Christie Signs Property Tax Cap 2.0

The 2-percent property tax levy cap, which is the centerpiece of Gov. Chris Christie’s efforts to control local government and school district spending, was signed into law on July 13.

School districts will start to feel the impact of the 2-percent restriction on local school property tax growth this fall when they begin development of budgets for 2011-2012 – a year that, at this point, seems unlikely to offer any increase in state aid, the other major school funding source.

Cap 2.0 is a compromise between Gov. Christie’s and Senate President Stephen Sweeney’s proposals for a new tax levy cap. In addition to reducing the tax growth level in half, from 4 percent, it also eliminates many of the exceptions allowed under the previous law. (See chart.)

Adjustments Allowed The compromise plan, S-29, would adjust school district caps for debt service, unplanned enrollment increases, pension cost increases, and health benefit cost increases. The adjustment for health benefit costs – not part of the governor’s original proposal – is a critical one for school districts in light of last January’s 25 percent increase in premium costs for the School Employees Health Benefits Program and the proposed 8.6-percent increase for next year. (See related story.)

Waivers Limited In addition, the new law permits school districts to apply to the commissioner of education for cap waivers, but only for one reason: a district’s failure to meet New Jersey’s core curriculum content standards as determined through NJQSAC, the state’s school district monitoring system.

Cap Banking Also allowed is cap banking, a process under which school districts that budget under cap may apply the unused amounts to future years’ budgets. The previous cap law did not permit cap banking.

Voter Override Under Cap 2.0, voters may approve over-cap expenditures by a simple majority. The previous law required approval of such ballot questions by 60 percent of voters.

Further Changes Needed Although it reduces the cap and limits exceptions, the new law includes NJSBA-sought changes to Christie’s and Sweeney’s original proposals. These include adjustments for enrollment increases and health benefit costs, cap banking, and allowing voter override by a simple majority. In addition, NJSBA supported implementing the cap through statute, rather than a Constitutional amendment, which will make any needed changes easier to attain.

NJSBA supports reasonable caps on local tax levies, but believes that exceptions are necessary to address costs clearly outside a local school district’s control.  One such cost not addressed in the new law is extraordinary special education placements.  Late last month, the Association advocated for inclusion of such an adjustment in the new cap law. Assembly Speaker Sheila Oliver has expressed concern about the lack of such an adjustment, leaving open the possibility of implementing a special education cap exception through a separate bill.

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