In 2006, Italy won the World Cup, Beyoncé had two Billboard chart toppers and New Jersey property-tax bills averaged $6,446.
While a lot has changed over the last decade-and-a-half — including the size of those property-tax bills — the year 2006 remains frozen in time for one of the state’s most popular property-tax relief programs.
That’s because governors and lawmakers from both parties have for well over a decade been using outdated bills from 2006 to calculate property-tax relief benefits provided to seniors, people with disabilities and thousands of other homeowners who meet income qualifications for what’s known as the Homestead Benefit Program.
To carry out the annual shortchanging, every year they quietly insert fine print into the annual appropriations bill to override the state law that says Homestead benefits are effectively supposed to rise in value each year to mirror increases in the property-tax bills they are meant to offset.
This year, Gov. Phil Murphy has proposed the richest annual budget in state history, totaling nearly $45 billion. But unless lawmakers intervene, the shortchanging of Homestead recipients is poised to continue.
Moreover, while overall state spending would increase by more than 10% year-over-year under Murphy’s proposed budget, the amount set aside to pay for Homestead benefits will not be going up at all. Instead, budget documents indicate it will actually drop slightly, in part due to the program being stuck with that 2006 benchmark.
But property-tax bills are anything but frozen
Meanwhile, the size of the average New Jersey property-tax bill has been anything but stuck.
The average property-tax bill has increased by more than 40% over the last 15 years, reaching a record high of $9,112 in 2020, according to the latest figures from the New Jersey Department of Community Affairs.
For the recipients of the Homestead benefit, the pain is compounded.
The average Homestead benefit has been running at about $530 for seniors and roughly $410 for other qualified homeowners. Over the last five years, average property-tax bills have gone up by $563, easily swamping the full value of the average Homestead benefit, which has effectively been held flat for years. What’s more, the income limits for the Homestead program have remained unchanged for about a decade, all while median incomes in New Jersey have gone up by nearly 27% over the same period. That means people who had been getting the benefit may have seen a pay increase and then been excluded from the program while remaining below the statewide median income.
Despite those trends, the Homestead program has received little attention in Trenton in recent years. Yet there are indications changes could come up for consideration later this year.
During a recent appearance on NJ PBS’ Reporters Roundtable, Assembly Budget Committee Chair Eliana Pintor Marin (D-Essex) suggested lawmakers would review the Homestead program as they scrutinize Murphy’s broader budget proposals in the coming weeks.
“I think that’s something we’re going to take a look at,” Pintor Marin said.
The practice began in the Corzine era
The practice that results in the shortchanging of Homestead recipients — seniors and homeowners with disabilities making up to $150,000 annually, and other homeowners making up to $75,000 annually — started in 2008, during the tenure of then-Democratic Gov. Jon Corzine.
New Jersey was then in the depths of the 2007-2009 Great Recession and the budget was cratering. To help ease the crunch, Corzine decided to calculate the benefits not as a percentage of 2007 property-tax bills as state law would have required, but as a percentage of the smaller bills levied the year before.
The move was executed in budget language, with a signoff from lawmakers, and it saved the state an estimated $85 million in the 2009 fiscal year.
The freezing of the baseline year for calculating Homestead benefits has remained in effect ever since, and even after the state economy rebounded from the downturn during Republican Chris Christie’s eight-year tenure as governor.
During his budget address last week, Murphy used the phrases “property tax” or “property taxes” 10 different times. He also said his proposed $44.8 billion budget for the 2022 fiscal year would “continue to stabilize property taxes for hardworking families.”
But Murphy, a Democrat who faces reelection in November, made no references to the Homestead program, nor to the role he’s played in recent years to ensure benefits cannot keep pace with rising property-tax bills by maintaining the 2006 baseline.
Budget documents released by Murphy’s administration along with his new spending plan last week indicate the state will spend $260 million to fund Homestead benefits during the 2022 fiscal year. That’s down from the $275 million that was budgeted for the year before.
Small bump in direct property-tax relief
To be fair, Murphy’s new budget proposal does call for a small increase in overall spending on direct property-tax relief, up to a total $1.25 billion.
But most of the growth in direct property-tax relief spending is for underwriting a program that allows homeowners, regardless of their income, to take up to $15,000 in a state property tax write-off. Based on how that program is designed, the largest write-offs go to those with the means to pay property-tax bills that can run well above the statewide average on their state income taxes.
Treasury officials confirmed during background briefings with reporters last week that the planned reduction in spending on the more means-tested Homestead program is not due to anyone being kicked out of the program. It is instead effectively a function of there being fewer homeowners in New Jersey who will fall under the program’s static income standards, and also due to the plan to once again use budget language to set 2006 as the baseline for calculating benefits.
With all 120 legislative seats on the ballot in November, there could be more pressure than usual to change course.
Pintor Marin, during the Reporters Roundtable interview, noted the Homestead program has been a favorite of Assembly Speaker Craig Coughlin (D-Middlesex), who several years ago fought to undo an inadvertent cut in funding.
“We’ll have to take a look at whether we’re going to follow the statute or continue to fund it, as is,” she said.