New Jersey residents pay many high taxes, but none is more painful than the property tax. Homeowners pay the highest property taxes in the nation, an average $8,549 last year.
They would have paid a lot more if it weren’t for two laws passed in 2010. One permanently limited annual property-tax increases to 2 percent (with 14 areas such as debt service and pension contributions exempted from the cap).
But the other, which limited contract arbitration awards to police and paid firefighters to 2 percent, was temporary. It was renewed in 2014, but again temporarily, set to expire at the end of this year.
The case for renewing it permanently looks convincing, even overwhelming, as a way to continue to address the state’s most onerous tax.
The consequences of the arbitration cap, which comes into effect when unions choose to have an arbitrator settle their contract disagreements with local governments, was studied by the bipartisan Police and Fire Public Interest Arbitration Impact Task Force.
A preliminary report from the task force, released at the end of last month, says that by 2015 the arbitration cap had saved property taxpayers an estimated $2.9 billion. With the cap renewed, billions more would be saved going forward.
The state’s local government organizations have all urged the Legislature to permanently extend the cap, including the State League of Municipalities, the N.J. Conference of Mayors and the N.J. Association of Counties. Those groups said recently that allowing the cap to sunset would let arbitrators return to awarding double-digit increases that would force municipalities and counties to reduce or even eliminate essential services, employees and capital improvement projects.
The groups said in a statement they “maintain the utmost respect and admiration for the police, firefighters, correction officers and sheriff officers,” and we do too. With the cap in place, they’ve remained very well compensated.
Federal data show the average wage for a New Jersey patrol officer in 2016 was $87,490 and for a supervisor or detective $128,000. For paid firefighters, the average was $81,730, with supervisors getting $117,290.
In urging the Legislature to renew the cap, Gov. Chris Christie pointed out the pay for police was the second-highest in the nation and for firefighters, the highest in the nation.
And recruitment has become easier. By 2015, there was a 92 percent increase in eligible firefighters on the hiring list and a 43 percent increase in police officers since the arbitration cap was passed.
Property taxes were increasing as much as 7 percent a year before the two caps were enacted, including a 4.1 percent average rise in 2010. Since then, the increases have shrunk to just over 2 percent per year.
The federal Consumer Price Index for New Jersey has risen less than 2 percent a year for the past three years, so the nation-leading wages for police and firefighters aren’t being eroded by inflation. Making the cap permanent would help keep inflation under control, and if some day consumer prices soared (or property taxes ceased to be excessive), elected officials could adjust the cap at that time.
With New Jersey’s property-tax burden still the highest in the nation, the question should be what more could be done to provide relief for homeowners.
The Legislature should make the arbitration cap permanent before it expires Dec. 31.