EDITORIAL: A new Rx needed for tax reform

Proposed tax levy cap offers little relief, while craeting headaches for municipal governments and school districts around the state.

   When Gov. Jon Corzine called the state Legislature into special joint session last summer to address the state’s property-tax and budget crises, he insisted that a 4 percent cap be placed on tax bills.
   The cap, he said in July, needed to be on "the increase in the property-tax bill itself" so that it "would cut the recent spiraling rate of increases by more than a third."
   The theory was simple. Constrain a municipality or school board’s ability to ask taxpayers for money and it will be forced to constrain its spending.
   The promised impact of the tax-bill cap, however, always seemed a pipe dream to us, likely to do little more than tie the hands of local governments and school boards without offering much in the way of relief.
   And that was before the state Legislature applied the cap to the tax levy — or total amount to be raised by taxes — and not to individual tax bills.
   It also was before the state’s tax-reform effort bogged down, resulting in a watered down stew of legislation that nibbles around the edges but fails to address the real issues facing the state.
   The levy cap was supposed to be one of a long list of reforms that were to include appointment of a state comptroller with the power to audit state and local government entities; creation of a commission that could order municipal and school consolidation and shared services; creation of new local revenues; revision of the state’s school funding formula; and the modernization of the state’s tax structure.
   Weakened variations of some of the reforms have been signed into law, while others — a new school funding formula, for instance — are being tabled until next year.
   So, we’re not surprised to hear local mayors and school administrators criticize the arbitrary nature of the cap and to complain that they are being made the scapegoats for a problem for which they bear only a small portion of the blame.
   The cap law fails to take into account several realities facing most municipalities and school districts:
   • Contractual salary increases already negotiated that can range as high as 5 percent.
   • Health benefit costs that have been rising at an estimated 10 percent to 15 percent annually.
   • And growing pension costs — up to 40 percent in some towns.
   For many towns, this could mean service cuts.
   School districts will feel the most pain under the cap because their budgets are labor intensive and they do not have alternative revenue sources to offset spending. But towns like Jamesburg, which have been running their operations on shoe-string budgets for years, also will feel the pinch.
   In the end, the cap law is a flawed solution to the wrong problem. It attempts to fix the symptoms (rising property taxes), without addressing the root causes of our illness (among them single-source funding, not enough state financing, too many school districts and municipalities).
   A different prescription is needed.