New scrutiny of longtime income cap on NJ seniors’ property-tax relief

Governor’s budget plan keeps lid on income eligibility for the ‘senior freeze’ program. But, amid concerns over outmigration, lawmakers may seek adjustment

seniors paying bills
It’s not easy to find, but among the details of the state budget for fiscal year 2020 that Gov. Phil Murphy released a few weeks ago is language that would deny some New Jersey senior citizens property-tax relief checks even though state law says they deserve them.

If lawmakers allow the fine print to remain in the state budget, that will once again keep a lid on cost-of-living increases that by law are supposed to go to seniors who meet all other qualifications for the state’s popular “senior freeze” property-tax relief program.

Murphy, a first-term Democrat, is just the latest governor to carry on the largely overlooked budgeting policy, which began when New Jersey was hemorrhaging revenue and struggling to get by during the Great Recession. But a decade later, continuation of the cap seems to be at odds with Murphy’s overall agenda of using fiscal policy to boost New Jersey’s middle class. Even as last month’s budget address was entitled “A Blueprint for the Middle Class,” the language buried within Murphy’s budget would keep seniors making the state’s median household income of $76,475 from qualifying for senior-freeze tax relief.

But there are signs of a possible policy change this budget season as lawmakers are beginning to show new interest in the issue. Just last week, Treasurer Elizabeth Maher Muoio was pressed on the issue of the senior-freeze cost-of-living adjustments during a budget hearing in the State House. In response, she told lawmakers the Murphy administration is at least willing to listen if they want to lift the longstanding hold.

“We leave that to the Legislature to determine,” Muoio said.

Income ceiling hasn’t risen in years

The senior-freeze program is officially called Property Tax Reimbursement, but it gets its more recognizable nickname from state-funded checks that are sent out annually to thousands of senior-citizen and disabled recipients to effectively “freeze” their property tax bills.

To qualify for the program, which started in 1997, homeowners must be at least 65 years old or disabled, and be at least a 10-year resident of the state. They also have to be the owners of their residence for three years and be up to date on their property taxes.

State law also sets an income ceiling for the program, which is supposed to rise each year to keep pace with inflation, much like Social Security benefits. However, governors and lawmakers from both major political parties for the last decade have been sneaking fine print into the state budget — a document that overrides the provisions of any state law — to hold the income ceiling at $70,000, even for married couples.

On raising the income ceiling, state Treasurer Elizabeth Maher Muoio has indicated Murphy administration willing to listen.
The ceiling was supposed to be $87,268 in 2017, and rise to $89,013 for the 2018 tax year, but the fine print that appears on page D-412 of Murphy’s detailed budget proposal for FY2020 proposes again holding the ceiling at $70,000, if lawmakers agree to go along, as they have for the last decade.

The first sign that the practice of holding back the cost-of-living adjustments is getting new attention from lawmakers came as Muoio appeared before the Assembly Budget Committee in Trenton last week. Assemblyman John Burzichelli, the panel’s vice chair, cited recent concerns about outmigration and discussions on whether high taxes are forcing many residents to leave the state, though “many people like to stay here.” He noted concerns about the $70,000 ceiling being in place for roughly a decade even though the limit should be nearly $20,000 higher by now, according to the law.

Leaving it up to Legislature?

“Should we provide any focus on the freeze program with consideration to bringing the program up to the statutory income?” asked Burzichelli (D-Gloucester).

“That would increase our expenditure going forward,” responded Muoio. “We’ll leave that to your guidance.”

According to Treasury, it would cost an estimated $16 million to fund the program at its full, statutory level. That’s a small amount of money considering the overall budget projection of $38.6 billion under Murphy’s spending plan.

Murphy’s budget already banks on higher spending on direct property-tax relief after he decided last year to hike the state’s income-tax deduction for property taxes from $10,000 to $15,000. The higher deduction limit will increase the revenue lost to the property-tax write-off from an estimated $675 million in FY2019 to $710 million in FY2020. Meanwhile, the allocation for the senior-freeze program is declining, from $204 million in FY2019 to $202 million in FY2020. And unlike the senior freeze, there are no income limits for those claiming the state’s property-tax deduction, meaning the growth in spending on direct property-tax relief in FY2020 will largely occur in the program that doesn’t directly target tax relief toward low- and middle-income residents.

Influence of Assembly elections

While taxes remain a key concern for New Jersey residents, the results of a recent public-opinion poll suggest Murphy has some work to do to gain their full confidence. Only 29 percent of those surveyed last month for a Rutgers-Eagleton/Fairleigh Dickinson University poll said they approved of the governor’s handling of the tax issue. Forty-two percent said New Jersey is headed in the right direction, versus 58 percent who said the state is on the wrong track.

Last year, lawmakers led by Assembly Speaker Craig Coughlin (D-Middlesex) acted to prevent recipients of the state’s popular Homestead property-tax relief program from being shortchanged by a budgeting snafu that took place the year before amid a dispute with then-Gov. Chris Christie. Full funding for the Homestead program — which provides tax relief to senior and disabled homeowners making up to $150,000 annually — eventually made it into the final budget for FY2019, although recipients of that tax relief now get direct credits twice a year instead of all at once as a result of the fix sought by Coughlin.

This year, the full Assembly is up for re-election in the fall, and property-tax relief is likely to be a key concern for voters.

Asked for comment on the senior-freeze issue last week, Coughlin spokeswoman Liza Acevedo said the speaker will “continue to work to ensure a budget is passed that protects seniors and working families.”

“As budget negotiations commence, Speaker Coughlin looks forward to working with Governor Murphy and Senate President (Steve) Sweeney to adequately fund the state’s priorities in a fiscally sound manner,” she said.

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