TRENTON — New Jersey’s new law to limit property tax collections by 2 percent a year took its first hit Wednesday when state officials announced health care costs for towns enrolled in the state’s plan will likely rise by about 12 percent. Health care costs are among the exceptions to the 2 percent "cap" signed into law Tuesday by...
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Health care costs are among the exceptions to the 2 percent "cap" signed into law Tuesday by Gov. Chris Christie, and officials for towns said they will have to pass along the increases through higher taxes.
State consultants Wednesday recommended an 11.7 percent for municipalities and 5.7 percent for school districts enrolled in the state’s health plan.
"They (taxes) have to go up," said Frank Bradley, administrator for Union Township. "[Just] because it’s outside the cap, don’t be misled by that. It’s still an additional amount of money that has to be generated through a tax increase."
Christie initially did not want health care costs to be an exception to the 2 percent cap on annual property tax increases, but agreed to compromise with Democrats who control the Legislature to exclude increases for pensions, debt, school enrollment and states of emergency.
William Dressel, executive director of the New Jersey League of Municipalities, said it "absolutely is possible" towns will raise taxes to deal with the health care plan increase.
"This is a property tax driver," he said. "This is a poster child example of why an artificial spending limitation is not ... sensitive to the fiscal realities of the day."
Still, the increase was less than last year and less than some — including Senate President Stephen Sweeney — expected. Sweeney (D-Gloucester) said the increases illustrate why it’s not feasible to have a cap without exceptions when health benefits costs are managed by the state.
"As long as they’re giving local communities a bill for 12 percent this year, how could they possibly ask a town to keep it at 2 percent?" said Sweeney. "You can’t say. Do as I say, and not as I do.’"
He said lawmakers are willing to work with Christie to make the state plans more efficient and more affordable.
As of July 1, 677 cities, towns, counties and other districts, and 355 education employers such as school districts took part in the state health care plans, according to the Division of Pension and Benefits. Last year, some plans saw increases of 20 percent and 25 percent.
Christie spokesman Michael Drewniak said the exemption applies only to the portion of the cost increase above 2 percent and stressed the need for the Legislature to pass additional "companion reforms" that will help towns control costs, largely by giving them more power over personnel expenses.
But town officials said residents will wonder why their bills are going up more than the banner 2 percent number promoted by the governor and lawmakers.
"It’s part of the political rouse that the governor and the Senate president have created by saying property taxes will be capped at 2 percent," said Elizabeth Mayor Christian Bollwage, a strong critic of the cap. "It’s going to cause the taxpayers a lot of problems."
In Elizabeth, $25 million of the $200 million budget goes to health care costs, he said.
Bradley said Union Township, which saved money by switching to the state plan this year, is paying $11 million of its $82 million budget for health care. A law passed earlier this year that requires workers to pay 1.5 percent of their pay toward health care will help, but not much when the town pays $32 million in salaries, he said.
"It doesn’t help when you get 12 percent increases," he said. "Just do the math."
Related videos:
| N.J. Gov. Christie signs 2 percent property tax cap bill |
| Elizabeth Mayor J. Christian Bollwage speaks against property tax cap |