Topic Category: Tax and Budget

Increasing the EITC Will Boost New Jersey’s Workers and Their Families

Posted on by Jon Whiten

To read a PDF version of this report, click here.

Increasing New Jersey’s Earned Income Tax Credit (EITC) to 35 percent from 30 percent of the federal EITC will provide over half a million New Jersey working families with a much-needed bump in their take-home pay while giving the state’s economy a boost.

The state’s EITC supplements the federal EITC, an income tax credit for low-income working people that rewards work and boosts the pay of families across the country. Working families with qualifing children and earned incomes up to $53,505 (for married couples filing jointly and with three or more children in tax year 2016) are eligible for this tax credit; adults without children with earned incomes less than $14,880 are also eligible.

Working New Jerseyans are currently eligible to receive 30 percent of the federal credit received through the state EITC, which was created in 2000, rose to 25 percent in 2009, was cut to 20 percent in 2010 and was increased to 30 percent last year.[1] In 2013, the latest year for which state data are available, 576,400 New Jersey households claimed the credit on their tax returns.[2] In 2014, according to federal data compiled by the Brookings Institution, 594,700 New Jersey households claimed the federal EITC.[3]

Increasing the EITC to 35 percent will help nearly 600,000 New Jersey families whose members are working but not earning enough to get by in this high-cost state. These workers’ annual take-home pay will increase by an average of $116 (and by as much as $314), bringing the average total of state EITC dollars received to $811 a year.[4]

This income boost will be crucial for these working families in tandem with the fuel tax increases simultaneously approved by the legislature to invest in critical road, bridge and transit infrastructure. After all, low-income and middle-class families will pay a larger share of their incomes to these new fuel taxes than other New Jerseyans – and a boost to the EITC helps mitigate that impact.[5]

However, the large-scale tax package that included the fuel tax and EITC increases also included more than $1.3 billion in additional annual tax cuts that will disproportionately help higher-income New Jersey families while crippling the state’s ability to maintain services that are essential to low-income working families.[6] So it’s by no means all good news for low-income working families.

That said, with a 35 percent EITC, New Jersey will be a national leader in boosting the incomes of working families – and rightly so, given how expensive basic necessities like housing are here.

The Garden State now trails only the District of Columbia, which has a 40 percent credit; Minnesota and California have different structures that also allow for credits of more than 40 percent (the former’s range goes up to 45 percent; the latter’s, 85 percent).[7]

Families All Over New Jersey Will Benefit

eitc recip by county-01Boosting the EITC will help working people all over New Jersey. All but five of the state’s 21 counties have more than 10,000 households receiving the EITC, and more than half of them (12) have over 20,000 EITC households.

The largest counties in each part of the state have tens of thousands of EITC households, with Essex County having the most recipients in North Jersey, Middlesex County having the most in Central Jersey and Camden County having the most in South Jersey.

While there are greater concentrations of EITC families in New Jersey’s urban centers, the use of this tax credit has spread to more suburban counties as families all over the state struggle with long-term unemployment and stagnant wages or fewer hours for those who have jobs. Even affluent counties like Morris and Somerset, for example, now have over 10,000 EITC families.

Increasing the EITC Will Help Poor Families the Most

EITC incomes 2016-01Nine out of every ten New Jersey households that receive the EITC earn less than $30,000 a year. About three-quarters earn less than $20,000 and more than half – 61 percent – make less than $15,000.[8]

These are families that are clearly struggling to get by in high-cost New Jersey. The EITC is critical to their struggles.

For example, the budet needed to meet basic needs in the least expensive metro area of the state (the Ocean City area) is $29,662 a year just for a single, childless adult. Add one child to the mix, and that nearly doubles, to $55,672 a year. And this is the most affordable part of the state. In the most expensive metro area (the Middlesex/Somerset/Hunterdon area), the budget needed for basic necessities is $67,026 a year for that same single parent.[9]

In other words, it’s clear that even this modest boost to the take-home pay of these families will allow them to better meet basic necessities like food and rent and rely less on the social safety net to survive.

Boosting the EITC Will Make Tax System More Equitable

Despite having a relatively progressive income tax based on one’s ability to pay, New Jersey’s tax system is still backwards, with the lowest-income households paying the highest share of their earnings to state and local taxes each year. This is due to the regressive nature of sales and property taxes. One of the best ways to help make this upside-down system more equitable is to increase the EITC.

Increasing New Jersey’s EITC to 35 percent will reduce the share of state and local taxes paid by the poorest families. While these New Jerseyans in the bottom 20 percent, whose average annual income is a scant $15,000, will still pay the largest share of their income to these taxes, the gap between this group and other New Jersey households would have been reduced if the EITC increase happened in a vacuum.[10]

But it didn’t. Instead, the EITC increase was paired with a broad-based fuel tax increase that will affect nearly every New Jerseyan, as well as a slew of tax cuts that will benefit wealthier families the most. In the end, each income group in New Jersey will pay a greater share of their incomes to state and local taxes after all of the changes from the Transportation Trust Fund deal.[11]

Expanding This Tax Credit Will Boost New Jersey’s Economy

eitc dollars by county-01The EITC is also a big-time economic stimulus for local economies. The New Jersey EITC distributes nearly $400 million in tax credits each year throughout the state,[12] while the federal EITC puts nearly $1.4 billion a year into the pockets of working New Jerseyans.[13]

But the economic impact of the EITC goes beyond the specific amount credited to each family. Low-wage workers tend to spend these tax credits immediately and locally on short- to medium-term needs like clothes for their family, repairs to the family car, household items or catching up on past-due rent or utility bills.[14]

Increasing the state EITC to 35 percent will further boost the tax credit’s economic impact, generating $69 million in new tax credits each year that will help boost local economies around the state, bringing millions of dollars of spending to almost every county.[15]

The EITC Promotes Work, Raises Living Standards and Helps Lift Families Out of Poverty

The EITC, traditionally a strongly bipartisan measure, is perhaps the most powerful anti-poverty tool available, with significantly positive effects on families who receive it.

