Corzine Comes Up With Another Property Tax Relief Scheme

New Jersey’s Governor Jon Corzine has come up with a new scheme for “property tax relief”. Corzine says that with the money from the increased sales tax “the state could borrow $7 billion and create a pot of cash to reward towns that merge or adopt other reforms to reduce property taxes”.

Corzine said floating bonds backed by the new sales tax proceeds could provide a quick and massive one-time influx of cash to "stimulate the right kind of behavior patterns for change" among local governments.

Corzine acknowledged the plan would only provide a one-time source of cash, but said if it was used to bring about consolidation of local government, "you would get a payback" in long-term property tax savings.

We thought Corzine said the state had to extend the sales tax and increase the tax from 6 to 7 percent because New Jersey needed the money to close a budget gap. Now he claims we can use this extra revenue to borrow $7 billion to stimulate change in behavior patterns.

If local governments could save money by consolidating and sharing services, shouldn’t the cost savings be enough incentive? Why should the entire state have to a pay a bribe for this to happen?

The governor said the promise of big-money incentives could prompt voters to pressure their local governments and school boards toward consolidation. He said county governments could offer a "good point of consolidation" for local governments to fold into.

Now the truth comes out. Let’s have bigger government and pool all the property tax money into one big county pot. That way, for example, Newark will control how property taxes are raised and spent in Essex County.

"If you wanted to say, okay Essex County, you do these 10 things, we'll give you a billion dollars ... If you don't meet these constraints you don't get the dough," Corzine said. "Then the voter might find it compelling."

How about we say, okay Newark, you do these 10 things, and we’ll let you keep getting the billions we send you every year. If you don’t meet these constraints you don't get the dough. The voters in Newark might find that offer compelling too.

"I honestly don't understand what he means," [Sen. Leonard] Lance said of the governor's remarks. "I do not favor borrowing to provide a stream of funding for property tax relief. It violates every principle of sound fiscal policy that I know. It's how we've gotten into trouble in the first place. Here we go again."

State Treasurer Bradley Abelow said borrowing against a dedicated state funding source is not new. Similar borrowing has provided funds for transportation, open space acquisition and, before a 2004 Supreme Court ruling, to balance the budget.

Corzine said the state had several other options to consider for lowering property taxes.

He said the state could "tinker with the income tax brackets" and extend the sales tax to more purchases.

So there you have the options Democrats are considering for property tax relief. We can borrow a ton of money, raise the income tax or extend the sales tax even further. Perhaps we could even do all three.

Saving money though shared services and voluntary municipal consolidations, without spending money for bribes, is a good idea. However, if New Jersey’s goal is to reduce the total state and local tax bite, here are the real problems that must be addressed.

New Jersey spends 57 percent more per public student than the national average.

New Jersey’s 31 Abbott* school districts spend 30 percent more per student as compared to the rest of state. Average per-pupil spending in New Jersey school districts is $11,056. Abbott districts average $14,287.

The 31 Abbott* school districts will receive over 56% of property tax relief (state aid) for public schools in 2007 and yet make up only 25 percent of New Jersey’s public school enrollment.

The 31 Abbott* municipalities receive the bulk of all state municipal aid which also reduces local property taxes.

The only solutions to New Jersey’s property tax crisis are through cost containment, especially on salaries and benefits, where the bulk of the relentless cost increases come from and an equitable distribution of state property tax relief funds from existing tax rates and revenue sources.

* Thirty-one of the state’s 566 municipalities are designated as “Abbott” for the purposes of “property tax relief” related to education aid and “needy” for the purposes of “property tax relief” related to all other municipal aid.