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Transforming Property Tax: Education-Focused Reform Seminar

Join Mayor Gerry Tarantolo of NJLM and MU Kislak Real Estate Institute on June 11, 2013 for a seminar on property tax reform. Gain insight into the regressive nature of NJ property tax and the need to revamp the educational component. Analyze the current funding sources for education in NJ and explore alternative revenue options for a fairer system. Learn about the joint legislative committee on school funding reform and the proposed cost per pupil methodology. Discover the benefits of a progressive taxation system based on ability to pay, eliminating rebates, and enhancing educational spending control. Engage in discussions to lobby for increased federal school funding and stabilize NJ's tax base. The roadshow aims to garner support for a comprehensive reform strategy.

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Transforming Property Tax: Education-Focused Reform Seminar

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  1. MAYOR GERRY TARANTOLO NJLM / MU KISLAK REAL ESTATE INSTITUTE JUNE 11, 2013 PROPERTY TAX REFORM SEMINAR

  2. Thank you to Monmouth University’s Kislak Real Estate Institute for partnering with the NJ League of Municipalities on this project and providing us with this forum to bring to the public this very important property tax reform issue.

  3. PROPERTY TAX REFORMTHE CONCEPT • NJ PROPERTY TAX IS REGRESSIVE AND IS NOT BASED UPON ABILITY TO PAY. • THE TAX IS STRUCTURE WHERE THE PROPERTY TAX IS BASED UPON THE VALUE OF AN ASSET – YOUR HOME • THE PROPERTY TAX CONCEPT SHOULD BE REVISITED WITH PARICULAR EMPHASIS ON THE EDUCATIONAL COMPONENT OF THE PROPERTY TAX. • THE EDUCATIONAL COMPONENT OF THE PROPERTY TAX COMPRISES ON AVERAGE ABOUT 50-60 % OF THE TOTAL PROPERTY TAX BILL. • THE NJLM ADVOCATES THAT ALL EDUCATIONAL FUNDING SHOULD BE REMOVED FROM THE PROPERTY TAX AND FUNDED SEPARATELY BY A DEDICATED FUNDING REVENUE. • FUNDING EDUCATION IN NJ SHOULD BE VIA THE 2006 LEGISLATIVE COMMITTEE ON EDUCATIONAL FUNDING’S RECOMMENDATION.

  4. FUNDING EDUCATION IN NEW JERSEY – 2008-09 BASIC REVENUE SOURCES • TOTAL COST OF EDUCATION = $23.1B • FEDERAL AID = $762M (3.3% of total) [national average = 8.8% and NY and PA rec’d = 7.3%] • STATE AID TO LOCAL SCHOOL DISTRICTS = $11.5B (49% of total) • FEDERAL + STATE AID = $12.3B • BALANCE OF EDUCATION BILL PAID VIA PROPERTY TAXES = $23.1 - $12.3 = $10.8B (47%) • TO ACHIEVE OUR OBJECTIVE, $10.8B WOULD HAVE TO BE MADEUP FROM OTHER REVENUES: • INCOME TAX = $12.93B • SALES TAX = $8.71B • CORPORATE/BUSINESS TAX = $2.46B • TOLLS,CASINO,LOTTERY = $ 8.4B • Total = $32.5B

  5. OTHER APPROPRIATIONS RELATED TO PROPERTY TAX RELIEF • BUDGETED PROPERTY TAX RELIEF WOULD NOT BE REQUIRED (REBATES) = $3.3B • THE BALANCE OF TOTAL EDUCATIONAL COST WOULD BE $10.8B LESS $3.3B OR $7.5B • TO IMPLEMENT OUR OBJECTIVE, $7.5B WOULD HAVE TO BE GENERATED VIA THE DESIGNATED REVENUE SOURCES

  6. LEADING REVENUE SOURCE CANDIDATES FOR REPLACING PROPERTY TAX EDUCATIONAL FUNDING • STATE INCOME TAX SURCHARGE IMPOSED ACROSS THE BOARD ON ALL FILIERS BASED ON ABILITY TO PAY • FEDERAL GOVERNMENT’S CONTRIBUTION TO NJ SCHOOL FUNDING ONLY 3.3% WHERE NATIONAL AVERAGE = 8.8% (NY & PA = 7.3%) – NJ WOULD RECEIVE $1B MORE IF THEY REC’D 7.3% LIKE NY & PA. • UPWARD ADJUSTMENT TO SOME OTHER TAXES (SALES, LOTTERY, CASINO) TO SUPPORT EDUCATION • REALLOCATION OF EXISTING REVENUES COULD MAKE UP THE $7.5B SHORTFALL

  7. NJ EDUCATION SCHOOL FUNDING IN THE FUTURE • USE THE 2006 JOINT LEGISLATIVE COMMITTEE ON SCHOOL FUNDING REFORM RECOMMENDATION • NEW FUNDING FORMULA IS BASED ON A WEIGHTED COST PER PUPIL ALGORITHM BASED UPON DEMOGRAPHICS • THE CONCEPT WAS DEVELOPED BY EDUCATORS • NJ DEPT. OF EDUCATION ENDORSED THE CONCEPT IN 2007 • APPROVED BY THE COURTS WHEN APPLIED TO AND CHALLENGED BY ABBOT DISTRICTS

