Current 4% Cap

Proposed 2.0% Cap

Compromise

PRIME MOVERS

Senate and Assembly leadership

Gov. Christie and Sen. President Sweeney

METHOD OF ENACTMENT

·        Signed into law by then-Gov. Jon Corzine in April 2007 as P.L.2007, c.62

·         Passed during Legislature’s Special Session Property Tax Reform (2006-2007)

·        Legislation passed by the Senate and Assembly and signed by the governor.

·         If enacted, future change could take place through legislation, including provisions in the annual state budget.

• Differs from the governor’s original plan to implement cap through a Constitutional amendment

STATUS

·        Set to expire after the 2011-2012 school budget year

·        If lawmakers take no further action, the previous “S-1701 cap” will return.

–         Placed a 2.5% cap on increase in total school revenue (property tax, state funding, federal aid), enabling property tax levy increases to make up for flat or reduced state aid

• Compromise cap plan is not yet available in print. Both houses passed Sen. Sweeney’s original 2.9-percent cap legislation, S-29/A3065, on June 28.  While the governor will not sign that bill, he could “conditionally veto” it, so that it reflects the compromise.  In such a case, both houses of the Legislature would have to approve the governor’s recommended changes for the compromise plan to be enacted.

·        To be effective 2010-2011

ALLOWABLE

PROPERTY TAX INCREASE

4%

2%

BASIS

Previous year’s school tax levy, adjusted for enrollment increases and debt service

Previous year’s school tax levy.

OTHER

ADJUSTMENTS

·         Reduction in state aid

·         Health benefits cost increases

·         Pension cost Increases

·         Enrollment increases

·         Debt Service

·         Health benefits cost increases

·         Pension cost Increases

·         Unanticipated enrollment cost increases

·         Debt Service

COMMISSIONER OF EDUCATION WAIVERS

·        Inability to meet state core academic standards

·         New school start-up costs

·         Appropriation of non-recurring revenues

·        Cost increases above 4% for the following:

–         Energy

–         Capital outlay

–         Extraordinary special education costs

–         Tuition (sending-receiving, vocational)

• Insurance premiums
• Failure to meet NJQSAC
• Student Health and Safety

• Uncertain if compromise provides for commissioner of education cap waivers
• Governor’s original CAP 2.5 plan eliminated commissioner cap waivers; Sen. Sweeney’s alternate proposal allowed commissioner cap waivers, but only for inability to meet state core academic standards.

SECOND QUESTIONS

60% of participating voters may approve question to spend above cap for specific purposes not related to the provision of a thorough and efficient education.

• Compromise allows simple majority of participating voters may approve question to spend above cap.
• Governor’s Cap 2.5 plan would have required 60% approval; Senate president’s alternative did not provide for voter override of cap.
• Not certain if compromise would restrict use of over-cap revenue

CAP BANKING

(Application of “unused” portion of district’s current tax levy cap to future years’ caps)

Not permitted

Allowed

IMPACT ON STATE SPENDING

None

• Not certain
• Governor’s original Cap 2.5 proposal included separate constitutional amendment to cap growth of state operating budget. As a result any future growth of state tax revenue would go toward school, municipal and higher education aid.
• No indication if compromise 2% cap would affect administration’s plan to restrict increases in the cost of state government operations