League of Municipalities takes issue with Treasurer testimony

Dear Member of the Senate Budget and Appropriations Committee:

In his appearance before you today in Trenton, State Treasurer Andrew Sidamon-Eristoff testified, with regards to CMPTRA and the Energy Tax, that “… the State has been meeting its full statutory obligations ….”

If the term “full statutory obligations” means the obligations imposed by the statutes, then we believe that the State Treasurer erred.

N.J.S.A. 52:27D-442 reads, in part:

In each State fiscal year, each municipality shall receive Consolidated Municipal Property Tax Relief Aid equal to the amount of Consolidated Municipal Property Tax Relief Aid received in the prior State fiscal year multiplied by the sum of 1.0 and the index rate or zero, whichever is greater.

The statute goes on to state, “The Director of the Division of Local Government Services shall promulgate annually the index rate to apply in the next following fiscal year which shall be the same as the index rate determined pursuant to section 4 of P.L. 1983, c. 49 (C.40A:4-45.1.a.)”

That statute, as we read it, obliged the State to increase the SFY 2007 CMPTRA of $710.7 million distribution by 5%, in SFY 2008. Instead, the SFY 2008 distribution decreased to $631.1 million.

The statute, as we read it, would then have obliged the State to increase that year’s $631.1 million CMPTRA distribution by 6.5% in SFY 2009. Instead, the SFY 2009 decreased to $536.1 million.

That sum, according to the obligation imposed by the statute, should have remained level. Instead, it decreased to $264.7 million.

As Senator Weinberg noted at the hearing, these reductions have been used, in part, to allow the State to meet its Energy Tax obligations.

So the State has been able to meet its obligations regarding the Energy Tax by failing to meet its obligations regarding CMPTRA.

Going beyond the Treasurer’s statement, and regarding the restoration of Energy Tax Receipts Property Tax Relief funding, some have expressed confusion about the numbers we have used in our statements and letters. It is a complicated issue. We hope this explanation helps.

There are three measures that can be used to express the magnitude of the problem. Each has been used to answer a different question.

The First Question (The Funding Gap Question) is theoretical and built on an assumption. (“If the State had complied with the statutes, then …”). This question relates to the law that requires annual inflationary adjustments to both Energy Tax and CMPTRA funding.

Question 1: If the State had complied with the law (and increased Energy Tax and CMPTRA distribution by the rate of inflation in each year) from 2002 to 2011, then how much more would municipalities have received?

Answer: $3.4 BILLION is the 10 year total. Using the same standard, we have mentioned annual funding gaps. E.g.:

2011 (FY 2012) – Statutorily Required $2,182,502,000
2011 (FY 2012) – Actual distribution $1,293,794,000
2011 municipal funding gap                            $888,708,000

The Second Question (The Funding Cuts Question) concerns year-to-year property tax relief cuts from combined Energy Tax and CMPTRA funding.

Question 2: How much were Energy Tax/CMPTRA distributions reduced in recent years?

Answer: Municipalities suffered actual cuts in property tax relief funding of $26 million in 2008, $32 million in 2009 and $271 million in 2010.

The Third Question (The State Skim Question) measures the amount of dedicated Energy Tax revenue that the State has used to balance its budget in a given year.

Question 3: How much of the Energy Tax, collected for municipalities, has the State kept in a given year?

Answer: From $72 million in State Fiscal Year 2005, to $505 million in State Fiscal Year 2011, the State’s diversion of Energy Taxes has continued to grow.

The bottom line is, no matter how it is measured, municipal property taxpayers have been denied the relief to which they are entitled. We would be happy to meet with any party to further discuss this matter.

Very truly yours,

William G. Dressel, Jr.

Executive Director

Cc: Hon. Andrew Sidamon-Eristoff, State Treasurer

League of Municipalities takes issue with Treasurer testimony