  8. PROPERTY TAX REFORM -JOINT LEGISLATIVE COMMITTEE ON SCHOOL FUNDING REFORMCOST PER PUPIL METHODOLOGY PER 2006 REPORT

  9. NJLM TAX REFORM STEERING COMMITTEEPLAN OF ACTION • 14 MAYORS SERVE ON THE STEERING COMMITTEE • AT 2009 ANNUAL CONFERENCE A RESOLUTION WAS PASSED IN SUPPORT OF THE TAX REFORM CONCEPT. • TO DATE 200 PLUS MAYORAL SIGNED STATEMENTS OF SUPPORT HAVE BEEN OBTAINED. • THE STEERING COMMITTEE HAS UNDERTAKEN AN EFFORT TO PARTNER WITH OTHER NJ STAKEHOLDERS. • TO DATE THE FOLLOWING HAVE AGREED TO WORK WITH US TOWARD ACHIEVING OUR GOAL or for Information Only: • NJEA • NJSBA • NJCC (Information/Resource Only) • Senate President Sweeney’s Staff (Information Only) • NJ Tax/Fiscal Policy Study Commission • Senators O’Toole, Bucco. Oroho, Pennaccio (Information Only) • Education Commissioner – Bret Schundler (Information Only) • Assemblymen Greenwald and Bucco • RUTGERS Tax Advisory Group – Ernie Reock – Prof. Emeritus

  10. CONCEPTUAL BENEFITS USING THIS METHOD OF PROPERTY TAX REFORM • PROGRESSIVE TAXATION BASED UPON ABILITY TO PAY • ELIMINATE THE ADMINISTRATION OF REBATES – NO REBATES • SCHOOL BUDGETS BASED ON LOADED COST PER STUDENT AND ACTUAL STUDENT POPULATION • STATE WOULD DISSEMINATE BUDGET FUNDING BASED ON ENROLLMENTS WEIGHTED FOR STUDENT NEEDS AND DEMOGRAPHICS • NO MORE DEFEATED BUDGETS • NO NEED FOR CUSTODIAN OF SCHOOL MONIES • ONE OR REGIONAL STATE TEACHER’S CONTRACT • NO MORE STATE MANDATES PLACED ON LOCAL BOARDS • STATE CAN EXERT GREATER CONTROL ON EDUCATIONAL SPENDING • EVERYONE PAYS THEIR FAIR SHARE FOR EDUCATION, I.E. HOMEOWNERS, TENANTS, AND BUSINESS • LOBBY FOR MORE FEDERAL SCHOOL FUNDING – 3.3% IS NOT ACCEPTABLE • STOP THE EXODUS FROM NJ AND CREATE A STABLE TAX BASE AND ELIMINATE LOST TAX REVENUE • CONSISTENCY AT LAST AND IT’S CONSTITUTIONAL…ETC.

  11. NJLM TAX REFORM ROAD SHOW • ALL OF THE MEETINGS WITH OUR STAKEHOLDERS WERE CORDIAL AND RECEPTIVE • THE ONE COMMON REACTION TO OUR CONCEPT AND SUPPORTING DATA WAS ‘SHOW ME.’ • A MASSIVE DATA ANALYSIS WOULD BE REQUIRED TO EMPIRICAL DEMONSTRATE THAT THE CONCEPT WE WERE PROMOTING WAS “DOABLE” I.E, REMOVAL OF EDUCATIONAL FUNDING FROM THE PROPERTY TAX WOULD RESULT IN LOWERING OVERALL TAX OBLIGATION OF HOMEOWNERS. • DATA ANALYSIS OF THIS MAGNITUDE WOULD REQUIRE A SIGNIFICANT COST TO DO IT PROPERLY. • WE WERE NOW CONFRONTED WITH A WHOLE NEW SET OF CHALLENGES. • WE SET OUT TO FIND NEW PARTNERS THAT COULD ASSIST US IN OUR EFFORT.

  12. SOME COMPONENTS OF THE DATA ANALYSIS • Update 2008-09 Data and Define Budget Shortfall (e.g. is it still $7.5B) • Determine Values of the Revenue Sources (are they higher or lower than 08 – 09) • Can the Taxable Income Surcharge approach offset the new shortfall (analyze income data via expanded tax base) • What % would the surcharge have to be to cover the shortfall (examine levels of taxable income and number of taxpayers in those intervals)

  13. COMPONENTS OF THE DATA ANALYSES (cont’d) • Total Income Tax Collected (based on most available data) • Total Number of NJ Residents that paid income tax. • Breakdown Taxable Income by numbers of payers in dollar ranges (0-10K, 10K-30K, 30K-50K,etc.) • Does this analysis show that the cost of education is covered by the income tax surcharge approach. • Demonstrate via examples that a taxpayer (resident, tenant, commercial) saves 50-60% of their property tax using this method of reallocation of revenue sources. • Demonstrate that this method of funding plus the the cost per pupil budgeting could replace the regressive method currently in place.

  14. THE NEW PARTNERSHIP • FIRST POINT OF CONTACT PAUL GAFFNEY, MU PRESIDENT • HARRY POZYCKI, CHAIRMAN, CITIZENS CAMPAIGN – A NONPARTISAN CIVIC ORGANIZATION • MARK MAYGAR – RUTGERS ADJUNCT PROFESSOR AND EXEC. DIR. THE INDEPENDENT CENTER • PETER REINHART, ESQ. – DIRECTOR OT THE MU KISLAK REAL ESTATE INSTITUTE • THE DODGE FOUNDATION WHOSE FUNDING MADE THE ANALYSIS POSSIBLE

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