this year, after Murphy, a Democrat, took over for the term-limited Christie in January, his new administration proposed a $143.5 million allocation for the Homestead program in the fiscal 2019 spending plan. That carried over roughly the same, reduced amount that ended up being included in the final budget for the current fiscal year. By contrast, up until this year, the state had been spending much more on the Homestead program during Christie’s tenure; $341 million in fiscal 2016, $374 million in fiscal 2015, and $400 million in fiscal 2014, according to budget documents.

Since the Homestead program works as a direct credit on property taxes, the notice posted online last week by the Division of Taxation spelled out for the first time the direct impact this year’s Homestead funding will have on the bottom line for recipients.

“The factual information on our website is based on what is currently budgeted and is intended to help clarify questions we typically get each year as credits/rebates are about to be issued,” said Treasury spokeswoman Jennifer Sciortino. “It would be inappropriate to post prospective information on a budget that has not yet been finalized.”
If a deal on Homestead funding can’t be reached between Murphy and lawmakers, it would be just the latest blow for the longstanding tax-relief program. About a decade ago, Homestead was funded with more than $2 billion, and it had much higher income ceilings, allowing for rebate checks that averaged over $1,000 to go out to many more New Jersey homeowners. But there are other initiatives in Murphy’s fiscal 2019 budget aimed at reducing property taxes, including a plan to increase K-12 education aid by $284 million, and to expand the size of the state income-tax deduction for property taxes, from $10,000 to $15,000.