(TRENTON) — Legislation sponsored by Assembly Democrats Nicholas Chiaravalloti, Raj Mukherji and Angela McKnight to enable municipalities to create a local revenue stream dedicated to funding education was approved Thursday by the full Assembly, 46-27.
The bill (A-4163) would allow any municipality having a population over 200,000 to impose and collect an employer payroll tax. Presently, Jersey City is the only municipality under the bill that would be both eligible to impose an employer payroll tax and meet the median household income threshold which triggers the requirement to use employer payroll tax revenues for school purposes.
“Larger municipalities may see a marked decrease in school aid in the next year as a result of a bill currently going through the legislature,” said Chiaravalloti (D-Hudson). “Our bill is a proactive step that will help municipalities which meet certain criteria– as Jersey City does– if and when this bill is enacted into law.”
Chiaravalloti is referring to a bill that would modify school funding law to eliminate adjustment aid and State aid growth limit and allows adjustment to tax levy growth limitation for certain school districts.
Current law allows a municipality to impose and collect an employer payroll tax if it had collected the tax or adopted the tax during the two-year period prior to July 1, 1995. Newark was the only municipality to have done so, and is the only municipality currently authorized to impose and collect an employer payroll tax.
“We take no pleasure in doing this, but with Jersey City facing draconian cuts to state school aid, this legislation would allow the city an alternative to property taxes to raise the revenue to maintain current school funding levels,” said Mukherji (D-Hudson). “Newark has been successful in implementing a similar municipal payroll tax. Jersey City would be permitted to exclude our own residents from the tax, and the revenue would be dedicated to funding education.”
“After years of seeing no change in or even reduced state school aid, another reduction of any amount would hurt largely populated municipalities,” said McKnight (D-Hudson). “This bill will help to offset reductions in state school aid that may be in effect after state fiscal year 2018.”
Under the bill, the employer payroll tax revenues are required to be paid to the school district on a monthly basis if the municipality has a median household income of $55,000 or more.
The amount of employer payroll taxes to be paid to the school district in a year would be equal to the difference between State school aid provided to the school district in that State fiscal year and State fiscal year 2018. Any revenue surpluses generated that are not paid over to the school district would be held in reserve to help cover any future shortfalls in the amount needed to cover that difference.
The bill would also allow any municipality that has adopted an employer payroll tax to create an exception for wages of employees who are residents of the municipality. In addition, a municipality would be allowed to change the rate of an employer payroll tax so long as the rate does not exceed one percent. Current law does not explicitly provide that a municipality may make that change.
The bill will now go to the Senate for final approval.