Could NJ be forced to boost property tax relief?

New Jersey finances are shaping up in such a way that – gasp! – the state might have to do more to lower your property taxes.

In essence, New Jersey is running out of ways in its current budget to allocate the income tax and sales tax revenue it is legally required to put toward property tax relief. It might be compelled to consider things like allocating more money for schools, towns and property tax credits.

The state has other options, such as amending the constitution to change how income tax proceeds can be used or reclassifying some of the ways it already spends money so those appropriations can be treated as property tax relief.

"There are several options. One of them is to accept the constitution and put more money into property tax relief and less into other things. That's at least a possibility," David Rosen, the Legislature's budget and finance officer, told lawmakers last week.

Among ready alternatives:

The state could put more money into school aid. It puts $1 billion less a year into school aid than its funding formula envisions.

Around $1 billion could be put into property tax credits if the original law were followed and limits on credit amounts and eligibility were lifted.

Even the bigger state pension payments sought by unions could be considered property tax relief because the state makes the payment in connection with local government employees.

"What that means is you'd have less money available for other things the state budget pays for," Rosen said. "But that's another option. You don't have to shift stuff around, you could in fact change priorities based on what the constitution says."

Cutting income taxes could be an option, as well.

By law, every dollar from income taxes has to go toward property tax relief. In the upcoming year, that's expected to total about $14 billion. Since 2006, a portion of sales tax revenue also goes toward property tax relief. That's expected to total around $710 million in the upcoming year.

In a $33.8 billion state budget, that amounts to $3 of every $7 being earmarked for certain types of programs.

For the first 40 years of the Property Tax Relief Fund, the requirement hasn't much mattered. The state always put more toward property tax programs than the income tax actually generated.

But income taxes now account for 41 percent of state budget revenue and counting. In 2016, just $148 million in general-fund dollars will go toward property tax relief. In fact, much of the state's rainy-day surplus will be locked in the property tax relief fund, unavailable to fund general needs in a pinch.

"You're getting right up at the edge," Rosen said.

 

Treasurer Andrew Sidamon-Eristoff said it's "become more and more challenging as time goes by" to identify expenses that can be covered by the (Property Tax Relief Fund), and he said future administrations and legislatures will probably have to grapple with maintaining the balance.

"That gives us less flexibility going forward," Sidamon-Eristoff said. "At some point, we are going to run out of property tax relief fund-eligible expenditures, and then we'll be in an ironic situation."

New Jersey has the nation's highest average property tax bill, more than $8,000.

 

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Assemblyman Troy Singleton, D-Burlington, said it "seems almost ludicrous to think that we don't have enough expenses for property tax payments in New Jersey."

Still, hitting the wall — the point were income tax revenues exceed property tax-relief eligible programs —might not mean increasing local aid or credits for taxpayers.

The state has other options, such as moving $800 million in energy tax receipts aid sent to municipalities out of its dedicated fund and into the regular state budget, where it could be counted as a property tax expense. The state could do the same with the $274 million in local aid sent through the Transportation Trust Fund, or the money the state spends for administration of county-run welfare programs.

"There are things in the budget which we have traditionally not paid for out of the property tax relief fund but which you could plausibly argue are property tax relief," said Rosen. "But there's only so much of that."

TROY SINGLETON
ASSEMBLYMAN, 7TH DISTRICT
400 NORTH CHURCH STREET, SUITE 260
MOORESTOWN, NJ 08057
 
Tel: 856-234-2790
Fax: 856-234-2957
Email: AsmSingleton@njleg.org