There Are Better Options Than Dedicating $200 Million a Year for Open Space

July 24th, 2013  |  by  |  Published in Budget and Tax Policy, NJPP Blog: As a Matter of Fact ...

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The clock is ticking if the legislature wants to constitutionally dedicate $200 million a year in revenue to preserve open space. It’s hot and humid, and one would think that this is no time to drag everyone back to Trenton to take extraordinary action on an amendment that further endangers New Jersey’s fiscal health. But stranger things have happened – like the Senate approving an earlier version that would have taken $17 billion out of future budgets without even bothering to send the bill to the budget committee. Once the facts were known, the Assembly put on the brakes and a new version was introduced.

The current proposed amendment would divert $200 million each year for the next 30 years from sales tax collections to support open space, farmland preservation and historic sites. Laudable goals. And, in a $33 billion budget, $200 million is pocket change, right? Wrong. Start with this year’s budget: Had the proposed amendment been in force, the budgeted surplus would have been cut from a thin $300 million to a cadaverous $100 million. That would have moved New Jersey from dicey to reckless on the credit rating chart.

Assuming that revenue for FY 2015 grows by $1.6 billion and pension costs rise by $800 million or so, then the $200 million that would be dedicated would represent about one-quarter of the remaining revenue growth, leaving only $500 million or so in growth to fund inflationary costs and any new initiatives.

Before legislators vote, they should consider other, better, uses of the $200 million a year.

Higher Education Operating Aid: The costs of attending public colleges and universities have risen dramatically over the last decade, primarily because the state has sharply reduced operating support. If just half of the $200 million were used to increase operating support for four-year public colleges, they would receive about what they got back in 2010. An increase of $100 million would allow them to freeze tuitions at 2013-2014 levels and catch up with inflation since 2010. This would be a direct benefit to the 100,000 or so New Jerseyans attending public institutions.

Earned Income Tax Credit: In 2010, the legislature and governor agreed to cut New Jersey’s share of the EITC from 25 to 20 percent of the federal benefit. Thus, the only tax increase imposed that year was on working families earning below-survival wages in high-cost New Jersey. Just a quarter of the $200 million proposed to go to open spaces would restore the tax credits, giving about 500,000 working families an average of $124 a year (some would receive nearly $350 a year). This is money that would be spent immediately and locally, giving a badly needed jolt to local economies.

Homestead Property Tax Credits: If the full $200 million were used for the Homestead Property Tax Credit, 830,000 eligible homeowners could see a 50 percent increase from what they will receive this year. That would mean an increase from $518 to over $775 for the senior beneficiaries and a jump from $409 to slightly over $600 for non-seniors. Even with this increase, the credit would be noticeably short of the $1,263 ($1,374 in today’s dollars) average provided seniors in calendar year 2009 and the average $789 ($858 if adjusted for inflation) provided to non-seniors. These benefits would be spent quickly and locally.

School Aid: This year, school districts will share in a hardly noticeable $100 million aid increase. Add the $200 million diverted for open space and districts could begin to make up for the sharp reductions that took place in 2010. Or, districts could use the additional funds to provide property tax relief (from 2011 to 2012, the school property tax levy increased by $178 million, so $200 million would be noticeable). Assuming a similar increase from 2012 to 2013, $100 million more in state aid would represent more than half of the increase.

Municipal Aid: Municipalities have not seen increases in state aid for many years. Using $200 million for aid to towns would represent a significant portion of the over $250 million that municipalities argue that the state has been withholding from them from increased energy tax collections. Using all the $200 million for aid to local governments could reverse the sharp cutbacks in policing in many cities and provide tax relief to struggling homeowners. Assuming that the increase in municipal property taxes in 2014 is similar to the $150 million rise in 2012, this additional aid would offset all of the tax increase.

These five areas are just a few of the many that could benefit from even a small portion of the $200 million that would no longer be available if the constitutional amendment is approved. Legislators might ask themselves if their constituents talk to them about open space and historic preservation as often as they do about property taxes, the costs of college, cuts in essential local services or getting by on shrinking incomes.

If the legislative leadership is so deeply committed to open space that they would call an extraordinary legislative session in the heat of July, why don’t they put a bond issue on the ballot and let future beneficiaries help repay the debt at the rate of $15 million to $20 million a year? Thirteen times in the last forty years voters have been asked to preserve open space and farmland and 13 times they’ve said “yes.”


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