 Straight
talk on state convention
Sunday, November 28, 2004 • The
Star-Ledger
As you doubtless have heard by now, the state has been
bandying about the question of whether to hold a
constitutional convention to address an issue that becomes
ever-more prominent in the minds of New Jersey homeowners:
property taxes.
The Property Tax Convention Task Force, established by
former Gov. James McGreevey, has heard testimony from former
governors, business leaders, legal scholars, constitutional
experts and civil rights advocates, as well as ordinary
citizens. All have made salient points on the merits and
drawbacks of such a convention, what it might reasonably
accomplish and the potential obstacles to achieving its
goals.
But few have been as blunt about what we can and cannot
realistically expect from such a gathering as Richard C.
Leone, who testified before the task force on Nov. 12.
Leone is president of the public policy research group
The Century Foundation. A New Jersey homeowner himself, he
served as state treasurer under Gov. Brendan T. Byrne and as
commissioner and chairman of the Port Authority of New York
and New Jersey, which gives you an idea why the task force
sought his input.
For the record, Leone is not a proponent of a
constitutional convention to address property taxes. But if
we're going to have one, he says, and the objective is to
reduce our dependence on property taxes to fund our schools,
that probably means some form of a cap on property tax
rates.
And that's fine -- except it doesn't mean we need less
money. It only means we have to find it somewhere else.
"Once a tax limit is incorporated into a state
constitution, its continuing impact on revenue is very hard
to reverse," he told the task force, noting the problems
that arose where this path was taken. "In most states, most
of the time, the results, in my judgment, have been
unfortunate."
When property tax limits reduce revenues, a state is
left with two choices: raise other taxes and/or cut
services, often in areas where government help is most
essential. He cited Arizona, where aid to disabled adults
was cut; Idaho, where college tuition shot up more than 10
percent in two consecutive years; Ohio, where state housing
assistance was reduced; Washington, which was forced to cut
eligibility for child care assistance.
And then there were the draconian cuts in California
after many property tax rates were capped.
"While many states reduced tax burdens in the 1980s, the
average national decline was 5 percent," Leone testified.
"California, in contrast, implemented a decline closer to 20
percent. The state that boasted tremendous surpluses during
parts of the 1980s economic boom had a $14 billion deficit
by 1991."
The subsequent cuts affected everything from parks to
education. A state whose educational system was a national
model in the 1960s, ranking in the top 10, had by 1995
fallen to ranking 41st.
California tried to address that educational decline,
Leone noted, with Proposition 98, "a constitutional
amendment that guaranteed minimum funding for public
schools. ... But Proposition 98 didn't solve the problem: it
robbed Peter to pay Paul."
Specifically, lawmakers were forced to raid local
coffers "in order to fill desperate gaps in statewide
education budgets. ... Since 1992, state lawmakers have
taken more than $33 billion in property taxes away from
local governments, to the detriment of social services such
as hospitals, jails and libraries."
As these illustrations make clear, Leone is warning that
a constitutional cap on any particular tax, particularly the
property tax, isn't an automatic solution. More often, it's
a domino, and we need to understand all the other dominoes
it can topple.
Leone's advice to the task force was to make certain New
Jersey residents understand that a constitutional convention
won't find a magic wand that will grant property tax relief
at no ancillary cost. If that's the route we take, we're in
for sacrifices -- very likely severe sacrifices.
"The starting point is to come clean with the people of
New Jersey," he said. "To actually lay out what the options
are. We haven't done that for a long time, and nobody's
given the big picture."
A constitutional convention is also an expensive
undertaking for a state already deep in debt. But don't bet
for a minute that we won't have one anyway. Those who are in
favor of it -- some for valid reasons, some because they
naively believe in miracle cures -- may be too numerous at
this point to be denied. And of course, a constitutional
convention provides an easy sidestep for legislators who
should be addressing this issue themselves, but can't or
won't.
So if this train is too far down the track to come back,
the least we can do is approach it with our eyes open.
"I think people were a little surprised at how blunt I
was," Leone said on the phone the other day. "But unless
they're selling constitutions on street corners, they don't
generate revenue. I don't think you can (fix property taxes)
with a constitutional amendment. States that have done that
have created one crisis after another."
Fran Wood is a Star-Ledger columnist.
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