S534

An Act concerning the calculation of the tax levy cap and amending P.L.2007, 62.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 10 of P.L.2007, c.62 (C.40A:4-45.45) is amended to read as follows:

10. a. (1) In the preparation of its budget the amount to be raised by taxation by a local unit shall not exceed, except as provided in paragraph (2) of this subsection, the sum of new ratables, the adjusted tax levy, and the total of waivers approved pursuant to section 11 of P.L.2007, c.62 (C.40A:4-45.46); provided, however, that in the case of a county, the amount to be raised by taxation shall not exceed the amount permitted by section 4 of P.L.1976, c.68 (C.40A:4-45.4).

(2) A local unit that has not been granted approval for a waiver pursuant to section 11 of P.L.2007, c.62 (C.40A:4-45.46), may add to its adjusted tax levy in either of the next two succeeding years, the amount of the difference between the maximum allowable amount to be raised by taxation or county purposes tax, as applicable, for the current local budget year pursuant to subsection a. of this section and the actual amount to be raised by taxation or county purposes tax, as applicable, for the current local budget year.

b. The following exclusions shall be added to the calculation of the adjusted tax levy:

(1) increases in amounts required to be raised for (a) all debt service and (b) lease payments with county improvement authorities pursuant to leases in effect on the effective date of P.L.2007, c.62 (C.18A:7F-37 et al.);

(2) increases in amounts required to be raised to replace State formula aid due to a reduction in State formula aid from the previous local budget year;

(3) increases in amounts for certain pension contributions set forth in section 5 of P.L.2003, c.108 (C.40A:4-45.43) for the years set forth in that section;

(4) with respect to municipalities, any increase, greater than four percent, in the reserve for uncollected taxes that is required by law;

(5) increases in health care costs equal to that portion of the actual increase in total health care costs for the budget year that is in excess of four percent of the total health care costs in the prior year, but is not in excess of the product of the total health care costs in the prior year and the average percentage increase of the State Health Benefits Program, P.L.1961, c.49 (C.52:14-17.25 et seq.), as annually determined by the Division of Pensions and Benefits in the Department of the Treasury;

(6) increases in amounts for certain normal and accrued liability pension contributions set forth in sections 1 and 2 of P.L.2009, c.19 amending section 24 of P.L.1954, c.84 (C.43:15A-24) and section 15 of P.L.1944, c.255 (C.43:16A-15) equal to that portion of the actual increase in normal and accrued liability pension contributions for the budget year that is in excess of four percent of the normal and accrued liability pension contributions in the prior year.

[Notwithstanding the other provisions of this subsection, when the appropriation for all debt service is less than the amount appropriated for all debt service in the prior fiscal year, the amount of the difference shall be deducted from the sum of the exclusions listed in paragraphs (1) through (6) of this subsection.] If there are no exclusions, then the amount of the difference shall reduce the adjusted tax levy by that amount. Any cancelled or unexpended appropriation for any exclusion pursuant to this subsection or waiver pursuant to section 11 of P.L.2007, c.62 (C.40A:4-45.46), also shall be deducted from the sum of the exclusions listed in paragraphs (1) through (6) or directly reduce the adjusted tax levy if there are no exclusions.

(cf: P.L.2009, c.19, s.4)

2. This act shall take effect immediately.

STATEMENT

This bill would permit levy cap "banking" of any portion of the permitted 4% increase under the municipal and county property tax levy cap that is not used by the local unit in any budget year. Under current law, if a local unit does not use the entire 4% increase, perhaps because it uses surplus that year to keep tax rates steady, the difference is lost. This can be a problem in a succeeding tax year if circumstances require an unexpected increase in expenditures to maintain services. Under the bill, any unused permissible increase amount permitted under the 4% levy cap limit could be used in either of the next two succeeding local budget years. This concept is similar to cap banking under the appropriations cap law (N.J.S.A.40A:4-45.1 et seq.).

The bill also deletes language in current law in order to eliminate a levy cap penalty that occurs when a local unit acts responsibly to reduce its debt servicing expenditures.