Local municipalities are being shortchanged and under-funded, and taxpayers are being forced to carry more of the tax burden because of the way the state collects and distributes tax revenues, a group of local mayors said last week.
“It’s taxes, taxes, taxes. We’re being shortchanged on the energy tax, and the concept of funding education has to be addressed. We don’t need tax relief, we need tax reform,” said Eatontown Mayor Gerald Tarantolo at the Two River Council of Mayors meeting on April 19.
Mayors from Eatontown, West Long Branch, Shrewsbury, Little Silver, Fair Haven, Rumson, Monmouth Beach and Sea Bright attended the meeting and discussed the spoiling impacts of the energy receipts and school funding formula on property taxes.
“The energy receipt tax money used to be collected locally in the municipalities, and then the law was changed and the state said they would collect it for you and guaranteed you would keep it,” explained Lori Buckelew, senior legislative analyst for the New Jersey State League of Municipalities (NJLM).
Instead of returning revenues to municipalities, she said, state budget makers have continued to collect energy taxes while keeping additional revenues. She told the mayors the No. 1 priority this year is to restore energy taxes, like those for gas and electric utilities, to municipalities. The state’s diversion of energy taxes has continued to grow from $72 million in state fiscal year 2005 to $505 million in state fiscal year 2011, said Buckelew.
The state slashed municipal revenue replacement by about $26 million in 2008 and $32 million in 2009. In 2010, losses to municipalities statewide grew to $271 million.
Buckelew said the biggest misconception regarding municipalities is that local officials don’t know how to control their spending. The reality, she said, is that towns are spending less but taxes are still going up because of decisions made on the state level.
“I think we need to start educating folks and say that we’re spending less but your taxes are still going up because we’re losing revenue. And the main source of revenue in municipalities is property taxes,” she said.
The NJLM is asking local towns to adopt resolutions in support of restoring the energy tax to municipalities in the amount of $330 million.
Tarantolo said these are taxes that should be going to the municipalities but instead have fallen into what has become “the money sink for the state.”
“In 2011, the amount collected and the amount distributed to the municipalities, the shortfall resulted in $888 million. So that’s what the state skimmed off in one year,” he said. “It’s probably about 30 percent.”
Little Silver Mayor Robert Neff said the state would then keep two-thirds of what’s collected from municipalities statewide every year, putting tremendous pressure on the towns to make up the difference.
The resolution that NJLM encourages also calls on state policy makers to return the responsibility of collecting energy taxes back to the municipalities in an effort to relieve “the worst-in-the-nation property tax burden.”
School funding is another key part of the property tax that has contributed to an increase for local towns. Tarantolo said that for two years he has been working on a concept that would remove school funding entirely from the property tax levy.
If realized, the proposal could reduce property taxes by 50-60 percent, he said.
The Eatontown mayor said that the concept was done once before in the 1990s and was revisited in 2006 when then-Gov. Jon Corzine called for an educators’ conference to come up with an alternative school funding formula, which resulted in the concept of per-pupil costs.
“It never went anywhere. However, it did change the way school budgets were prepared, because now with school budgets, you have to have a figure that determines what is the actual cost per pupil in your particular district,” said Tarantolo.
Tarantolo’s alternate school funding formula could provide the sought-after solution that many towns could benefit from by easing their tax burden.
“The concept is actually taking hold. We now have an NJLM committee, we have a group at Rutgers University that’s doing some analysis for us to prove the concept, and we’re hoping that within the month, the analysis that’s done by this Rutgers group will actually provide the rationale for moving in that direction,” explained Tarantolo.
“So, we’re hoping that we’ll be able to show that 566 municipalities in the state of New Jersey will reap the benefits of a new concept in how we handle property taxes: namely, remove educational funding totally from it and fund education using this 2006 concept that was developed by the special committee on educational funding.”