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New Jersey’s Laws and Fiscal Safeguards Make Municipal Bankruptcy Unlikely

Structure and functions of local government

To understand local government finance in New Jersey and the oversight role played by the state, it is helpful to consider the overall state and local government structure. New Jersey has a very strong central state operation with a governor who has significant appointment and budgetary powers. New Jersey local governments tout their home-rule powers – while that is true in certain circumstances, when it comes to local and school finance the state’s powers and oversight responsibilities are quite extensive.

State Structure: The state’s Office of the Governor is often viewed as the strongest in the country. Unlike any other state, the governor is the only officer elected statewide, and all cabinet officers and principal state officials are appointed by the governor. (The office of lieutenant governor was created in 2006 and runs with the governor in elections.). The governor has both constitutional veto power to propose changes in enacted bills and an absolute line-item veto to eliminate specific provisions in appropriations acts – including dollar amounts and language. The Legislature is composed of 40 senators elected for four-year terms and 80 Assembly members elected for two-year terms.

There is a unified court system headed by a Supreme Court which makes rules governing all the courts in the state and has jurisdiction over admissions to the bar and discipline of attorneys. All state court judges, including the Supreme Court judges, are appointed by the governor with the advice and consent of the Senate, and they are precluded from political activity and outside employment. If re-appointed after an initial seven-year term, judges receive tenure, with a mandatory retirement age of 70. The governor appoints each of the 21 county prosecutors. (4)

Home rule: While explicit grants of home rule are avoided in the state’s constitution, a relevant section reads as follows: \The provisions of this Constitution and any law concerning municipal corporations … shall be liberally construed in their favor. The powers of counties and such municipal corporations shall include not only those granted in express terms but also those necessary or fair implication, or incident to the powers expressly conferred… (5)

While many scholars emphasize the sweeping nature of this provision, judicial decisions have been mixed. Although some courts have taken a strict constructionist approach to local powers, and in general courts have honored the spirit of the constitutional provision, they have also supported the state’s right to preempt activity in any given field.

The Supreme Court has generally been deferential to local government when individual rights have been involved. Alternatively, a series of landmark decisions in 1975, 1983 and 1986 ruled that all municipalities have a constitutional obligation through their land-use decisions to provide a realistic opportunity for meeting the region’s need for housing for moderate and low-income families (a.k.a. the “Mount Laurel” cases). The Legislature has provided a number of ways in which municipalities may meet this obligation -- ways that have evolved over time. (6)

Structural Features of Home Rule: The state’s 566 municipalities range from Tavistock Town, with just five residents, to large cities like Newark (277,000) and Jersey City (247,000). Despite the state’s population of almost 9 million, only six municipalities in the state have populations of 100,000 or more.

The Home Rule Act of 1917 formally granted townships authority as full-fledged municipalities and granted a long list of specific powers to all municipalities.

Where municipalities do vary, however, is in the organization of their government. Each type of municipality has a different structure as set forth in state law – city, town, borough, township or village. Voters have the option of changing the structure to one of several optional forms of government based on laws passed over the years, including council-manager, and strong mayor-council.

The 21 counties in New Jersey have been historically governed under a committee system with the governing body known as the “Board of Chosen Freeholders.” Traditionally, freeholders take responsibility for supervising specific county departments –either individually or through a committee structure. In 1972 the Legislature enacted an optional charter law for counties. This provided the option of having an elected county executive.

Annexation of territory and consolidation of municipalities is authorized by law, but since the entire area of the state is part of an incorporated municipality, the agreement of both jurisdictions is required for consolidation.

The Legislature’s constitutional responsibility “to provide for the maintenance of a thorough and efficient system of free public schools for the instruction of all children of the state between the ages of five and eighteen” has been delegated to what are now approximately 600 local school districts. Historically, the schools were coterminous with municipalities, but there are approximately 70 regional districts that cover more than one municipality. (7)

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