The tax credit promotes work, particularly in strong labor markets. During the 1990s, for example, EITC expansions did more to raise employment among single mothers with children than either the changes to welfare during that time or the strong economy.[16]

Lifting a low-income family’s income when a child is young, as the EITC does, improves that child’s immediate well-being, as the family is able to better meet basic needs. But these income boosts have also been tied to better health and more schooling for these children, as well as more hours worked and higher earnings once they become adults.[17]

The extra dollars that these low-wage workers and their families receive each year keeps more than 150,000 New Jerseyans above the federal poverty level each year, including 79,000 New Jersey children.[18] Investing in a program that does so much to help low-income families across New Jersey is common sense.

Next Up: Expanding the EITC for Adults Without Children

The EITC is a crucial tool that improves the lives of working families with children. But it falls short in boosting working adults without children, thanks to a low income cutoff (only those earning less than $14,880 qualify) and a high age threshold (eligibility begins at 25). As a result, working adults without children are the lone group of Americans that the federal tax code taxes into – or deeper into – poverty.

Expanding the EITC for low-income workers without dependent children would raise their incomes and help offset the impact of other taxes they pay.[19] And in a high-cost state like New Jersey, which leads the nation in the share of 18 to 34 year olds living at home,[20] this EITC expansion would help promote greater economic mobility for young workers, which in turn would help boost the economy.

Thankfully, national leaders from both political parties agree this is a problem. The proposals to fix the problem put forward by House Speaker Paul Ryan, Senator Cory Booker, Senator Sherrod Brown and others would help between 343,000 and 504,000 low-income working New Jerseyans across different ethnic groups and vocations.[21] 

Appendix: Impact of Increasing the EITC to 35 Percent by County

EITCto35countychart-01

Endnotes

[1] New Jersey Division of Taxation, Earned Income Tax Credit Information

[2] New Jersey Office of Revenue and Economic Analysis, Statistics of Income, 2013 Tax Returns, Summer 2015.

[3] NJPP analysis of Brookings Institution, Earned Income Tax Credit Interactive and Resources, Tax Year 2014. Source data available at https://www.brookings.edu/interactives/earned-income-tax-credit-eitc-interactive-and-resources/

[4] Ibid 3

[5] New Jersey Policy Perspective, Tax Increase to Fund Transportation Should Be Combined with Credit to Help Low-Income Families, January 2015.

[6] New Jersey Office of Legislative Services, Legislative Fiscal Estimate of A-12, October 2016. Note: NJPP used the low range of the estimated revenue loss for Fiscal Year 2022.

[7] Tax Credits for Workers and Their Families, State Tax Credits, 2016.

[8] Ibid 2

[9] Economic Policy Institute, Family Budget Calculator, 2016.

[10] Institute on Taxation and Economic Policy microsimulation model. For more on the methodology, see the Institute’s Who Pays? report: http://www.itep.org/whopays/

[11] Ibid 10

[12] New Jersey Division of Taxation, New Jersey Tax Expenditure Report, February 2016.

[13] Ibid 3

[14] The Brookings Institution, Using the Earned Income Tax Credit to Stimulate Local Economies, November 2006.

[15] Ibid 3

[16] Center on Budget and Policy Priorities, EITC and Child Tax Credit Promote Work, Reduce Poverty, and Support Children’s Development, Research Finds, April 2015.

[17] Ibid 16

[18] Brookings Institution, Fighting Poverty at Tax Time through the EITC, December 2014.

[19] Center on Budget and Policy Priorities, Strengthening the EITC for Childless Workers Would Promote Work and Reduce Poverty, April 2016.

[20] New Jersey Policy Perspective, New Jersey’s Sluggish Recovery Hurting Working Families, September 2016.

[21] New Jersey Policy Perspective, EITC Expansion Would Provide a Crucial Boost to Hundreds of Thousands of New Jerseyans, October 2016.

New Jersey Should Welcome Immigrants

Posted on by Erika J Nava

This op-ed appeared in the January 18, 2017 edition of NJ Spotlight.

As the Presidential inauguration approaches, immigrants and advocates across the country – including in New Jersey, the state with the third largest share of immigrants – are preparing for a very real threat: mass deportations. New Jersey families are looking to local governments to lead a charge of resistance that is rooted in common sense and public safety, not fear-mongering. Here’s how.

Throughout the President-elect’s campaign, he falsely linked undocumented immigrants with crime while pledging to crack down on “sanctuary cities.” While there is no single definition of what “sanctuary” means, it typically refers to cities, towns, counties, and even states that limit their voluntary involvement with federal Immigrations and Customs Enforcement (ICE) deportations. This can take many forms. It can be outlined in a police department’s policy, passed via ordinance or be an executive policy directive – with local law enforcement approval – that clearly prohibits police officers from asking about anyone’s immigration status.

In addition, as part of a sanctuary policy, police departments or jails might honor the Constitution by declining to honor requests from immigration agents to hold undocumented persons behind bars to turn them over to ICE. Declining these legally dubious “ICE holds” means that people are released once the criminal justice process is complete and not endlessly warehoused in jails. This practice avoids costly lawsuits for violating basic constitutional rights. Anti-detainer policies are not limited to big cities but have been adopted in rural Kansas and in suburban Princeton, New Jersey.

In his anti-immigrant speeches, Trump regularly failed to mention that “sanctuary cities” are actually supported by many police departments. In other words, the police chiefs Trump praises at his rallies are the same ones he is going after when he labels sanctuary cities bad for public safety. In fact, an association of chiefs and sheriffs of the 68 largest law enforcement agencies in the U.S. has declared that requiring them to participate in immigration enforcement “would undermine the trust and cooperation between police and officers and immigrant communities, which are essential elements of community-oriented policing.” It’s no surprise that so many local law enforcement officials feel this way, since having local police departments become agents for ICE also diverts attention, time and resources from their primary role of protecting their community from real criminals.

And despite the President-elect’s assertions, a “sanctuary city” is not a safe haven for criminals. In fact, there is zero evidence of any link between crime and immigration status. Without evidence, anti-immigrant leaders are left to cherry-pick random and extreme anecdotes in order to paint a scary picture of immigrants. The one certain result of these unsupported charges is to push immigrant communities further underground and dissuade them from reporting crimes and serving as witnesses. This is hardly a public safety strategy.

For local communities, becoming a sanctuary promotes inclusion of all residents, regardless of immigration status, and respects everyone’s privacy. This includes not asking residents about their immigration status, or unnecessarily retaining such information in city databases. This helps explain why the eight cities in New Jersey that allow its residents to apply for municipal IDs, for example, do not keep supporting documents.

