A key component of Governor Chris Christie’s spending and tax reduction plan is his proposal to place a hard cap of 2.5% on property tax increases, based on Massachusetts’ Prop 2 and 1/2. A compromise was reached with the Legislature this weekend to create a 2% cap with several exceptions for pensions, health care, and debt.
My reservations over the property tax cap boil down to a basic theoretical observation. Capping one source of revenue only shifts the bill. The problem in New Jersey does not lie with the property tax, per se, but in the evolution of an intergovernmental aid system, and state spending mandates that have eroded Home Rule.
Local budget watchers will want to keep an eye on how local governments choose to navigate the cap this year. Pension costs and health care are set to consume the state’s budget in the coming decade. Cap or no cap, as the Governor knows, New Jersey has plenty left to cut.
The carrot of additional aid in exchange for a salary freeze is part of a larger strategy to get a handle on local government spending. The Governor’s plan includes introducing a property tax cap styled on Massachusetts Prop 2 and 1/2 as well as reform of collective bargaining rules to end the ever-escalating inflation in public sector salaries and pensions. The first test of Christie’s budget plan is on April 20th when residents vote on school budgets.