With Aid from Trenton Flat, Municipal Officials Foresee Problems

While inflation has risen 21 percent since mid-2007, total state aid to towns is down almost 11 percent over that time

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State aid to New Jersey municipalities would remain essentially flat under Gov. Phil Murphy’s budget proposal, with the total amount of financial assistance from Trenton to towns coming in lower than it was a dozen years ago.

The budget would allocate $1.55 billion to help municipalities cover costs in the 2020 fiscal year — a bump of just $4.1 million, or less than 1 percent, over the current spending plan. All of that increase would go for transitional aid, available only to cities and towns in dire financial straits. The most current data available from the state Division of Local Government Services shows 11 municipalities got $90.4 million in transitional aid during the 2018 fiscal year, with Paterson getting the most — $27 million.

That leaves all but a handful of communities with no aid increase from the state to help cover inflationary increases and a new higher minimum wage for towns’ lowest paid workers, such as summer recreation help.

In his budget address, Murphy promised $400 million in savings to schools, counties and municipalities from lower healthcare spending. But lawmakers from both parties want to see that money used exclusively for property-tax relief. And municipal officials say they are not counting on the savings because they have received no details about it, nor how much any individual town might receive.

“It is not yet apparent to us exactly what these savings entail and how much will be realized for municipalities, for counties and for school districts,” said Michael Cerra, assistant executive director of the New Jersey State League of Municipalities. “It is premature to suggest such savings should be used to offset property taxes when property tax relief funding has been flat for over a decade … and with all local governments operating under a 2 percent levy cap.”

In other words, municipalities may be stretching to provide services given that they’ve had flat aid for more than 10 years.

Towns facing the press of rising costs

Cerra said towns are also grappling with the expiration of a 2-percent cap on raises that an arbitrator could award police officers and paid firefighters to end a contract dispute, as well as the higher minimum wage, which will increase to $10 on July 1 and then continue to rise until reaching $15 in 2024.

These concerns have not stopped lawmakers, including Senate President Steve Sweeney (D-Gloucester) from calling for any savings to be used to reduce property taxes. Although the average local tax bill increased by the smallest amount in decades last year — less than 1 percent — New Jersey’s property taxes are still the highest in the nation, on average.

“One of my suggestions is if towns and counties can save up to $400 million in healthcare costs that we legislate that they have to cut their property taxes by those dollars saved,” Sweeney said Thursday in an interview with NJ Spotlight. “What happens is, when you get savings, there’s always a pressing need, there’s always a project that someone wanted to do. ‘Guess what? (Revenue) just fell out of the sky, now I can build my playground.’ So restricting dollars I think is critically important.“

A call for Trenton to pony up

Colleen Mahr, president of the League of Municipalities and mayor of Fanwood, said local officials are eager to learn “how the proposed $400 million in savings from collective bargaining translates to property tax relief at the local level.”

And while the league is grateful for the slight increase in transitional aid, what officials really want is for Trenton to pass along all the energy and other tax money they say is rightfully theirs.
As early as 1900, the state collected taxes on public utilities and transferred them to municipalities. Over time, some of the taxes, and how they were collected, changed. But ultimately they are all supposed to be municipal revenues, according to the league.

For decades, though, the state has collected and distributed the money, while skimming some for the state budget. That skim reached new heights during the Great Recession and continues.

Mahr called it “unfortunate” that Murphy proposes to continue diverting Energy Tax Receipts collected by the state for use in the state budget. She said the governor’s proposal of level funding for ETR and Consolidated Municipal Property Tax Relief Assistance (CMPTRA), the second-biggest category of municipal aid, is “better than a cut,” but still a disappointment.

If lawmakers agree with Murphy’s proposal, FY2020 funding for ETR and CMPTRA will total $190 million less than before the recession.

“The League continues to call on the administration and Legislature to begin the long-overdue full restoration of this property-tax relief,” she said.

Budget document touts shared services

Municipal services account for about $3 of every $10 paid in property taxes. (The rest goes for schools and counties.) And while the Consumer Price Index has risen by 21 percent from mid-2007, total municipal aid is almost 11 percent less than 12 years ago.

There could be some unknown amount of future savings to municipalities teased by the Budget in Brief document from shared services. Last year, Murphy named “Shared Services Czars” to encourage more municipalities to pursue shared services. The budget proposal would create a Local Assistance Bureau within the Division of Local Government Services to “facilitate shared services and consolidation assistance,” according to the document.
It also put forward the possibility of municipal savings from counties assuming certain local services, although that would raise county costs by at least some unknown amount.

“Local Government Services (LGS) has also provided the Governor with its first suggestions for services that should be offered at the county level, including recommendations that counties assume the responsibility for 9-1-1 dispatch, public health, and road maintenance (e.g., snow removal) for municipalities,” the Budget in Brief states. “The State’s largest cities may need to continue operating their own programs.”

No other details about when or even whether counties would take over road maintenance and other services, or about potential cost savings, were available. Murphy’s office referred questions to the Department of Community Affairs, which houses LGS, but officials there did not respond to a request for comment.

“We were unaware of these recommendations and still don’t know the details and what is the basis for them,” said the league’s Cerra. “We have no problem with the counties ‘offering’ any services, providing any such service agreement is entered into voluntarily by all parties.”

John Reitmeyer contributed to this story.

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