Despite the threats of the President-elect, some experts suggest that eliminating federal funding to sanctuary cities would be unconstitutional and halted by the courts. The U.S. Supreme Court has repeatedly ruled that immigration enforcement is a federal responsibility and struck down attempts to force states or localities do federal jobs as a violation of the anti-commandeering clause of the10th Amendment, which protects local government from being forced to do the federal government’s work. Simply put, in a sanctuary town, ICE agents have to do their own deportation work, not rely on local police to do it for them.

New Jersey’s local leaders should be focused on building stronger and safer communities, which includes welcoming immigrants regardless of their status. The New Jersey Alliance for Immigrant Justice is focused on helping towns and cities understand the actions they can take to send a clear message that all their residents will be treated with dignity and respect.

When it comes to public safety, one important step cities and counties can take is to send a clear message to all residents: our job is keeping the community safe, not volunteering to become ICE agents. Counties and municipalities should enhance their privacy and non-discrimination policies by not asking for the citizenship or immigration status of anyone unless it is required by law.

Counties and municipalities can also support their immigrant residents by establishing a fund to provide legal representation to poor residents in deportation proceedings, as well as establishing citizenship services and English classes.

Make no mistake: the threats to New Jersey’s families, its economy and its communities are huge. Deporting all half million or so undocumented New Jerseyans would, for example, lead the state’s economy to shrink by nearly 5 percent – the largest such drop of any state. And many families with both documented and undocumented members would be torn apart under such a plan, further destabilizing communities across the state.

In the face of these threats from D.C., the Garden State’s cities and counties have an opportunity to redefine what makes a sanctuary city. These polices are an investment in the reality that immigrants – both documented and undocumented – are huge assets to New Jersey and should be protected and nourished.

GOP Governors are Standing Up for Obamacare

Posted on by Raymond Castro

This op-ed appeared in the Sunday, January 15, 2017 edition of the Star-Ledger.

With this week’s late-night Senate vote, lawmakers in D.C. have begun their attempt to repeal the Affordable Care Act and Medicaid expansion. As the prospects of repeal have become more realistic, some courageous Republican governors are pressing Congress to protect the health coverage of millions of their constituents.

Time’s running out, and Gov. Chris Christie should join them now to make the urgent case to Congress and President-elect Trump to protect the most certain piece of his legacy: expanding Medicaid for over half a million low-income New Jerseyans.

In the State of the State address, Christie emphasized the critical role that the Medicaid expansion played in the state’s efforts to treat New Jerseyans addicted to opioid drugs. Over three-quarters of the funding for the governor’s major behavioral-health and substance-use disorder initiative this year was from federal Medicaid dollars. It is that very guarantee of federal matching funds for an unforeseen health crisis that Republicans in Congress want to eliminate. Yet while the governor spent the bulk of his State of the State on what he sees as the urgent need to fight addiction, he has thus far remained silent about protecting his best vehicle to fund that fight. That needs to change.

As a Republican with close ties to the Republican Party and the President-elect, Christie is in an excellent position to advocate for 530,000 struggling New Jerseyans who are at risk of losing the only health insurance if the Medicaid expansion is repealed. At the very least, the governor should tell New Jersey’s Republican Congressmen that it would be the height of irresponsibility to repeal Obamacare without replacing it at the same time.

In addition to preserving health care for hundreds of thousands of New Jerseyans, Christie has a lot riding on this issue because his decision to opt for the Medicaid expansion could arguably be considered his most important legacy as governor. The benefits to New Jersey have been stunning and unprecedented. Over a half million low-income, mostly working, residents have obtained health coverage, the primary explanation for the historic one-third decrease in the state’s uninsurance rate.  His decision has generated over $3 billion annually in federal funds for health care, which has helped create thousands of good jobs; and it has saved the state about $700 million each year, helping to balance the state budget.

The governor – one of 16 Republican governors who expanded Medicaid – is aware of the benefits to New Jersey, and in the past has enthusiastically defended his decision. Now, with the threat to health care access rising to new heights, it is time for him to do so again. By doing so, he’d be joining some of his fellow Republican governors from around the country, like Doug Ducey from Arizona, Ohio’s John Kasich and Rick Snyder from Michigan, who have already pressed Congress to spare their programs from repeal.

Christie’s case would be especially compelling because losing the Medicaid expansion would cause much greater harm to New Jersey than most other states. New Jersey saw the ninth largest increase in Medicaid enrollment in the nation due to the expansion. Taking away health coverage from hundreds of thousands of New Jerseyans could create a health care crisis of historic proportions, while a loss of up to $3 billion loss in federal funds would also wreak havoc in the state’s health care industry and its fragile budget and economy.

These are arguments that New Jersey’s Republican Representatives should listen to – especially if they are made by a fellow home-state Republican. In addition, they know the tremendous harm that such a loss in health care would mean in their districts. In fact, 145,000 New Jerseyans who are now covered under the Medicaid expansion live in their districts.

Christie also should urge New Jersey’s Congressional delegation to not repeal the ACA without first replacing it with something better. This goes far beyond the Medicaid expansion and includes the fate of the health insurance market, consumer protections and even Medicare improvements. A recent poll found that three in four Americans either do not want the ACA repealed or repealed without a replacement at the same time.

But that is not what the Republicans in Congress are planning; they want to repeal now, and then figure out how best to replace later. Since Congressional Republicans haven’t been able to agree on a replacement for the last six years, even though they have voted to repeal the ACA over 60 times, a healthy dose of skepticism regarding their interest in, or capacity to, enact a replacement is warranted.

And the proposals they have discussed – like more tax breaks for the wealthy, high deductibles for bare- bone plans, and reducing essential insurance benefits – would all be bad news for struggling New Jerseyans only making matters worse. The most damaging idea is a Medicaid block grant, which would permanently cap funding at a sharply reduced level. Medicaid is the major health safety net for 1.8 million New Jerseyans. This plan would not only threaten the working poor in the Medicaid expansion, it could result in devastating cuts to health care for seniors, people with disabilities and children for generations to come.

In his final year in office, Christie has a chance to do what’s right and clearly beneficial for New Jersey. Will he seek to protect essential health care for struggling residents of his home state, or will he sit on the sidelines while his party destroys a lifeline for millions of Americans?

