Thursday, July 01, 2010

Cap 2.5

Now that Governor Chris Christie has gotten his budget passed through the legislature he has turned his attention to his proposal to amend the state constitution with a "hard cap" of 2.5% on property taxes.

The Democratic legislature passed a "swiss cheese" cap of 2.9% last week that does not amend the constitution.

A constitutional amendment requires a super majority of the legislature to approve and must be approved by the voters in a general election referendum. Alternatively, an amendment can be passed by a simple majority of the legislature in two consecutive sessions before being submitted to the voters for approval.

In order to make it on to the ballot for the coming general election, Christie's proposals must pass with a super majority by July 6. The Governor has called the legislature into special session to address his proposal and has indicated that he is willing to keep the legislature in session through the holiday weekend if necessary to get it done. Senate President Steve Sweeney has said it is not happening. Christie can call the legislature into session, but he can't determine what they address.

Knowing what I know today, and and given some questions I have about the Christie's proposal, I would vote against the constitutional amendment if today were election day.

Christie should compromise with the legislature. Get them to pass his tougher proposal legislatively without a constitutional amendment. Give his cap and the accompanying "tool kit" for municipal government and school board reform some time to work through the system before tinkering with the constitution.

Here are my problems with Cap 2.5:

1) As Christie has said, "New Jersey residents have waited too long for property tax relief. New Jersey families pay an average of $7281 in property taxes, up 70% in just 10 years."

How is a 2.5% cap relief?

If property taxes rise 2.5% on average over the next ten years, the average bill will be $9320. That's a 28% increase over 10 years. Much better than the 70% over the last 10 years, but still obscene. That's not reform.

2) Christie's "tool kit", 33 pieces of legislation that give municipal governments, school boards and the state higher education system the ability to reform their operations should result in a reduction in the cost of government. 2.5% increases could be wasteful and thwart reform.

3) Inflation. Given the runaway government spending and borrowing in Washington, it is not unthinkable that we could experience double digit inflation when our economy finally starts to recover. If that happens, a 2.5% constitutional cap could be too severe, resulting to massive and shocking cuts in local government spending in "real dollars." The thought of that happening warms my heart, but concerns my mind. As we saw in the recent budget process, Christie knows that reform doesn't happen overnight. Inflation of 12% with a 2.5% property tax cap that can only be waived via referendum, or another constitutional amendment, could be disastrous.

4) School funding and the State Supreme Court. Property taxes are so high in New Jersey in large part because of the wasteful state government spending in urban school districts that is mandated by the State Supreme Court. Christie recognises that problem and says he wants to reshape the Supreme Court with judges that will recognise the errors of the court's ways over the last few decades.

When we have a reshaped court, how will urban school districts start paying their own way for education if there is a 2.5% constitutional cap on property taxes? One possible answer is that they will stop wasting so much money when they are spending their own. That would be a good thing. But there is too much uncertainty about how urban school funding will look 10 years from now to institute a constitutional amendment that might have to be reversed due to unintended consequences.

Thanks to Governor Chris Christie, New Jersey is finally starting to face economic reality and the errors of our ways. Thanks to Governor Christie we are becoming a national leader in reforming state and municipal government.

I hate to say it, but Senate President Sweeney is right to caution about the unknown and unintended consequences of a constitutional amendment.

Christie should use this special legislative session to get the legislature to go along with his caps which are tougher than Sweeney's and to pass his "tool kit," but it should be done legislatively, not via constitutional amendment.

No comments: