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Senate Approves Bill To Provide Recession Cushion For Local Govts

Bill Aims to Limit Tax Hikes at Local Level in Light of Deflated Revenues

TRENTON – The full Senate today approved a bill sponsored by Senate President Richard J. Codey (D-Essex) that would give local governments a temporary cushion to help avert a tax hike during the current economic crisis.

“Since this bill was first introduced in December, revenue estimates have become even more grim,” said Sen. Codey. “This bill will help provide immediate assistance to towns and counties faced with the sudden devastating loss of revenue. Our ultimate goal is to help protect the taxpayer by providing local governments with an additional option to help avoid massive tax hikes.”

Bill S21, which was amended from previous versions, was approved by a vote of 21 to 17. The bill would provide local employers with a one-year option of deferring a portion of their annual pension contribution to the Public Employees’ Retirement System (PERS) and the Police and Firemen’s Retirement System (PFRS).

Local employers would be allowed to pay 50% of the full pension contribution amount required in the fiscal year ending June 30, 2009. Full pension contributions would again be required beginning in FY 2010. The bill would allow a local employer to contribute the full 100% pension contribution if so desired. This contribution would be deposited into the pension funds in the same manner as a normal pension contribution.

Another new measure added to the bill would provide an added level of scrutiny to assure that an employer is deferring a portion of its pension contributions out of dire necessity. Local employers that elect to pay the reduced pension contribution would be required to adopt a resolution, separate and apart from other budget resolutions, that provides an explanation of the need to defer payment, which shall include:

1) a description of its inability to meet the local levy cap without jeopardizing public safety, health, and welfare or without jeopardizing the fiscal stability of the employer; or

2) a description of another condition that offsets the long term fiscal impact of the payment of the reduced contribution.

The bill would also require that an employer document the actions it has taken to reduce its operating costs, or provide a description of relevant anticipated circumstances that could have an impact on revenues or expenditures. Local employers would then be required to submit this resolution for approval by the Local Finance Board, which must make a finding that these fiscal conditions are valid. Lastly, the bill would provide some relief from levy and spending caps for local governments.

The bill was first proposed by Governor Corzine at November’s League of Municipalities Convention and designed, not as a cure-all, but as a modicum of relief for local governments grappling with declining revenues and rising pension obligations. The bill now awaits approval by the General Assembly.

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