Congress Can Help More Workers Escape Poverty

Posted on by Jon Whiten

This op-ed, which was jointly written with Pennsylvania Budget and Policy Center Director Marc Stier, appeared in Newsworks on January 6, 2017.

Those of us focused on the well-being of Americans with low incomes have many concerns about the incoming Trump administration. If President Trump and Republicans in Congress repeal the Affordable Care Act (and especially the law’s expansion of Medicaid), millions of people will lose health insurance. If the Republicans move to turn the original Medicaid and Food Stamp programs into block grants that don’t give states enough funds to provide the current level of benefits and meet rising needs in a future recession, millions more will suffer. As advocates, we will be fighting those proposals, and we hope to see Democrats in Congress and even some Republicans do the same.

But we see one ray of hope for progress — and for bi-partisan cooperation. The Earned Income Tax Credit has had a major impact in promoting work and reducing poverty in America, and it has a long history of bi-partisan support. Democrats and Republicans might be able to come together to fix one flaw in the program: It does little to nothing for millions of struggling workers who are not raising children.

Because of that limitation, many of these workers are pushed into, or deeper into, poverty by federal taxes each year. Expanding the EITC to include these workers and ensure that they are no longer taxed into poverty should be a top priority for both parties next year.

The EITC has helped low-wage workers and their families since it was enacted in 1975 by a Democratic Congress and signed by Republican President Gerald Ford. It has been expanded by bi-partisan efforts since.

The EITC offsets federal payroll and income taxes and allows low-income workers to keep more of their hard-earned money at tax time. When you’re making $7, $8, or even $10 an hour, every penny counts. Workers use the money they get back from the EITC to stay afloat and pay for basic needs such as groceries and a decent place to live.

The impact of the EITC is greater in the long term. It creates a powerful incentive for people to work more and develop their skills because the EITC increases with each additional dollar of earnings until reaching the maximum level. This lifts even more families out of poverty.

Between the years 2011 and 2013, an average of over six million people, including three million children, were lifted out of poverty by the EITC. Twenty million more benefitted from the program, although the EITC by itself was not enough to raise their incomes above the poverty line. An average of 152,000 people in Pennsylvania, including 73,000 children, and 156,000 people in New Jersey, including 79,000 children, escaped poverty each year due to the EITC. And note, these figures only include the direct impact of EITC benefits. If we include an estimate of the wages received by people who are encouraged to work by the EITC, the number of people who escape poverty is roughly doubled.

The benefits of the EITC don’t just flow to individual families. Encouraging work and putting more money in the hands of those with low incomes helps generate increased economic activity in our communities. In 2014, the EITC put $2.1 billion of purchasing power in the hands of Pennsylvania residents and $1.4 billion in the hands of New Jersey residents.

A central goal of the EITC has always been to ensure that federal taxes do not push workers into poverty or deeper into poverty. But that’s not the case for low-wage workers not raising children, who are either largely or entirely excluded from the EITC.

These workers also miss out on the EITC’s work incentive, and their communities miss out on the boost to economic activity that comes from more workers having enough money to spend on food and other essential goods and services.

Republican House Speaker Paul Ryan joined President Obama in proposing an expansion to the EITC to include workers not raising children. In explaining his proposal, he said, “We should make sure that in this country, it always pays to work.” Senator Sherrod Brown (D-Ohio) and Representative Richard Neal (D-Massachusetts), and Senators Cory Booker (D-New Jersey) and Tammy Baldwin (D-Wisconsin), have put forward even bolder plans.

These proposals would have a dramatic impact in our states. The Ryan proposal would help 544,000 individuals in Pennsylvania and 343,000 in New Jersey become newly eligible for the EITC or eligible for a larger credit. The Brown-Neal proposal would help 659,000 workers in Pennsylvania and 425,000 in New Jersey. Among them would be tens of thousands of former members of the military, young workers aged 21-24, workers in rural areas, and Latino and African American workers.

Advocates for low-income Americans may be spending much time fighting againt proposals we cannot accept. But, at the same time, we can’t afford to miss opportunities to make lives better for working people, as long as it doesn’t come at the cost of supporting deep reductions to existing programs. An effort to help and empower low-income workers by enacting a much-needed expansion of the EITC would be a good step forward, and we hope Senators Casey, Toomey, Menendez, and Booker and our other members of Congress will actively support it while resisting reductions to health care and food stamp benefits. Thousands of working people struggling to get out of poverty in New Jersey and Pennsylvania are counting on them.

60 Groups to U.S. Senators: EITC Expansion is a Priority

Posted on by Jon Whiten

Yesterday, as part of a campaign launched this fall by New Jersey Policy Perspective, New Jersey Citizen Action and the Anti-Poverty Network of New Jersey, 60 New Jersey-based organizations representing hundreds of thousands of residents sent a letter to Senators Booker and Menendez, urging them to continue their efforts to expand the federal Earned Income Tax Credit for working adults without children.  This expansion would help between 343,000 and 504,000 New Jersey workers.

The letters (view them here and here) identify several key political windows in which the EITC expansion could become a reality, even in an admittedly tough political climate to advance progressive policies. The fact that the EITC has a long history of bipartisan support helps increase the likelihood that it could be part of ongoing discussions about tax reform or infrastructure spending in 2017.

NJPP is glad to join 59 other leading New Jersey organizations today in reminding our U.S. Senators that expanding the Earned Income Tax Credit for low-wage workers not raising children remains a priority, even as we face incredibly daunting political headwinds in D.C.

Our Senators will have their hands full fighting some serious threats to low-income and middle-class Americans, but they should also be prepared to advance a proactive and bipartisan agenda that can boost working people – and this EITC expansion falls squarely into that category.

