Agony Over the Property Tax Cap

At the New Jersey  League of Municipalities convention to be held in Atlantic City tomorrow officials will be focused on a central problem, “How are we going to run our towns while keeping property tax growth below 2 percent?” The new cap is part of Governor Christie’s “tool kit” to reform local spending.

Will the cap work to reform local government spending? The true problem in New Jersey is not necessarily the state’s large number of small municipalities. In the 1950s, New Jersey had the same number of local governments. Schools were financed with local revenues. What has changed in the interim? The amount of things that state and local governments do, who provides these services, and how they are financed.

Since the 1960s, the rise of the public sector union, state and federal aid to local governments, court decisions on education financing, state mandates, environmental and business regulations have already achieved a level of ‘fiscal centralization,’ by planting a state and federal spending agenda in municipalities. The challenge of local spending reform is first to recognize the degree to which governments are entangled. The funding for locally provided goods, like education, are centralized through state and federal mandates, regulations, and state financing formulas.