When the current FY25 state budget was finalized in June, a $150 million fund dedicated to municipal aid was diverted to the General Fund.
At the New Jersey League of Municipalities conference this week, mayors and legislators were already making a big play to get it restored in FY26.
And in what’s anticipated to be a very challenging budget next year, it probably won’t come easily.
“This municipal aid is also a big deal for the business community,” NJBIA Chief Government Affairs Officer Christopher Emigholz said. “It is essentially property tax relief for all taxpayers including businesses instead of only for select homeowners, and businesses pay a lot of property taxes.
“When you consider New Jersey’s property taxes are the highest in the nation and they represent the largest state and local tax that businesses pay, it’s important that these dollars go back to their rightful place.”
The Municipal Relief Fund Aid was established to address the relatively recent history of the state diverting energy tax revenues intended for towns.
In the FY24 budget, $150 million in energy tax receipts did go back to municipalities. But this year, it didn’t – despite more than $600 million in late add-on projects put into the budget by Democrats who control the budget appropriations committees.
Since 2002, under both Democratic and Republican administrations, more than $14 billion in municipal tax relief funds have been diverted for budgetary purposes.
“As a former mayor, I can tell you (having the municipal aid diverted) would piss me off because, frankly, it doesn’t belong to the state,” said Assembly Minority Leader John DiMaio. “It belongs to most of the municipalities.”
“This is that never-ending, tug-of-war about a broken tax structure that relies on property taxes to fund all of local governments,” added Assembly Majority Leader Lou Greenwald.
“These are the types of shell games that take place in administrations to pull money from one to the other to offset their burden on the property tax, as opposed to really having a deep dive on the cost side, like we did on the Path to Progress (report).”
Prior to the League event, Senate Minority Leader Anthony Bucco, Senator Declan O’Scanlon and League of Municipalities Executive Director Mike Cerra penned a letter to Gov. Phil Murphy asking for restoration of the municipal funds when he makes his FY26 budget proposal in February.
“The aid cut will hit municipalities after years of high inflation,” they wrote. “And it will hit those municipalities remaining in the State Health Benefits Plan just as their taxpayers and employees start paying 16% higher health insurance premiums being charged by the state.
“We have proposed billions of dollars in State budget savings, program reforms and non-tax revenue ideas over the past several years that have gone ignored. Embracing just some of our ideas would allow restoration of the cut and prevent property tax spokes and/or reductions in local services.”
Deputy Majority Leader and Senate Budget Chair Paul Sarlo said he was “disappointed” that the municipal funding was cut for FY25, but also touted the full funding of education and a full pension fund payment for the fourth straight year.
“I’m going to warn everybody now – I think it’s going to be a very, very tight budget,” Sarlo said. “(The restoration of the fund) is a priority of mine. It’s a priority of probably everybody on this panel and every mayor. But it is a competing priority.”