LETTER SIGNERS (listed in alphabetical order):
  • 1199 SEIU
  • ACCSES New Jersey
  • The Affordable Homes Group
  • Amalgamated Transit Union – New Jersey State Council
  • American Federation of State, County and Municipal Employees District 1
  • Anti-Poverty Network of New Jersey
  • Bethel AME Church (Woodbury) – Rev. Charles Boyer, Pastor
  • BlueWave New Jersey
  • Catholic Charities – Diocese of Trenton
  • Communications Workers of America – New Jersey
  • Communications Workers of America – Local 1039
  • Communications Workers of America – Local 1081
  • CUMAC
  • Elizabeth Coalition to House the Homeless
  • Family Voices New Jersey
  • The FoodBank of Monmouth and Ocean Counties
  • Garden State Equality
  • Greater New Jersey United Methodist Church – Palisades District
  • Hackensack Environmental Justice Green Drinks
  • Health Professionals and Allied Employees
  • Holy Trinity Lutheran Church, Hasbrouck Heights
  • HomeFront
  • Housing and Community Development Network of New Jersey
  • Hyacinth AIDS Foundation
  • Ironbound Community Corporation
  • Jewish Family Service of Atlantic & Cape May Counties
  • League of Women Voters of New Jersey
  • Lutheran Episcopal Advocacy Ministry of New Jersey
  • The Mercer Alliance to End Homelessness
  • Monarch Housing Associates
  • National Association for the Advancement of Colored People New Jersey State Conference
  • National Organization for Women of New Jersey
  • National Organization for Women – Northern New Jersey Chapter
  • Newark Environmental Justice Green Drinks
  • Newark Teachers Union
  • New Jersey Alliance for Immigrant Justice
  • New Jersey Anti-Hunger Coalition
  • New Jersey Citizen Action
  • New Jersey Coalition to End Domestic Violence
  • New Jersey Coalition to End Homelessness
  • New Jersey Education Association
  • New Jersey Main Street Alliance
  • New Jersey Policy Perspective
  • New Jersey State Association of Jewish Federations
  • New Jersey Tenant Organization
  • New Jersey Work Environment Council
  • New Jersey Working Families Alliance
  • Parent Education Organizing Council
  • Paterson Environmental Justice Green Drinks
  • Philabundance
  • Region 9 Housing
  • RESULTS Bernardsville
  • Service Employees International Union, New Jersey State Council
  • Statewide Parent Advocacy Network (SPAN)
  • Supportive Housing Association
  • Tierra Madres
  • Trenton Area Soup Kitchen (TASK)
  • Unitarian Universalist Legislative Ministry of New Jersey
  • United Way of Northern New Jersey
  • The Wei

New Jersey’s Tax Revenues Continue to Lag

Posted on by Sheila Reynertson

New Jersey’s recovery from the Great Recession continues to be rocky one, according to a the latest analysis of tax revenue data by Pew Charitable Trusts. While tax revenues in the majority of states have returned to pre-recession levels, New Jersey’s remain well below collections made just before the recession.

Nationally, states took in 6.5 percent more tax revenue in the first quarter of 2016 than they did in the third quarter of 2008. That is the equivalent of 6.5 cents more in purchasing power for every dollar collected at their 2008 peak. Sounds good, right?

But the national trend hides how varied the recovery has been among states with their own set of economic conditions, population changes and tax policy choices since the recession. New Jersey has consistently lagged behind national tax revenue rates and, in the first quarter of 2016, pulled in tax revenues 7.7 percent less than it did when its tax revenue last peaked in late 2007.  

screen-shot-2016-12-16-at-11-13-43-am

Some states that have fully recovered their tax revenue raised taxes after the recession including California and Minnesota. These states have rebounded by 17 percent and 21.5 percent, respectfully. Some states that chose to cut taxes continue to struggle toward previous tax collection peaks since the recession – including New Jersey.

The Garden State’s tax revenue collections recovery have taken a “two steps forward, one step back” approach since its last major dip in 2001. Meantime, significant tax cuts that were passed in October as part of the gas tax increase deal will go into full effect next year – taking as much as $675 million in revenue out of next year’s budget, according to Office of Legislative Services estimates. Although national analysts predict that total state tax revenues will likely grow at a slow rate in 2017, it remains to be seen if New Jersey’s revenue will do the same.

A Step Forward on Corporate Tax Subsidy Accountability

Posted on by Jon Whiten

This morning the New Jersey Economic Development Authority (EDA) took an important step toward reining in some of the excesses of the state’s corporate tax subsidy programs, heeding calls for reform that we and other advocates have made over the past few years. But the EDA’s capacity to truly reform the state’s tax breaks is limited – the real onus is on the legislature, and as the EDA’s actions today make clear, it’s high time for the legislature to act.

Specifically, today the EDA opened a public comment period for a change to the “net benefit model” that the Authority staff use to estimate the likely economic impact of a project that is applying for tax breaks. Due to 2013 legislative changes, the current model puts New Jersey taxpayers at serious and unnecessary risk because it calculates a project’s economic benefits to cover a time when there is no guarantee the project will still be in the state.

In other words, the test allows corporations to get tax breaks that assume that the approved project will still be producing economic benefits for up to 35 years even though New Jersey’s 2013 law allows the corporation to take its full tax breaks and flee the state after just 15 years. (For more background, see our May 2015 report, Risky Business: https://www.njpp.org/budget/risky-business-new-jersey-must-hold-corporations-more-accountable-in-subsidy-deals.)
Camden net benefits total dec 2016-01.jpg

The test is riskiest when it comes to the subsidies approved for corporations relocating to Camden. As a result, while the state touts a net economic benefit of $561 million from the 22 deals it has approved for Camden since December 2013 under the Grow New Jersey program, the reality is that New Jersey is at risk of losing $254 million on the deals because of this flawed formula.

Under the EDA’s proposed changes, the net benefits test would eliminate most – but not all – of the estimated economic benefits in the so-called “out years” (ie, the years when there is no guarantee a corporation will still be in New Jersey). There is a window in which a corporation can ink an agreement with the EDA promising to stay beyond the official commitment period and still receive the larger subsidy. While this is not ideal, we are glad to see the proposed changes also include a clawback provision, by which the state can recoup some of the subsidy it’s already awarded if the corporation breaks a promise to stay beyond the official commitment period.

The EDA is to be applauded for its actions, and NJPP appreciates the willingness of EDA leadership to continue what’s been a productive, ongoing dialogue about New Jersey’s economic development subsidies. But the real reform must come from the legislature and governor, as they write the law that governs these subsidies.

When it comes to this net benefits test, the legislature should follow the EDA’s lead and restore some fiscal responsibility and realism to the test. The easiest and most sensible way to do so would be to ensure that the net benefits test covers only the number of years the corporation is committed by statute to stay in the state, as legislation introduced by Assemblyman Troy Singleton would do.

