New Jersey property taxes will likely resume the double digit annual growth that occurred under the McGreevey, Codey and Corzine Administrations if Assembly Speaker Vincent Prieto’s version of the of the Interest Arbitration extension becomes law. Either that, or municipal governments as we know them will cease to exist, succumbing to a long and painful death of higher crime and reduced services and capital improvements.
A 2% cap on interest arbitration awards in labor disputes was a key component of the 2% property tax cap negotiated between Governor Chris Christie, Senate President Steve Sweeney and Prieto’s predecessor, Sheila Oliver in 2010. It worked. Arbitrators made awards of less that 2% to police and fire fighters unions and property taxes rose less than 2% per year over the last four years.
The problem is Oliver insisted that the arbitration cap expire on April 1, 2014. Now, we’re a week before the arbitration cap expires and Prietro is gutting the cap by passing an extension of the law that exempts contracts that were awarded less than 2% during the last three years from any future caps and raises the cap to 3% on contracts that have not been negotiated since 2010.
The math will never work. If property taxes stay capped at 2% but the primary cost of property taxes, salaries, are not capped or are capped at 3%, municipal services will disappear. Police will be laid off, with the junior, lower paid officers being let go first, leaving the older and more highly paid officers to run drown the inevitable increase in crime. Towns will go bust. The state will take over municipal governments and force consolidations.
“This bill is a cap-killing bill masquerading as a cap extension,” said Assembly Republican Budget Officer Declan O’Scanlon. “In fact, over 80 percent of the contracts going forward will not be subject to the cap. Those few that would be subject to any type of cap would increase salaries at a rate 50 percent faster than the revenues supporting the expenses.
“Since we have negotiated for three years under the 2 percent cap, and most contracts are for three or four years, there will be very few contracts that haven’t already been subject to the previous cap,” continued O’Scanlon. “You cannot have a cap on the rate that municipal officials can raise revenue while at the same time dictating to them that their largest budget line item can increase at a rate faster than their ability to raise revenue.”
“If your mortgage is allowed to increase 8 percent every year, but you only receive a 2 percent annual raise, it doesn’t take rocket science to realize you’ll soon mail your mortgage company everything you earn,” commented O’Scanlon.
“Democrats on the committee, who are trying to suggest that the arbitration award cap isn’t essential, simply don’t understand the process,” stated O’Scanlon. “The cap didn’t only affect arbitrated contracts – it affected all contracts, negotiated or not. To suggest otherwise is completely disingenuous.”
“To be clear – one cannot have a tax cap work without an identical arbitration award cap,” explained O’Scanlon. “A vote for this bill is a vote for higher property taxes or municipalities eventually going bankrupt. Chose your poison, but it can only be one or the other unless legislators have acquired the power to alter the laws of mathematics. All my math teachers taught me that wasn’t possible.”
The legislature doesn’t have the text of the cap extension bill, A3067 in the Assembly and S1869 in the Senate posted on their website. I’m relying on information reported in The Star Ledger and conversations with Senate President Steve Sweeney and O’Scanlon for this post.
The legislature’s website says that identical bills were cleared through committee on Monday. I find that hard to believe, given what Sweeney said his desire for the cap was last week at his town hall meeting. The fact that Senator Mike Doherty, perhaps the most conservative member of the Republican Caucus in the Senate, is listed as a Primary Sponsor with Sweeney of the Senate bill, gives me hope that they are not identical bills.
Sweeney told me last week that he wants to extend the arbitration cap and that he wants to make it permanent. Pietro’s bill, as reported by The Star Ledger, makes the cap useless. As O’Scanlon said that roughly 80% of the union contracts have been negotiated/arbitrated since the cap went into place in 2010. Prieto’s bill would the vast majority of those contracts from ever being subject to the cap again. The other 20% of the contracts have a new cap of 3%. This can’t work.
If the bills are identical, i.e., Sweeney is on the same page as Prieto and really wants to gut the cap, New Jersey’s middle class is screwed. Property taxes will skyrocket again and/or municipal services, including and especially police, will be cut. We’ll be left with older, richer cops. Just like Newark.
Governor Christie’s historic reforms will not be a legacy, just temporary measures.
If this is the bill the Democratic legislature sends to Christie, what does he do? If he vetoes the bill, the cap expires next week. If he signs it, he puts the inevitable off for a couple of years. Either way, Christie, and New Jersey property tax payers, are at the whims of the Democratic legislature.
This makes one wish that Christie fought harder to win seats in the legislature last fall.
Click here for reuse options!
Copyright 2014 MoreMonmouthMusings