5 ways to cut property taxes

Property taxes in New Jersey are the highest in the nation. Since 2000, they have doubled and have risen at over twice the rate of inflation. No wonder people are forced to move; no wonder we have the highest foreclosure rate in the nation.

Property taxpayers suffer because raising this tax is the path of least resistance. When the income tax goes up, people blame politicians in the Statehouse. For property taxes, it’s not clear who’s to blame: the state blames local governments. The towns who collect the taxes for school districts and counties blame those entities for not controlling costs. The towns, school districts and counties all blame the state for cutting state aid.

Everyone is to blame. No one is responsible.

The obvious way to control property taxes is to hold the line on expenses, but this is fraught with political consequences, especially for Democrats. Public-sector unions like the NJEA and the two police unions, whose members’ salaries and benefits are largely paid by property taxes, wield enormous influence in both general elections and, particularly, Democratic primaries

So the political trick is to say nice things about fiscal responsibility while not doing anything to anger the unions.

For example, politicians talk about shared services — neighboring municipalities sharing common services such as school buses, public works departments and police and fire services where appropriate — but such measures won’t solve the property tax crisis until we actually address the level of services and the per-unit cost of those services.

Our embedded costs are higher than any other state, negotiated by public employee unions who have represented their members very well with respect to preserving benefits and maintaining headcount. We want fair pay for public employees, but we want an affordable state, too.

1. Health care costs

Positive change can be made. For starters, we could cut property taxes by about 8 percent simply by insisting that local employees get the same healthcare benefits that exist at the high end of private sector plans. That alone would save about $2.5 billion on $28 billion in annual property taxes. But what politician wants to risk the wrath of the unions?

2. Great but affordable schools

Then there is the cost of education, and how to control it while maintaining excellent schools and fair pay. In 2013, New Jersey paid its teachers over $10 billion in salary alone — roughly one out of every six dollars in state and local taxes collected.

The most recent available data, from 2012-13, shows New Jersey with the highest starting teacher salaries of any state. But three states have higher average salaries than our $68,797. On top of this, data from the Bureau of Labor Statistics suggests that the value of total benefits added 29.4 percent or $28,520 to base pay for a total value of over $89,000. And then adjust as you will for a shorter work year.

It seems that the bigger issue is proliferation of non teaching staff. There are far more vice principals and administrators than a generation ago, which has not improved education. One national study shows that the number of K-12 administrators has increased 2.3 times faster than the number of students in school. If we don’t deal head-on with these issues, we will shortly be forced to increase class sizes.

I heard one deputy commissioner of education say some years ago that if we had the same class sizes as the national average, we would save over $1 billion per year. If we spent what Massachusetts spends per student, we’d save $3.8 billion, according to U.S. Census figures. Compared with Maryland, the savings would be $5.3 billion. And both of those states have great schools and are in the top 10 for education spending.

One more administrative example. Gloria Bonilla-Santiago, who runs a well-regarded charter school in Camden, says her custodial costs are $400 per student, versus $1,200 per student for the unionized custodians in the Camden public schools. The NJEA pointedly asks gubernatorial candidates if they would do anything to change this. Not if they want to win a primary election.

3. Protecting streets and pocketbooks

Public safety is the other major local cost driver. We want to be safe and to properly reward people who put their lives on the line.

But accordingly to FBI data, the average police officer in New Jersey makes about 50 percent more than officers elsewhere in America. And when you add benefits to base pay and step pay, a compensation package can be well over $200,000.

Moreover, we have 70 percent more officers per capita than the rest of the country, with too many of them in our suburbs manning speed traps. So we’re actually paying people to drive up our auto insurance premiums.

If we want to maximize public safety, we would have police and fire stations on every corner. What we need to do is optimize – not maximize – by balancing realistic needs with reasonable wages and work rules and rational staffing levels.

There is enormous variance among municipal budgets, even in comparable towns.

At one time a consultant was paid by private foundations to put local budget data online in a form that was readily available, transparent, and more understandable than the deliberately opaque official budgets.

But that website no longer exists. It highlighted huge spending discrepancies. I recall that the Princetons (pre-merger) had the same population as nearby East Windsor but spent three times as much in its municipal budget. Those variances need to narrow, and perhaps we limit municipal aid to towns that spend way in excess of norms.

5. Counties

County government costs — largely funded by property taxes — are even harder to understand.

We have has 21 counties in which elected officials most citizens can’t name decide how to spend money they don’t have to raise in ways that are hard to track – never a recipe for fiscal responsibility. Half the budget is for public safety, but when a sheriff’s office records five times as many sick days as vacation days, one can’t help but wonder about personnel costs.

Certainly state aid to local government plays a role in property tax relief. That is what the income tax was intended to do. Instead, income tax revenue is increasingly diverted to fund public employee benefits. The dirty secret of New Jersey taxation is that increased benefit funding effectively cuts state aid. When state aid is cut, property taxes rise. The key to reducing property taxes is addressing the underlying cost drivers. Property taxes will continue their steep rise until voters pin down candidates on the specifics and demand real change.

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