But the legislature’s reform efforts must not stop with the net benefits test. There are many other fixes that are desperately needed. Among those at the top of the list: restoring spending caps, mandating better reporting on the outcomes of tax breaks, developing more stringent standards for subsidies given to corporations shifting jobs around the state, and restricting corporations’ ability to redeem more in tax credits than they owe in taxes.

Slow Economic Gains from Low-Octane Wages

Posted on by Brandon McKoy

This op-ed appeared in the December 11, 2016 edition of the Bergen Record and other Gannett newspapers.

Ensuring that all workers in New Jersey can afford a decent living is vital to boosting the state’s economy to the benefit of all residents — and a simple way to do so is to increase the minimum wage. About 1 million New Jersey workers currently make poverty wages, forcing many of them to rely on private charity and the increasingly fragile public safety net just to make ends meet. When so many people can’t afford basic daily needs in a consumer-based economy, it creates a big drag on the economy: Everything and everyone suffers.

Apparently, not everyone understands this basic tenet of economics. Opponents of a livable wage continue to assert that the sky will fall and the economy will crumble if New Jersey phases in an increase to a $15 minimum wage over five years. Gov. Chris Christie took this line of attack when he vetoed a bill during the summer that would have boosted wages for one in four New Jersey workers. And the latest wolf-crier is the lieutenant governor, who recently warned that increasing the minimum wage would — horror of horrors — require New Jerseyans to pump their own gas, as if that’s somehow an unacceptable trade-off for ensuring that all of our neighbors are able to live and thrive.

Over the years, opponents of livable wages have stoked fears that increasing the minimum wage would slow the economy and lead to job losses. Never mind that other cities and states that have increased the wage are seeing stronger economies and increased spending; never mind that study after study shows that increasing the minimum wage has far more positive effects than negative ones; never mind that one in four New Jersey workers is living in poverty because he or she isn’t paid enough to afford the most basic daily needs.

After the governor rejected a raise for nearly 1 million workers, legislative leaders promised they would take the issue directly to voters again, as they did in 2013. With a key deadline rapidly approaching, the likelihood of that promise being fulfilled seems less and less likely. Given this stalemate, New Jersey workers who aren’t paid enough to afford the most basic daily needs may have to wait even l­onger —until an administration more interested in boosting working families arrives in Trenton — for a substantial boost to their wages.

Who are these workers? Despite the longstanding myth, they turn out not to be affluent teens working for extra spending money. In fact, 91 percent of these workers are adults. What’s more, 61 percent of them are working full time, about half have graduated from or attended college, and nearly one in three is a parent. Altogether, 21 percent of New Jersey’s children have at least one low-paid working parent.

The simple reality is that poverty and inequality harm all of us. When fewer and fewer people own more and more of the wealth, all of us suffer. If you’re a child whose parents don’t earn enough to reliably provide for your needs, you can’t focus at school. If you’re a parent whose recent college grad can’t afford to move out and build a life, you worry about your child’s future. If you’re a business owner whose customer base has suffered from stagnant wages for decades, it doesn’t matter how good your product is, how good your marketing is, or how nice your store is; there won’t be enough people with enough disposable income to buy your goods or services.

Every time we try to increase the minimum wage, opponents wail and moan that doing so will destroy our economy and bring about a thousand years of darkness. Yet every time we muster the courage to actually increase the wage, jobs are created, the economy grows stronger and the sun continues to shine.

The last time we increased the wage, opponents said with absolute certainty that we would lose 30,000 jobs — instead, we gained 90,000 as low-wage workers were better able to afford their day-to-day needs and infuse the state’s economy with spending that creates jobs and spurs growth. Imagine the effect we’ll see when we actually increase the wage to a level where people can earn a decent living. It’s time to stop accepting the naysayers’ fictional threats.

This past Election Day, voters in Colorado, Maine, Arizona and Washington approved increases in their minimum wages, helping millions of workers. All of these states have a lower cost of living than New Jersey’s and they were still able to understand and appreciate the vital importance that raising the minimum wage would mean for them. So, New Jersey, what are we waiting for?

The coming year will see state Republicans and Democrats argue this very point as they jockey for position in the gubernatorial race. Christie’s political stature is not what it was, but it is unlikely he would sign off on a $15 minimum wage statewide or even for workers at the Port Authority of New York and New Jersey-controlled Newark Liberty International Airport. The latter means a two-tiered wage system between the Port Authority airports in New York and New Jersey. The minimum wage at the two New York major airports is set to rise to $15 an hour.

Meanwhile, our state has been stuck in neutral for far too long as lawmakers have poured money in the pockets of the well-off through lavish tax breaks and sweetheart deals. The only way to get New Jersey going again is to make sure that every worker is able to afford a decent living — it will benefit them, their families and their communities. In other words, it will benefit all of us. Let’s stop listening to those who cry wolf and start using the experiences of other cities and states to do what is sensible and right.

Let’s raise the minimum wage.

Six Reasons the Governor’s ‘Fairness Formula’ Must be Rejected

Posted on by Gordon MacInnes

To read a PDF version of this report, click here.

Gov. Christie has proposed a radical change to New Jersey’s school aid formula that would dismantle four decades of efforts to target school aid to districts that serve concentrations of children from poor families. Labeled the “Fairness Formula,” his proposal is rooted in the argument that lower-income districts have failed so completely after decades of generous state funding that it’s time to reallocate their funds to more successful districts. In brief, he seeks to use school aid to lower property taxes in middle-income and wealthy districts at the expense of districts serving kids from poor families.

In September, the governor petitioned the New Jersey Supreme Court to reverse the court’s 40 years of strong decisions establishing that the state constitution mandates that the state provide funding to address the consequences of concentrated poverty in selected districts. He requests, moreover, that the court nullify statutes dealing with teacher tenure and to overturn collective bargaining contracts. Elsewhere, he described the continuation of funding for urban districts as “criminal.”

Of course, there is no way to predict how the Court will respond to the governor’s petition. One cannot guarantee a quick dismissal, and even if there is one, this issue won’t necessarily go away. The governor could go so far as to incorporate his formula in his 2018 budget proposal, which would be followed two days later with official notices to districts of their expected aid. But assuming that the Governor’s preferred formula would not be adopted via the legislative budget process, districts would be in a precarious position since school budgets have to be adopted in early April before the June 30 deadline for state budget adoption. Districts losing significant state aid would have to send layoff notices not later than May 15 before the budget is resolved, leading to chaos.

