Gov. Phil Murphy was quick to take credit after news broke earlier this month that New Jersey’s hated property-tax bills grew at their slowest rate in decades last year, asserting his administration’s effort to boost funding for local school districts was a major factor.
But Republicans say “not so fast.” They point instead to the lasting impact of so-called “tool-kit” reforms that were adopted during the tenure of former GOP Gov. Chris Christie, including a 2 percent cap on annual levy increases that remains in effect.
While additional detailed property-tax data that could shed more light is still pending from the state, the debate will likely rage on for months in Trenton. Murphy has already announced he wants to spend even more on K-12 school aid in the new state budget due out in early March.
Meanwhile, Republicans are still angling for the reinstatement of a major Christie-era reform that expired last year — a hard cap on the salary increases for local police officers and firefighters through binding arbitration. That policy was credited with saving taxpayers hundreds of millions of dollars while it was in place.
Moreover, competing efforts are ongoing to change public-worker healthcare policy in New Jersey, something that could also influence local property-tax bills.
Property-tax bills still heading in wrong direction
According to figures published online earlier this month by NJ 101.5 FM radio, the average New Jersey property-tax bill increased to $8,767 in 2018. That was $77 more than the average bill levied in 2017, and the rate of growth was just under 1 percent, besting the 1.65 percent rate of growth seen between 2016 and 2017.
To be sure, the size of property-tax bills is still heading in the wrong direction in New Jersey, where many homeowners can no longer write off their full value from federal taxes due to President Donald Trump’s capping of the state and local deduction known as SALT.
But the modest growth rates of the last few years stand in contrast to the growth in the 2000s just before the Great Recession. For example, New Jersey property-tax bills rose by 7 percent year-over-year between 2005 and 2006, and by more than 5 percent between 2006 and 2007, according to data compiled by the state Department of Community Affairs.
During Christie’s eight years in office, property-tax bills never rose by more than 2.4 percent year-over-year, something he attributed to the strength of the tool-kit policies, including the 2 percent cap on annual property-tax increases, the limit on arbitration awards for police officers and firefighters, and increased employee-contribution rates that were established for public-worker health benefits and pensions. In fact, the rate of growth has been declining steadily since 2015.
“The trend is what it is,” said Sen. Declan O’Scanlon (R-Monmouth).
Murphy: More school aid good for local taxpayers
But another part of Christie’s record was the persistent underfunding of the state’s school-aid law as he pursued a tax-cutting agenda. That’s something Murphy underlined repeatedly during his successful 2017 campaign to replace the term-limited Christie and it’s something he continues to talk about today.
In fact, in his State of the State address earlier this month, Murphy noted that last year’s reduced rate of growth in property-tax bills coincided with an increase in funding for local schools that totaled $350 million in the fiscal year 2019 budget. Days later at a public event in Woodbridge, Murphy highlighted a 17 percent boost in aid that just went to the local school district there.
“The most effective property tax relief program is reinvesting in our public schools by the state so that local taxpayers shoulder less of the burden,” Murphy said.
While the increased school aid likely played some role in the slowed rate of property-tax growth experienced statewide, Marc Pfeiffer, assistant director of Rutgers University’s Bloustein Local Government Research Center, suggested it will take a more in-depth review of 2018 property-tax data to draw more definitive conclusions. Other likely factors pointed to by Pfeiffer are the Christie-era reforms touted by Republicans, as well as a sizable increase in the state’s ratable base that also occurred last year.
“It’s a mix of things,” said Pfeiffer, a former official with the Department of Community Affairs who is an expert on local property-tax issues.
No matter the explanation, what remains to be seen now is how long the string of slowed growth can last.
O’Scanlon: ‘It’s a real mess’
Many economists are raising concerns that a recession is looming, something that could lead to real-estate value losses that would shrink New Jersey’s ratable base and make it tougher for local governments to sustain current spending levels with only modest tax increases.
O’Scanlon, the Republican senator, is also warning about the impact the expiration last year of the 2 percent arbitration cap could have on local-government budgets as new contracts begin to be struck with no limit in place. A report released in 2017 suggested the cap saved property owners a combined $530 million while it was in effect.
“It’s a real mess,” O’Scanlon said of the situation caused by the loss of the cap.
Competing efforts to rewrite public-worker healthcare policy could also affect property taxes.
One proposed bill backed by some Democrats and the powerful New Jersey Education Association seeks to change employee benefits contribution rules that were established when Christie was governor, including by capping the amount workers pay toward their healthcare coverage.
But Senate President Steve Sweeney (D-Gloucester) is backing a separate push to enact a new round of proposed benefit cuts that were included in a report issued last year by a group of fiscal-policy experts, including Pfeiffer. The changes would include offering workers less costly “gold” coverage instead of the “platinum” plans they can currently choose. The proposal includes changes to pension benefits for many workers.
While Murphy has yet to embrace any of the policy group’s suggestions, O’Scanlon said they would give him an opportunity to generate significant property-tax savings.
“There’s nothing else you can do that’s going to save big numbers,” he said.