officials respond
to components of plan
Local residents,
officials respond
to components of plan
BY TARA PETERSEN
Staff Writer
TARA PETERSEN Gov. James E. McGreevey looks over some documents during a recent meeting in New Brunswick with area weekly newspaper reporters.
Gov. James E. McGreevey says his new three-prong approach to tax relief will bring both short- and long-term savings to taxpayers.
The Fair and Immediate Relief (FAIR) plan, as outlined by McGreevey at a recent roundtable meeting with reporters, includes a 2.6 percent income tax for the state’s wealthiest residents, government spending controls, and a call for a constitutional convention in 2005.
"We have a property tax crisis," McGreevey said. "We need to begin to provide for relief for middle class families and senior citizens. We all understand the importance of keeping seniors and middle class families in their homes."
An overall concept plan at this time, McGreevey said the legislation regarding the millionaire tax could be introduced as early as this week.
The millionaire tax
The added income tax, dubbed the millionaire tax, would apply to taxpayers making an annual income over $500,000, which according to McGreevey represents about 28,500 or less than 1 percent of New Jersey taxpayers. It would raise an additional $800 million to be given back to middle- and lower-income taxpayers in the form of rebates, he said.
McGreevey cited the "windfall" from the federal tax cut that President George W. Bush enacted, which he said favored the wealthiest residents. Families making $550,000 to $1 million receive between $19,000 to $40,000 annually from the federal government, according to McGreevey.
He said that the added tax would take a portion of the money saved through the federal tax cuts, and that "every single cent will go back to property tax reform."
"The millionaires didn’t have this $40,000 three years ago. It represents a windfall," McGreevey said.
Funding for the two major direct property tax relief programs would more than double from $670 million to $1.5 billion, he said. About 458,000 seniors would see an increase in homestead rebates from $750 to $1,200.
McGreevey estimates that 97 percent of homeowners in Middlesex County would receive larger rebate checks, while only 3 percent or about 925 taxpayers would be adversely affected.
Senior citizen Raquel Frucht, a resident of Greenbriar at Whittingham in Monroe for four years, said she thought the millionaire tax should be for those making at least $1 million annually.
She also said that tax dollars spent in the school district should go to teacher salaries rather than for creating grand school buildings. She said that those who want to learn would learn.
"We had tattered school books. I had to sit on a radiator and it didn’t mean a thing," Frucht said.
"I’m definitely for it," said Inge Seidorf, a Concordia resident in Monroe. "Those families in that income bracket can definitely afford it."
Anne Lemler, who has lived in Concordia for 18 years, said she has seen her property taxes go up tremendously over the years.
"When young families have to tighten their belts, it’s not a problem," Lemler said. "In the senior community, you have to give up medications, cut back on food …"
Spending caps
McGreevey has proposed a cap on government and administrative spending at 2.5 percent for the state and local levels.
"We spend more money than any state on education," McGreevey said. "We are increasing administrative overhead, which represents fewer dollars in the classroom
School districts and municipalities would be asked to cap spending at 2.5 percent, and school districts would reduce their mandatory surplus from 6 to 3 percent.
If a school district were to submit a budget that exceeded the 2.5 percent cap, McGreevey said, the state commissioner of education would "reject the budget and literally prevent the district from sending that budget to the voters."
Milltown School Business Administrator Richard Guarini said that he is concerned with some of the aspects of the plan, though he wished to reserve his judgment until he sees the proposed legislation.
The school district recently trimmed 5 cents off its rejected school budget that initially carried a 14-cent increase. The district has its own elementary and middle schools and sends its high school students to Spotswood. Guarini attributed a large part of the increase to a larger-than-normal eighth-grade class going to Spotswood in the fall.
"If we were talking this year, it would have exceeded the spending cap. There would have had to have been an adjustment," Guarini said. "How would he deal with that?"
"I’m concerned because of tuition to Spotswood. A lot of that is uncontrollable," Guarini added.
He also said he does not feel McGreevey should target administrative spending.
"Administrative spending is not a large amount in terms of the total. It sounds good and a lot of people believe that it is, but that’s just not where the money goes," he said.
McGreevey also plans to regionalize administrative services in the school districts. In January, he outlined a plan to consolidate districts with no schools of their own.
The borough of Helmetta is one of 23 such districts that would be affected. School and government officials there oppose the consolidation plan. Helmetta has only two paid part-time positions in its school district — a business administrator earning $19,800 and a treasurer who earns $1,500. The positions are mandated by the state, officials said.
"What [McGreevey] has to do is look at alternate ways to fund schools, like through income tax," Helmetta Mayor Nancy Martin said. "He’s looking in the wrong place."
When asked directly about Helmetta’s situation, McGreevey said, "We need to view innovative ways to control administrative spending and maximize expenditures in the classroom."
Monroe Township Business Administrator Wayne Hamilton also has concerns over whether a growing community like Monroe would be able to exceed the cap.
Hamilton said the existing cap allows for growth, which varies from year to year.
"We have been able to budget within 5 percent [of an increase]," Hamilton said, noting that a decrease to 2.5 percent would "severely impact" the township if it were not able to exceed the cap due to growth.
Hamilton also spoke about federal and state mandates on all the towns.
"The new stormwater management program is going to cost municipalities a lot of money," he said.
Hamilton said that municipalities, unlike school districts, are already forced to closely monitor spending since they are only allowed to transfer budget money from one line item to another in November and December, and because they can only dip into the surplus when the budget is first introduced.
"It forces us to do an extremely good job in budget forecasting," he said. "I don’t think the problem with spending is on the municipal side."
Hamilton also said that any money collected from the millionaire tax would be better spent if sent directly to the municipalities to reduce property taxes.
"Think of the money it costs just to administer the rebate programs," he said.
The convention
Though few seem to disagree that property tax reform is necessary, there are many opinions as to how to go about it.
McGreevey, who is up for re-election next year, has endorsed a plan to have a constitutional convention in 2005. McGreevey said he did not originally support the convention, but that it is "arguably the best way" to reform taxes in the state, saying it has been debated for at least "a quarter of a century."
He also said the economic circumstances have vastly improved since he was first elected.
"The New Jersey economy is the fourth-strongest economy in the country," McGreevey said, noting that several thousand more jobs have been created in the last few years.
McGreevey said he supports a convention that would strictly focus on property taxes, but that he would look at spending as well as revenue.
According to McGreevey, the convention would be made up of citizens "from every walk of life" and government officials who would serve as delegates to participate in deliberations. The group would make a recommendation for reform that would be brought before voters to accept or reject.
McGreevey is targeting November 2005 for that vote, meaning the convention would take place prior to that time.
"As a state, we should also embrace democracy. We were founded on give and take, and free expression of ideas," he said. "This is an historic opportunity to move on a bipartisan effort."
When asked about the current legislative support for the convention, McGreevey said that some state officials support it and some don’t, and that it was "too early" to assess the level of support.
The last constitutional convention was held in 1966.