In the end, the governor’s proposal would reduce – even eliminate – educational opportunities for children from New Jersey’s poor and working-class families. 

1. The proposal ignores indisputable evidence about the connection between poverty and educational achievement.

Beginning with the 1967 Coleman Report, there are now billions of data points that consistently point to the two factors that most heavily determine student achievement: the socioeconomic status of one’s parents and the socioeconomic status of one’s classmates. Know these two facts and one can predict with near-certainty how most students will perform on standardized tests.

The gold standard for tracking the academic achievement of large numbers of randomly selected students is the National Assessment for Educational Progress. A review of the reading and math tests in 2015 confirms that not one state’s students from poor families (its free and reduced lunch recipients) outperformed the students from middle-class and affluent families (those not eligible for subsidized lunches) in their own or any other state.[1]

New Jersey has operated since 1975 with a classification scheme to take these economic and demographic certainties into account to gauge how students in similar districts perform. Districts in the lowest grouping (“A”) have lower family incomes, parental educational and occupational levels, higher poverty and unemployment rates. Districts in the highest grouping (“J”) have low poverty rates with higher parental income and educational levels.[2] Given that there are eight groupings for reporting test results, that tests are required in seven grade levels and that there is both a math and language arts test in each grade (plus a science test in two grades), there are a total of 102 opportunities each year for districts in a lower-rated socioeconomic group to outperform a higher group. Over the two-year period of 2013 and 2014 (when there were 204 opportunities), this happened once, and by a tiny margin (by .1 of 1 percent on the scale score for high school math).[3]

A 204-to-1 bet is not a good one to place. And the notion advanced by the governor that “no child in this state is worth more state aid than another” ignores decades of evidence that schools with concentrations of children from poor families in fact face more daunting educational challenges.[4]

2. Children in urban districts are the innocent victims since the districts are unprepared to contend with devastating cuts in state aid.

By far, the biggest losers under Gov. Christie’s plan would be the 31 school districts formerly called the “Abbott” districts (based on 21 New Jersey Supreme Court decisions between 1985 and 2011). These districts educate about 20 percent of New Jersey’s students and receive about 55 percent of all state aid. Between them the districts would lose $2.5 billion in aid – a reduction of 43.6 percent.

Students in these districts are disproportionately poor, representing 41.6 percent of all students who are eligible for the free lunch program, and these districts enroll about half (47.9 percent) of the state’s English-language learner students. A majority of students in these districts (85 percent) are black and Latino, accounting for about two of every five black and Latino students in New Jersey.

And the poorer the district, the greater the loss. Gentrified Hoboken would actually see its aid increase by 20 percent; Camden – the poorest of the former Abbott districts – would lose 78.1 percent of its scheduled aid.

How a formula that would dismantle the work of districts charged with the education of the state’s most vulnerable children can be described as “fair” requires a Kafkaesque or Orwellian dictionary.

The governor’s claim of widespread failure in these districts ignores not only the indisputable difficulties of educating concentrations of poor children, but the fact that they are not uniformly poor-performing districts. In fact, more than one-third of them have a four-year average graduation rate that exceeds the national rate of 82 percent, and four of the 31 districts have a higher graduation rate than the state average (which is one of the nation’s highest).

abbotts-grad-rates-01

Let’s take a look at Union City, which, as the governor has noted, comes very close to the state average for graduation rates – even with almost one-quarter of its students still learning English and one of the highest counts of children from very poor families in the state. The governor was right to spotlight Union City since it is one of the best-performing deeply poor school districts in the nation. As a reward, he proposes to slash aid to Union City by 56 percent – and offers no explanation for how the district would maintain its exceptional performance after losing more than half of its funding.

3. Children in over 100 working-class districts would also be harmed.

The governor builds his case on the court-ordered Abbott case that resulted in 31 districts receiving 55 percent of the state’s school aid. However, in his town hall tour he neglects to mention that an additional 110 school districts would also suffer a loss in state aid with the result that one-third of New Jersey’s students – not the mistaken 23 percent he cites – would go to school in districts with reduced state aid. Not surprisingly, these 110 districts also have larger shares of students from poor families and more students from non-English-speaking homes.

Take Dover in Morris County as an example. Eighty-six percent of its students are Latinos and 62 percent are free-lunch-eligible.[5] Even though it is one of the highest-performing “A” districts, it would lose one-sixth of its state aid ($6.2 million). Lindenwold in Camden County has an even higher count of very poor students (75 percent are free-lunch-eligible) and 83 percent are black and Latino.[6] Lindenwold would suffer a 19 percent reduction of $7.2 million in state aid under the governor’s proposal. Neither district could make up the loss from higher property taxes, with the result being a severe reduction in staffing and the consequences that flow from bigger class sizes and less individualized attention. 

4. The proposal would spell the end of high-quality preschool for poor New Jersey families, removing an essential building block to help close the achievement gap.

The evidence is overwhelming that investing in high-quality preschool pays off better than just about any public investment. Kids from very poor families that attend good preschools are much more likely than their neighbors who do not to graduate from high school, stay out of jail and work full time.

New Jersey’s expansion of preschool opportunity is a direct result of the Abbott decisions, but the School Finance and Reform Act of 2008 extended preschool aid to another 81 districts with high counts of very poor kids. Unfortunately, the state has never paid for this preschool expansion. (The legislature in 2016 authorized a modest $25 million increase but the governor vetoed it out of the budget.)

The oft-cited excellence of the Union City schools begins with its emphasis on preschool (nine of ten Union City 3- and 4 year-olds attend) and its almost organic connection to the K-3 years. The result is that Union City’s 3rd graders outperform those in every other former Abbott district.[7] It is ironic and inconsistent that the governor would single out Union City for its excellent performance and then dismiss the foundation for that excellence – preschool – as “babysitting” and propose to effectively demolish that foundation by slashing the district’s state aid.

The governor’s blanket claim of city school failure ignores not just Union City’s progress, but that of other districts like Elizabeth, Long Branch and West New York that all educate many students from deeply poor families. All of them give special emphasis to connecting their preschool “grads” to intensive early literacy efforts in the K-3 grades.

5. The governor glosses over the root causes of New Jersey’s property tax problem.

Gov. Christie begins by arguing that the intervention of the state Supreme Court in school finance “has caused us to have the highest property taxes in the nation.” This is true: New Jersey does have the highest property taxes.

