LEGISLATIVE FISCAL ESTIMATE

SENATE, No. 1900

STATE OF NEW JERSEY

215th LEGISLATURE

 

DATED: MAY 23, 2012

 

 

SUMMARY

 

Synopsis:

Increases distributions from Energy Tax Receipts Property Tax Relief Fund over five years to restore aid reductions; extends “poison pill” protection to total formula aid provided to each municipality.

Type of Impact:

Increases in State expenditures and municipal revenues.

Agencies Affected:

Municipalities

 

 

Office of Legislative Services Estimate

Fiscal Impact

Year 1 

Year 2 

Year 3 

 

State Cost

$66 million

$132 million

$198 million

 

Municipal Revenue

$66 million

$132 million

$198 million

 

 

 

 

 

·        The enactment of Senate Bill No. 1900 would result in an increase in State expenditures and municipal revenues because the bill requires the distribution to municipalities of an additional $331 million in Energy Tax Receipts Property Tax Relief Aid over a period of five fiscal years.

·        Municipalities would receive $66 million, or 20 percent of the total amount of supplemental State aid, in Fiscal Year 2013.  An additional 20 percent of the total amount would be distributed in each Fiscal Year from 2014 through 2017.

·        The allocation of energy utility tax revenues to provide additional State aid would effectively decrease the amount available for General Fund purposes.

 

BILL DESCRIPTION

 

      Senate Bill No. 1900 of 2012 amends the “Energy Tax Receipts Property Tax Relief Act,” P.L.1997, c.167 (C.52:27D-438 et seq.) to require the distribution of additional State aid to municipalities.  Budget constraints required reductions in the amount of Consolidated Municipal Property Tax Relief Aid (CMPTRA) distributed to all municipalities in Fiscal Years 2009, 2010, and 2011.  Some municipalities also experienced reductions in their Energy Tax Receipts Property Tax Relief Aid (ETR Aid) during that period.  This supplemental funding would restore, over a five-year period, approximately $331 million in reductions to CMPTRA and ETR Aid. 

      In Fiscal Year 2013, municipalities would receive an aid increase equal to 20 percent of the difference between their total payment of CMPTRA and ETR in Fiscal Year 2008 and Fiscal Year 2012.  Municipalities would receive equal increases in each of the following four fiscal years.  The fully restored amount would be distributed beginning in State Fiscal Year 2017 and in each fiscal year thereafter.  The total amount of aid to be restored to each municipality would be in addition to the total amount of CMPTRA and ETR Aid distributed to each municipality in Fiscal Year 2012.  This legislation also extends the existing ETR Aid “poison pill” protection to ensure that each municipality receives an aid amount not less than the combined payment of CMPTRA and ETR Aid to the municipality in Fiscal Year 2012 and the additional aid distributed under the bill. 

 

FISCAL ANALYSIS

 

EXECUTIVE BRANCH

 

      None received.

 

OFFICE OF LEGISLATIVE SERVICES

 

      The enactment of Senate Bill No. 1900 would result, over a five-year period, in a $331 million increase in State costs and in municipal revenues.  These expenditures and revenues would be in the form of additional State aid distributed to municipalities as ETR Aid from the Energy Tax Receipts Property Tax Relief Fund (ETR Fund).  In Fiscal Year 2013, municipalities would receive approximately $66 million in supplemental State aid in Fiscal Year 2013.  That amount would increase by an additional $66 million in each of the following four fiscal years.  In the first year of the implementation of the bill, municipalities would receive an aid increase equal to 20 percent of the difference between the total payment of CMPTRA and ETR to them in Fiscal Year 2008 and Fiscal Year 2012.  Municipalities would receive an additional 20 percent per year in Fiscal Years 2014, 2015, and 2016. The fully restored amount would be distributed beginning in State Fiscal Year 2017. 

      The ETR Fund was created in 1997 as a dedicated fund to replace the public utility franchise and gross receipts tax on electric, natural gas, and telecommunications utilities.  Municipalities received a total of $1.049 billion in ETR Aid in Fiscal Year 2012.  A portion of that amount, $788.5 million, is an allocation of revenues generated by energy utility taxes.  The difference, $261.2 million, is transferred from the State appropriation for CMPTRA and supports the annual inflation adjustment to ETR Aid required by current law.  Under this bill, the total amount of ETR Aid would increase to $1.379 billion over the next five fiscal years.  The additional ETR Aid allocated by this bill would also receive the “poison pill” protection currently provided to existing ETR Aid.

      Energy utilities are subject to the sales and use tax, the corporation business tax (CBT), and the transitional facilities assessment.  As noted above, a portion of the revenues generated by those taxes are credited to the ETR Fund and allocated to municipalities under a statutory formula.  The remaining revenues are allocated to the State General Fund to support the budget.  According to data provided to the Office of Legislative Services by the New Jersey Department of the Treasury, the portion of energy tax receipts revenue from the CBT and sales tax not allocated to the ETR Fund has grown over time, from $72.2 million in Fiscal Year 2005 to an anticipated $480 million in Fiscal Year 2013.  The allocation of energy utility tax revenues to provide additional State aid would effectively decrease the amount available for General Fund purposes by an equal amount.

 

Section:

Local Government

Analyst:

Scott Brodsky

Senior Fiscal Analyst

Approved:

David J. Rosen

Legislative Budget and Finance Officer

 

 

This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).