A Comparison of Cap Proposals

Lawmakers are dealing with two proposals to tighten New Jersey’s current cap on school property tax increases. Gov. Chris Christie’s “CAP 2.5” is a proposed amendment to the state Constitution that would place a 2.5 percent hard cap on school, municipal and county tax property tax levies. The Senate leadership’s 2.9 percent plan would be implemented through legislation and would reduce the current number of exceptions.

School Board Notes presents the following chart to help school board members note key differences between the Administration’s and the Senate’s proposals, as well as New Jersey’s current 4 percent tax levy cap.

	Current 4% Cap	‘CAP 2.5’: SCR 104/ACR 131	2.9% Cap: S-29/A-3065
PRIME MOVERS	Assembly and Senate leadership	Governor Christie	Senate 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).	• Constitutional Amendment approved by simple majority of voters • Placement on ballot requires Senate and Assembly to OK concurrent resolutions by three-fifths majorities. • If adopted by voters, future cap changes would require re-amendment of Constitution.	• 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.
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 total school spending, enabling property tax levy increases to make up for flat or reduced state aid	• SCR 104, assigned to Senate Budget & Appropriations Committee; ACR 131, assigned to Assembly Budget Committee. Both introduced May 20. • The full Senate and full Assembly tabled the resolutions by votes of 21-16 and 44-36, respectively, on June 21. • To appear on November 2010 ballot, Assembly and Senate must approve concurrent resolutions by three-fifths vote in July. • To be effective 2011-12	• S-29 and A-3065 were scheduled for votes in the Senate and the Assembly June 28. • To be effective 2010-2011
ALLOWABLE PROPERTY TAX INCREASE	4%	2.5%	2.9%
BASIS	Previous year’s school tax levy, adjusted for enrollment increases and debt service	Previous year’s school tax levy, reflecting assessed value of new construction.	Previous year’s school tax levy, adjusted for enrollment increase and debt service
ADJUSTMENTS	• Reduction in state aid • Health benefits cost increases • Pension cost Increases	• Debt service increase	• Reduction in state aid • Health benefits cost increases • Pension cost Increases
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	None	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.	60% of voters may approve question to spend above cap. Concurrent resolutions do not restrict the use of the additional funds.	None
CAP BANKING (Application of “unused” portion of district’s current tax levy cap to future years’ caps)	Not permitted	Allowed	Allowed, but proposal would not permit application of unused cap above 2.9% from the 2010-2011 school year.
IMPACT ON STATE SPENDING	None	• Related proposals, SCR 103 and ACR 130, would amend state Constitution by placing a 2.5% cap on future growth in the state operating budget, with the exception of aid to schools, municipalities and counties. • According to supporters, future increases in state income, sales and corporate tax revenues would then be applied to school, municipal and county aid.	None

NJSBA Position on State Budget Caps

NJSBA has long-standing policy supporting reasonable caps on revenues and spending. However, the definition of a “reasonable cap” must include allowances for cost increases that are not within a local school board’s control.
The allowable percentage increase in the cap should reflect current economic conditions, including the costs to operate a local school district, as well as consumer prices.
“Cap banking” encourages long-range financial planning by permitting a school district to apply the unused portion of the cap to future years’ budgets.
NJSBA also supports the ability of school districts to propose expenditures above cap to voters. Such questions should require simple majority approval.
Budget caps should be implemented through legislation, rather than being permanently memorialized in the state Constitution. Since 1977, school districts and municipalities have been subject to various forms of caps. From a taxpayer’s perspective, some worked better than others; some did not work at all. Necessary changes can be made much more easily through legislation than by “re-amending” the Constitution.