But this is also true, and unmentioned by the governor: New Jersey had the highest property taxes before the court’s orders on school finance kicked in in the 1997 fiscal year.[8]

There are many explanations for New Jersey’s historically high property taxes such as its population density, the excessive number of municipalities and school districts and its traditions of local control. For the majority of school districts, the local property tax has always been the primary source of funding – and that did not change with the court’s Abbott decisions.

The governor claims his proposal would lead to substantial property tax reductions in the state’s middle-class and affluent towns, as it would distribute state aid on a $6,599 per student basis. Nine out of the ten districts that would receive at least a 1,530 percent increase in state aid under the “Fairness Formula” are in the wealthiest groupings of the Department of Education classification scheme. In other words, the districts with the least challenging educational issues would receive the most money. Districts receiving the increased aid would be limited to using a small part of it to cover the 2 percent ceiling on increased school spending, with the balance mandated to reduce residential property taxes. To make the case clearer, assume one of those wealthy districts spends $15,000 per student with only $800 coming from the state, the balance paid via the property tax. If the governor’s plan were adopted, the district’s spending could rise to $15,300 per student but the property tax bill would be reduced by $5,499 per student, a 687 percent decrease.

However, not all of this aid will be available if the governor follows through on his pledge to protect state assistance for special education and charter schools. One might safely assume that assistance for transportation, security and health services at private religious schools would also be maintained. So, right off the top, the $6,599 number declines to no more than around $4,500 per student.

6. The governor misleads on urban charter schools.

There is a common assumption that charter and district schools – since they are located in the same municipality – educate kids from a uniform pool. They don’t.

Across the state, there are two categories of students that are noticeably missing from the charter school rolls: students who are classified with special education disabilities and English-language learners.

For example, in Newark’s district schools, 17.1 percent of students are classified for special education, including one in six with multiple disabilities or autism. The count in Newark’s charter schools is 9.7 percent, all of whom fell into the three least severe disability categories.[9]

When it comes to students who are English-language learners, the charter schools are close to AWOL. Just 0.9 of 1 percent of Newark’s charter students are English learners, while more than one in ten students (10.9 percent) in the Newark district schools are.[10] The governor’s solitary reliance on charter schools to address the problems of 141 districts receiving state aid cuts fails to even mention the need to address the education of thousands of immigrant and disabled students who are found overwhelmingly in districts suffering reductions in state aid.

To provide these contrasts between charter and district school profiles is not a blanket criticism of charter schools, nor an automatic defense of district schools. Many charters do not enroll a large enough student body to employ the highly specialized teachers and specialists to contend with large numbers of classified students, especially the severely disabled. To a lesser extent, the same prevails when it comes to educating large numbers of students not proficient in English. However, given the numbers of foreign-born families in charter-rich cities such as Paterson, Jersey City and Newark the modest to non-existent outreach by charters to English learners is noteworthy.

While charters in some cities like Newark and Camden might enroll students with similar economic profiles as students in district schools, this is not true in all major cities. In Jersey City, for example, the contrast is quite marked. Free-lunch-eligible students make up 48.6 percent of the 4,392 students enrolled in ten charters there, compared to 71.7 percent for the district as a whole.[11] The notion, therefore, that charter schools alone can make up for the slashing of district school budgets does not come close to addressing the consequences. In Jersey City’s case, the “Fairness Formula” would slash $216.7 million in aid, a cut of almost $7,800 per student or 51.8 percent.

Moreover, the core of the governor’s argument – that urban charter schools perform better than district schools for about half the money – is simply untrue. In fact, it turns out to be the reverse: charter schools receive significantly more funding than individual district schools.

The governor’s calculations fail to account for the fact that charter school funding comes directly out of their home district’s budget. They also fail to account for district payments to charter schools, out-of-district placements for special education, central office management and debt service when calculating the true cost of educating a child enrolled in an urban district.

Charter schools are protected by enabling legislation stating they will receive 90 percent of the district’s per-student operating budget. In Newark, for example, charter schools received $226 million in the 2015-6 school year to educate 13,752 students or $16,434 per student. This and other out-of-district payments, debt service and central office expenses left Newark’s public schools with $323 million to manage over 35,000 students at an average of $8,500 per K-8 students and $11,300 per high school student.[12] These numbers aren’t even close to the governor’s citation that Newark spends $22,000 for students enrolled in its district schools.

Endnotes

[1] NJPP analysis of The Nation’s Report Card 2015; available at https://www.nationsreportcard.gov/reading_math_2015/#reading/state?grade=4

[2] See New Jersey Department of Education for more detail (http://www.state.nj.us/education/finance/rda/dfg.shtml)

[3] NJPP analysis of “NJ ASK” and “HSPA” results from 2013 and 2014

[4] Gov. Chris Christie’s Office, Governor Christie: No Child Is Worth More Than Another, June 2016.

[5] NJPP analysis of New Jersey Department of Education enrollment data

[6] Ibid 4

[7] New Jersey Department of Education, Grade 3 New Jersey Assessment of Skills and Knowledge Spring 2014 – specifically the “NJASK 2014 State Summary” Excel file. Available at http://www.state.nj.us/education/schools/achievement/14/njask3/

[8] The Public Policy Institute of New York State, Just the Facts: Key Economic and Social Indicators for New York State, (1999-2000) http://www.ppinys.org/jtf99/table23.htm

[9] New Jersey Department of Education, 2015 Special Education Data – specifically the “District Classification Rates, Ages 3-21” Excel file. Available at http://www.state.nj.us/education/specialed/data/2015.htm

[10] NJPP analysis of New Jersey Department of Education enrollment data

[11] NJPP analysis of New Jersey Department of Education enrollment data

[12] Newark Public Schools, Budget Presentation, pp. 10-11.

NJPP’s Gordon MacInnes on Latest Credit Downgrade

Posted on by NJPP Staff

Last week NJPP president Gordon MacInnes talked to Chasing News about the record 10th credit downgrade under the Christie administration, which came on the heels of the approval of a reckless package of tax cuts that accompanied a long-overdue gas tax increase this fall.

“It was certainly guessable that if the legislature and the governor agreed to blow yet another hole in New Jersey’s revenues, that the credit agencies would … issue their warnings and … another downgrade,” he said.

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