Extra Homestead Credit in Pipeline, But Budget Ploy Keeps Lid on Amount

John Reitmeyer | July 20, 2018 | Budget
Homeowners who waited in vain for full NJ property-tax credit in May will get a makeup credit. But state has ways to keep lid on what’s paid out

seniors paying bills
More than 600,000 New Jersey residents who saw their Homestead property-tax relief credits shortchanged earlier this year — thanks to a state government budgeting mix-up — will be made whole with a makeup credit coming this fall.

According to the Department of Treasury, language was written into the spending plan for the current fiscal year that calls for homeowners who qualify for the state’s Homestead property-tax relief program to get an additional direct credit this year; the credit will show up on bills that are due by November 1.

The extra Homestead credit will ensure that homeowners who were shorted by the state in May will be caught up in the same calendar year; this would fulfil the promises made by Democratic legislative leaders as they worked on the new budget that Gov. Phil Murphy enacted earlier this month.

Still, the new budget isn’t a complete victory for the thousands of seniors, disabled, and low- and moderate-income residents who benefit from the Homestead program. Treasury officials also confirmed that other fine print in the final version of the fiscal year 2019 spending plan will continue to keep a lid on the size of the credits to prevent them from keeping pace with rising bills.

In all, more than 600,000 New Jersey homeowners benefit each year from the Homestead program, which provides property-tax relief credits and rebates to take some of the sting out of the state’s notoriously high property-tax bills. Until this year, Homestead credits — which are typically provided as a direct credit on property-tax bills due by May 1 — averaged $515 for senior citizens and disabled homeowners making up to $150,000 annually, and $401 for middle- and low-income homeowners making up to $75,000 annually.

Other property-tax relief initiatives

But a budget battle last year between Democratic legislative leaders and then-Republican Gov. Chris Christie resulted in the nearly $300 million line item for the Homestead program being cut in half for fiscal year 2018. The reduction caused this year’s Homestead credits to average an estimated $259 for senior citizens and disabled homeowners, and $202 for other homeowners making up to $75,000.

The original budget proposal that Murphy, a first-term Democrat, put forward for the 2019 fiscal year would have maintained the reduced funding for the Homestead program. But legislative leaders tacked on $154.7 million for the program in the budget legislation they sent to Murphy in late June, and that funding was left in the final version of the fiscal 2019 appropriations act. Other language in the budget calls for the second credit to be provided this year on the bills that are due by November 1. Additional credits are to be paid out in May and possibly November 2019.

“We’re glad we were able to reach an agreement with the Legislature to fully fund Homestead rebates this year and continue delivering relief next year,” said Jennifer Sciortino, a spokeswoman for the Department of Treasury.

She also highlighted other property-tax relief initiatives that made it into the final version of the budget, including funding to increase the state’s income-tax deduction for property-tax bills from $10,000 to $15,000, and to boost direct state aid for K-12 school districts.

“The Governor is committed to delivering property tax relief to working and middle-class families and this year’s budget delivers on that in many ways,” Sciortino said.

Not all good news

It’s not all good news for New Jersey homeowners as Murphy’s first budget is continuing a tradition of using fine print to keep the size of the Homestead credits frozen instead of allowing them to increase every year to keep pace with rising property-tax bills — something the program was originally intended to do.

The practice of freezing the credits started in 2007, when Democrat Jon Corzine was in office and was facing a round of budget problems. To find some breathing room, Corzine decided to calculate that year’s Homestead benefits not on 2007 property tax bills, but on the smaller bills from the previous year. The move was executed by Corzine and lawmakers in budget language.

Fast forward to this year, and the language that’s been used to keep 2006 as the baseline year for calculating Homestead credits remains in the budget, having been carried over by Christie and now Murphy. What it means for Homestead recipients is that credits are still being calculated as a percentage of property-tax bills that averaged $6,446 in 2006, well below last year’s average of $8,690.

Further complicating matters is a long lag that has built up in the Homestead program, largely caused by Christie’s decision to delay the payment of credits on several occasions when faced with his own budget problems. Technically, the credits that homeowners receive this year are intended to help offset the property taxes they paid in 2015, and next year’s credits will be for the bills they paid in 2016.