Christie to propose cap on property-tax hikes

Gov. Christie will propose a constitutional amendment to cap property-tax increases at 2.5 percent per year in his budget speech tomorrow, hoping to hold down the levies that have been a long-standing source of frustration across the state.

He also plans to revive a controversial tax plan to raise money for hospitals; cut aid to towns, schools, and colleges; and reshape the state's property-tax rebate program as credits on homeowners' bills - instead of checks in the mail - according to three officials briefed yesterday by the Christie administration. The credits would not be applied until April, May, or June 2011.

That means homeowners would not receive checks in 2010, though they still would get tax relief in the coming fiscal year. The rebates are typically mailed in the summer and fall to help offset the state's high property taxes, which average $7,300.

Delaying the payments until the fiscal year's fourth quarter would give Christie time to convert the checks into credits and also buy some time while the state's financial picture became more clear. Under the governor's plan, the credits would not be paid until after nearly a full year of tax collections and after he has proposed his next budget.

Those who received rebate checks last year - senior citizens earning less than $150,000 and other homeowners making $75,000 or less - still would be eligible to get a credit at the same level, according to the officials, who spoke on the condition of anonymity because their briefing was meant to be confidential.

Under the $29.3 billion budget, hospitals would pay an additional $45 million in "provider taxes," a change that would help generate an extra $45 million in federal aid. The combined $90 million raised would be funneled back to hospitals, more than offsetting a $79 million cut in state aid.

But similar proposals in the past have proved controversial because hospitals in affluent areas often pay more than they get back. Under past proposals, the tax and redistribution would have created stark winners and losers.

Towns and schools also will have to make do with less aid, according to the officials briefed yesterday on the budget plans, increasing local leaders' challenge to stay within the 2.5 percent property-tax cap Christie will propose.

School aid would be cut by more than $800 million, largely as federal stimulus funding declines, according to the three sources.

Municipalities will lose around $445 million in aid. The cuts would be structured to limit the impact on the average property-tax bill in each town.

Christie plans to cut around $170 million from higher-education funding, according to two of the sources, including reductions in aid to public colleges and to some scholarship programs. Aid to private colleges, about $17 million, would be eliminated.

The cuts are part of a budget that Christie has warned will be difficult, but that he has characterized as crucial to repairing New Jersey's long ailing finances. He has decided against raising any major taxes.

The 2.5 percent property-tax cap would replace the existing 4 percent limit. Christie also will call for eliminating several exceptions that let schools and municipalities often exceed the 4 percent maximum.

According to two sources, Christie has considered imposing a similar 2.5 percent cap on increases in state operations.

The tougher property-tax limit would put more pressure on mayors and school boards to keep local spending in check even as they lost state aid. Christie has argued for weeks that local leaders need to do their part to make the state more affordable, and he has pledged to offer "tools," such as changes to the rules governing labor negotiations, to give them more power to control costs.

"All levels of government have to impose that discipline. Government cannot continue to be made larger and more expensive," Christie said at a news conference last week.

His budget speech is scheduled for 1 p.m. tomorrow.