Funding Alert

On July 28, Governor Corzine will open a special session of the New Jersey legislature. The special session is intended to address the problem of property taxes and school funding. The Legislature is expected to create joint committees to focus on four specific issues:

The Governor, in a recently reported interview with the Star Ledger, signaled his expectations for the special session. The Star Ledger reported that the Governor hopes to cut the total property tax bill by 20%. To accomplish this ambitious task, he plans to offer a package of spending cuts and tax increases. The Governor also says he wants to rewrite the school funding formula so that middle income districts get more state aid, while holding the Abbott districts harmless, at least during a transition period. He also said he wanted to tighten caps on education spending statewide.

The governor also reportedly wants to accelerate the move towards consolidation of towns and schools and hopes to leverage half of his one cent sales tax increase to do it. He would offer cash incentives to towns and schools that merge or come up with other ways to permanently reduce spending.

Finally, he is looking to "broaden" the tax base perhaps by tinkering with brackets within the existing income tax structure or expanding the goods and services to which the sales tax applies.

There are other proposals that may also appear in the special session. Assemblyman Lou Manzo's SMART bill has received a positive reception in some quarters. The bill (A3335) is aimed at lowering property tax costs in New Jersey. Currently, 60 percent of the state's property tax revenue is used to fund schools. Lower and middle-income families shoulder a heavier burden than wealthier taxpayers to support schools.

The SMART Act would redistribute this unbalanced tax burden from local property taxes onto broader state taxes -- namely the income and sales tax – resulting in a near 50 percent reduction in school property tax rates.

The four joint and bi-partisan committees are also expected to be announced on Friday, and will begin work in August. It is hoped that legislative proposals might be forthcoming by year’s end.