Tonight at 7:30 p.m. a meeting will be held in Hopewell Borough, N.J. to discuss the possibility of dissolving the town’s municipal charter and incorporating as a non-profit entity.
What gave Mayor Paul Anzano this idea? He cites the cost of state-wide mandates on the small municipality’s budget. State-mandated full-time animal control and health awareness programming alone cost the borough of 2000 residents $40,000 a year. Residents don’t want to merge with neighboring Hopewell Township, which the Mayor argues will not only lead to the town’s loss of community identity, but will also raise taxes on residents.
In the non-profit entity model residents would be charged for basic services. Students would still attend public schools and residents would be taxed, as they are currently, for the schools.
The big issues discussed tonight will include how to organize elections, the treatment of revenue, aid and tax benefits, the future of municipal employees, and the potential need to close the municipal court.
It’s a fascinating development that points to one of the most misunderstood features of New Jersey’s political and fiscal history. New Jersey’s 566 municipal governments, and 600 + school districts are a perennial target of policymakers in search of solutions for the state’s high property taxes and government inefficiency. An often-offered remedy: centralize. Consolidate municipalities and “rationalize” the map of New Jersey. Bigger governmental units are better.
But it’s a remedy that fails to ask a basic question. What’s causing the inefficiency and high property taxes to begin with?
New Jersey’s municipal map is silent on the last half century of interplay between the state, federal, and local govenrments in forming New Jersey’s current fiscal landscape. It only shows the boundaries that formed between the 17th and 20th centuries, set since 1956, of a state that grew prosperous in a period marked by institutional diversity and decentralization.
Writing in Saturday’s edition of the Wall Street Journal, Peter G. Peterson makes the case for tax increases and spending cuts:
While I believe that spending cuts must play a lead role in any solution to our long-term structural deficits, the sheer magnitude of the imbalances requires revenue increases.
The University of Rochester’s Steve Landsburg is a refreshing antidote to this line of thinking:
There is this notion abroad that an extra billion in federal spending can be converted from “irresponsible” to “responsible” as long as it’s accompanied by an extra billion in tax hikes. That’s like saying a $500 haircut can be converted from “irresponsible” to “responsible” as long as you withdraw the $500 from your bank account.
Here, according to Landsburg, is why:
The government’s chief asset—in fact, pretty much its only asset—is its ability to tax people, now and in the future. The taxpayers are the government’s ATM. Make a withdrawal today, and there’s less available tomorrow.
The bottom line: Under reasonable policy assumptions, government’s share of GDP is set to climb dramatically in the coming decades. We can not solve the problem by taxing ourselves to solvency.
NPR reports that in the city of Bell, California three city administrators agreed to resign after residents expressed outrage over their salaries. City Administrative Officer Robert Rizzo earns $787,637 a year, which twice the salary of the President of the United States.
The former administrators will not receive severance packages but they will collect pension benefits.
Mr. Rizzo will collect $650,000 a year making him the highest-paid beneficiary in the state’s pension system.
What is interesting is how they got their pay raises. The Los Angeles Times reports that the Bell City Council exempted themselves from state salary limits when they placed “Measure A” on the ballot in 2005 to change the city to “charter status” in a special election that only attracted 400 voters. Since passage, salaries for council members, who serve part-time, shot up by 50 percent to at least $96,996 a year.
The reason for the sudden switch was a state law passed in 2005 that limited the salaries of council members in “general law” cities. A law that itself was prompted by outrage over the pay of officials in South Gate, California.
Even more interesting is that Measure A didn’t bypass salary limits for serving on city councils. Instead, it gets around the salary limit imposed on boards and commissions. The City Council members receive $150 a month for council service, and $7,873.25 a month for serving on the Planning Commission, Surplus Property Authority, and the Solid Waste Recyling Authority.
How did Bell’s Council get its salaries? By fiscal evasion.
Most states know they have big problems and that today’s budget gaps were created over a long period by policy and budgeting choices.
In my latest Mercatus Center Working Paper “Fiscal Evasion in State Budgeting” I discuss how states got into this situation, in part, by (legally) concealing and avoiding the full costs of policies. Some of these tactics, such as deferring pension payments, have gotten alot of attention. And others are harder to tease out.
For example, see this video at the Yankee Institute for Public Policy on how Connecticut used state university tuition to balance its budget.
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