How will NJ’s new $15 minimum wage affect local governments?

Middletown has a population of 66,000. The Monmouth County city has horse farms, the beach and Big Mike’s Little Red Store. Middletown Mayor Tony Perry says raising the state’s minimum wage to $15 an hour will have a massive impact.

“We have estimated that over the course of the 5-year phase-in period that the minimum wage is set to evolve over, it has a $750,000 impact on our budget. That’s 1.5 percent of our budget,” said Perry.

Perry says that’s not just for wages but for added Social Security taxes and pension contributions. But how will Middletown pay for it?

“The taxpayers of Middletown can be assured that we’re doing everything that we can, budget meetings every single day about how to confront this mandate from Trenton and decide how we’re going to face it. And I can assure you services are not going to be cut, but we’re going to find a way, the best ways, to address this $15 minimum wage,” he said.

Perry says if affordability is the issue then the state should cut costs, like lowering property taxes. He says he favors paying living wages, but local government should decide that for their employees. And what about workers having more disposable income?

“At the same time, that’s when inflation occurs also. If we increase the minimum wage to $15 an hour, that’s only going to have a ripple effect on everything that we buy, all the activities that we and our families do. So those are the things that we’ll have to take into consideration. It’s always great to have a booming economy, but you’re not always going to have a booming economy. And when that economy decides to take a downturn, what then? Are we going to reduce the minimum wage,” asked Perry.

The New Jersey State League of Municipalities had not taken a position on the bill until the late hour when lawmakers bucked a long-standing policy.

“The local governments — be it a municipality, a county or a school district — was subject to the federal minimum wage but had been exempted like the state from the state minimum wage. This language wasn’t in any previous iterations of the bill. It had been state policy for decades,” said Michael Cerra, assistant executive director of the New Jersey State League of Municipalities.

Senate President Steve Sweeney has gone on record saying, “We had some people saying exempt government … but how do I exempt you guys when we’re making businesses pay? You lead by example, and for government to say ‘Leave me out’ is not leadership.”

Already one senator, Kristin Corrado, has introduced a bill to restore the exemption, saying, “The new minimum wage law is forcing local leaders to make impossible choices.”

The New Jersey League of Municipalities says it’s unlikely towns and townships and boroughs across the state will raise property taxes because of the 2 percent cap to make up for having to pay higher wages.

“And this is all going to fit underneath that cap. I think what it will do, is it will certainly for some services that have a great deal of interface with the public, such as recreation programs, youth programs, beach badges, it’ll likely increase registration fees. It might result in a decrease in hires or a streamlining of the services,” Cerra said.

The League estimates big cities such as Jersey City, which already has raised its minimum wage, will fare much better than smaller towns with tighter budgets. Nevertheless, the League says combine the wage hike with the failure to renew the 2 percent interest arbitration cap and locals waging expensive legal battles over affordable housing, and it adds to the “death by a thousand cuts” for local governments.