Governor Signs "2.0% Cap Compromise" Into Law July 13

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The Governor signed legislation (S-29/A-3065 (Sweeney/McKeon)) into law establishing a statutory cap on tax levies for school and municipal budgets beginning in FY2011.

Members of the New Jersey Assembly voted July 12 to approve the “2.0 cap compromise” Governor Christie and Senate President Sweeney came to on July 3. The measure was approved by the State Senate July 8.

The agreement announced by the Governor and Senate President in a press conference July 3 consists of a 2 percent cap on property tax increases which carves out exceptions for healthcare costs pension costs rising school enrollment debt service capital expenditures and emergency allocations. (Governor & Senate President Reach Cap Compromise July 3 July 3 2010).

2.0 Cap Compromise

The compromise to 2 percent – down from Christie’s 2.5 percent and Sweeney’s 2.9 percent – allowed for more exceptions than the governor had wanted and fewer than the Senate president had sought.

Beginning in 2011 local governments and school districts are only allowed to raise property taxes 2 percent a year. But they are provided key passes for rising pension and health care costs debt payments rising school enrollment and states of emergency.

Schools and towns have to ask voters for approval to raise taxes above the limit with a simple majority needed for approval.

Christie originally proposed a constitutional amendment for a 2.5 percent cap that contained almost no exemptions. The Legislature instead passed a 2.9 percent cap that Christie said gave local governments too much latitude to raise taxes.

Toolkit Next?

The Assembly and Senate plan to hold hearings throughout the summer on Gov. Chris Christie’s proposed “tool kit” – a package of legislation to help towns control costs so they can meet the new cap. Several of the bills have begun appearing on agendas as early as July 19.