Murphy gives New Jersey local governments green light to raise taxes

(The Center Square) — Gov. Phil Murphy has signed a package of bills that will allow cities and towns to consider overrides of a local property tax cap to offset proposed funding cuts to some school districts.

A key provision of the Democratic-led proposal would allow school districts to exceed the state’s 2% cap on property tax levy hikes by leveraging portions unused in previous budget cycles.

It would also create a Stabilized School Budget Aid Grant Program under the state Department of Education to provide grants equal to 45% of a school district’s state school aid reduction for the 2024-2025 school year. The bill earmarks $44.7 million to support the program.

SEE MORE: These towns actually REDUCED property taxes

Murphy said the legislation provides local governments with "critical support during trying times" and said "difficult financial realities muddy the already complex process of adopting a balanced budget."

"I am pleased to provide relief to school districts facing reductions in aid and, as we look ahead, I anticipate working alongside [Education] Commissioner [Kevin] Dehmer to ensure our tax dollars are being used responsibly to uplift all of our students," Murphy, a Democrat, said in a statement.

Assembly Speaker Craig Coughlin, a Democrat, argues the legislation would provide more flexibility for local districts to plan for the future while maintaining their commitment to fully funding education.

"It will also offer immediate support to mitigate job losses and cuts to programs due to fluctuations in the funding formula," Coughlin said in a statement.

Murphy unveiled his $55.9 billion budget plan in February. He proposes fully funding the state's public school funding formula for the first time in state history.

But the plan would still mean nearly 140 school districts — out of more than 580 districts statewide — would see a decline in their education funding next year, according to the Murphy administration.

Murphy's preliminary budget plan calls for increasing school funding by $908 million up to $11.7 billion in the next fiscal year.

A Republican-backed proposal called for amending the Appropriations Act to fully restore about $200 million in proposed school funding cuts for certain school districts in FY 2025 and allowing districts that received supplemental "hold harmless" aid last year to offset budget cuts to receive that amount again next fiscal year. But the Democratic-controlled Legislature rejected the GOP proposal.

Republicans argue the Murphy administration has dragged its feet on education funding reforms while "wasting" tens of millions of dollars on pork barrel projects, which they say has increasingly put pressure on local governments to ratchet up property taxes to cover shortfalls in funding.

They also note that the 2% cap has been credited with slowing the growth of New Jersey’s "highest-in-the-nation" property taxes, but school officials have lobbied for more flexibility to circumvent spending restrictions.

School leaders welcomed the passage of the package of relief bills but called for additional reforms to the state's funding formula to ensure that school districts receive enough funding.

"While this relief is certainly welcome, we recognize that even more work lies ahead, and we must remain laser focused on the matter of how we fund our schools," Timothy Purnell, executive director of the New Jersey School Boards Association, said in a statement. "We look forward to continuing to collaborate with the Murphy administration and the Legislature as they continue to evaluate the school funding formula to make necessary adjustments to guarantee ALL of New Jersey’s students receive a thorough and efficient education."