Thursday, November 20, 2008
BY CLAIRE HEININGER
In a move aimed at avoiding big property tax increases during the economic downturn, Gov. Jon Corzine today will offer municipalities a half-billion-dollar break on their payments into the state pension system, an administration official said last night.
Local governments would be able to defer half the amount they are scheduled to submit in April and pay it back gradually over the next three years, under the plan Corzine will present at the state League of Municipalities Convention today in Atlantic City. The proposal would require approval by the Legislature.
Corzine also will stress that towns should consider consolidation and sharing services to cut costs, according to a senior administration official familiar with his plan. The official spoke anonymously last night to avoid upstaging Corzine in advance of his speech to the annual gathering of local officials.
In recent weeks, municipal officials aired their concerns that skyrocketing local pension obligations would force them to break the state’s 4 percent cap on annual property tax increases to balance their budgets.
Local governments and counties are scheduled to pay about $1.1 billion into the pension system in April, according to information the state recently provided to the Transportation Trust Fund’s prospective bond-holders. Corzine’s proposal would allow the towns to defer at least half that amount.
William Dressel, executive director of the state League of Municipalities, said he had not heard full details of Corzine’s proposal and would need to see specifics before judging how much it will help. But he said municipalities will be in deep trouble without some boost.
“There’s not a lot of options out there,” Dressel said. “Clearly if we don’t get some kind of relief, that would be catastrophic for local budgets.”
Dressel testified last week before a state finance board that the property tax cap should be raised to make room for the rising bills of police and firefighter pensions. Instead, the governor plans to tell towns to stay within the 4 percent limit now that the pension payments can be partially deferred.
Anthony Wieners, president of the New Jersey State Policemen’s Benevolent Association, said his organization has “strong reservations about any deferment of the obligations to the police and firefighters of New Jersey.”
Deferring pension payments does have a long-term cost, because the bills must be paid eventually. The local governments’ pension funds currently have $9 billion less than actuaries say they need to meet their long-term cost, and postponing part of April’s payments would add to that debt.
Corzine’s speech was foreshadowed earlier yesterday at the league convention, when a mayor speaking at a luncheon asked members of the governor’s cabinet whether the local pension contributions could be phased in to lighten the financial load. The officials demurred, saying they’d talk it over with Corzine.
Frustration over the tough budget times spilled over at the normally placid convention when a Corzine critic provoked a testy exchange with the cabinet members.
Former Glen Ridge mayor Carl Bergmanson, who waged an effort earlier this year to recall Corzine from office, drew cheers at the mayors’ luncheon when he used an expletive to say the administration was punishing small towns by blaming them for high property taxes.
State Treasurer David Rousseau and Community Affairs commissioner Joseph Doria called the criticism unfair and insisted they are doing their best to cut costs in a bleak economy.
That left League of Municipalities officials to play referee, with the president, East Orange Mayor Robert Bowser, cutting off the back-and-forth to boos from the crowd.
Dressel also spent the moments before the lunch disposing of anti-Corzine bumper stickers that showed up underneath the mayors’ sandwiches and potato chips.
Last week, Corzine and Rousseau announced the state faces a $1.2 billion shortfall in its current budget and a hole of $5 billion for the next fiscal year. As Rousseau combs the budget, line by line, for savings, local officials said they are concerned about the impact on municipal aid and their own finances.
“There’s considerable frustration and anxiety,” Dressel said. But, he said, “it’s too early to start casting rocks and name-calling and passing out degrading slogans. … We’re all in this boat together.”
Staff writers Dunstan McNichol and Josh Margolin contributed to this report.