How Will the Tax Cap Affect the School District of the Chathams?

School District of the Chathams' Superintendent Jim O'Neill said Wednesday a property tax cap bill signed by Gov. Chris Christie Tuesday was not the best long-term solution to the state's financial difficulties.

"I don't believe it recognizes the unique circumstances of suburban schools that virtually get all of their money from property taxes," O'Neill said. "I belive a wiser and more long-term answer would have been combining this with some modifications in income taxes, or allowing school districts to keep some of the income taxes that their community sends to Trenton."

Voters passed a budget in April that included a 7.4 percent tax levy increase. Even though that increase was above the state-imposed 4 percent cap that had previously been enacted by former Gov. Jon Corzine, the district was allowed to raise taxes by more than that in part because of its state aid reduction.

It will be nearly impossible for the district to raise taxes by that much next year. The 2 percent cap is more strict, although there are exemptions in the bill that would allow school districts to raise taxes by more than 2 percent on constituents.

If a school district, for example, experiences a large increase in enrollment, it will be given some wiggle room within the cap. The Chatham school district expects to see such an increase—a consultant who spoke at a Board of Education meeting several months ago said there will likely be 179 additional students in public schools here in five years.

Because of that, the district will likely have that wiggle room.

"We desperately needed that adjustment," O'Neill said.

Rising health care costs, pension payments, debt service payments and capital expenditures—including new equipment and public works projects—are all exemptions that are also included in the bill.

That is a decrease from the 14 exemptions that were allowed under the 4 percent property tax cap.

"I'm glad that health care is there as well, but for us, all that does is give us the authority to ask people to tax themselves more than the 2 percent," O'Neill said.

Health care costs in the district went up 19.1 percent this year.

O'Neill said the district could find itself hamstrung when it comes to escalating energy costs, since there is no exemption that will allow the district to raise taxes because of those.

He also said the bill could negatively affect teacher salaries.

"There's no doubt that a 2 percent cap has a dramatic impact on the ability of the district to offer salary increases greater than 2 percent, when salaries are probably 68, close to 70 percent of our budget," O'Neill said. "Schools are people-intensive businesses."

The bill Christie signed into law Tuesday is only one step in the governor's reform plan. He has also proposed a 33-bill package—one he has referred to as a "toolkit"—that is intended to provide budgeting tools to municipal, county and school officials for negotiating public employee contracts and handling other issues that affect budgets and tax levies.

The governor said he is proposing the toolkit at the request of local leaders who have asked for increased ability to negotiate and handle budgets.

O'Neill said the toolkit needs to pass the Legislature.

"If they don't pass that, then the 2 percent cap on property taxes will wind up alienating a significant portion of the electorate. Every year they will see larger class sizes and a decrease in services," he said. "The toolkit, in my mind, is not something (that is) an option for them to do. It's an imperative."

He said, however, he was not totally behind all of the bills in the toolkit. One would give county superintendents greater control over negotiations between boards of education and unions, since it would require those superintendents to approve contracts between the two.

County superintendents, O'Neill said, might only look at the bottom line numbers in the contract. They might not, for example, take into consideration the special circumstances surrounding a teacher who agreed to work extra days and was paid more as a result.

"I don't know that the county superintendent's going to understand that," O'Neill said. He continued: "I think that opens a real can of worms in a lot of ways."