Advice on covering budgets for local reporters
These notes on how to cover municipal finance and budgeting were compiled from several discussions over the years with The Record’s Passaic County bureau editor Claude Deltieure. He is very knowledgeable about local and school budgets in New Jersey and has been incredibly generous with his time.
Budgets are made up of two main sections, revenues (income) and appropriations (spending). In an ideal world, these two would match up.
State & Federal aid (fluctuates and may not come)
Miscellaneous revenues (fees, licenses, court costs)
Surplus (carried over from last year)
Current expenses (salaries and other expenses)
Capital outlay (big ticket repairs)
Debt service (payment on municipal loans)
As Claude is fond of saying, municipal finance in New Jersey is “built for idiots.” You have to “appropriate” the public dollar to use it for a specific purpose. The governing body must vote to do this to pay any and all bills. Capital outlay is defined as durable goods that last more than three years.
Your job, as a reporter, is to give readers an idea of how their taxes are going to go up and explain why.
The total property tax bill is made up of several components:
- municipal services
- open space tax
- regional district tax
- Length of service award program
The Length of Service annuity is meant to help support volunteer firefighters and ambulance corps. Each town will pay for a volunteer’s equipment, and this money must cover that. One-penny on the tax rate goes to the annuities to be paid to a volunteer upon retirement.
New Jersey also ran out of landfill space 20 years ago, so it must pay astronomical amounts to handle its garbage.
Regional districts are shared and provide rural schools that cover several towns. The towns that “send” their students to school in another town must pay for those services.
You have to tell your readers that the municipal services tax is going up, not just that taxes as a whole are rising.
The state overseer of all issues regarding local finance is the Division of Local Government Services under the Department of Community Affairs. In many ways, it functions like a state version of the GAO.
The LGS reviews every municipal budget and must approve it.
The council does not “pass” a budget. It first “introduces” it to the town’s residents. Once the council introduces a budget, you as a reporter must be allowed to get a copy. They cannot give you a summary version. The council will then go on to “adopt” the budget. A governing body in New Jersey must have a two-thirds majority to pass a spending matter.
The impact in dollars and sense
The amount of your property taxes is based on the value of one-penny per $100 of the taxable value of your property. Each town hires an independent assessment firm every few years to perform a “revaluation” of its properties. On that, it bases its property tax assessments.
The tax rate is based on how much money your town collected last year. If you only collected 95 percent of the taxes last year, you can collect 105 percent this year.
That extra 5 percent, if you can collect it, is set aside as a “reserve for uncollected taxes”. If this year you collect 98 percent of your taxes, that extra 2 percent goes into your surplus and reserve. The reserve is anything you didn’t spend last year.
The surplus in the current budget comes out of last year’s reserve. Towns will often underestimate their expected tax collection rate, or overestimate their appropriations so that at the end of the fiscal year, they will have money left over to build their surplus. A surplus should be between 3 and 5 percent of the total budget. You need to be able to communicate to your readers this pull-and-tug of making the revenues and appropriations match up.
You need to know how many tax dollars come into your town if you collect one penny per $100 of assessed valuation.
First, call your town’s tax assessor and ask for the total valuation of your town. You can also find it on the LGS’ Web site here. If the total value of your town is $3 billion, one tax point will raise $300,000. So for every $300,000 in spending the city plans, it will levy one point in taxes.
To apply that to the average reader, multiply the tax-point times the average assessed value of a property in your town. Again, you can find this out from your tax assessor (who really should become your best friend), or from the LGS.
So if the average property in your town is worth $100,000, and your council wants to buy a $1.2 million jet for the mayor, how much will that cost your average taxpayer?
To find the average tax rate for each person: Divide $100,000 by $100 and then by 100 pennies. That gives you $10. So for each tax point that the town raises its taxes, the average homeowner will pay $10 more. If the municipality pays for the entire $1.2 million jet, that will cost 4 tax points ($1.2 million divided by $300,000 per tax point). That will cost your average taxpayer $40 more each year (4 tax points times $10 per point for the average home).
Figuring this out can help you paint spending decisions in a way readers can grasp. You should have these base figures–the total valuation, the tax point and the average value of a home–handy for each of your towns.
School districts also receive state aid based on a formula. The state expects each district to pay $10,000 each year to educate each student. The state looks at the average income and property values of each town to see how much it can afford of that $10,000 per student. If it doesn’t have the money, the state will pay for the essentials. But arts and other programs, such as music, can not receive this “state equalization aid” from Trenton.
These budgets can be very confusing, but as a reporter, you need to learn as much as you can about how they work. You must be able to talk shop with elected officials about the budgets to be able to detect attempts at slipping items through without the public’s notice.
Additional notes from Tom
When we’re writing budget stories, local officials often omit key numbers that every reader wants to know. To help ensure that you don’t forget to press them to fill in the blanks, here’s a handy checklist of the key figures you need to ask for. Every budget story must include this graf:
Under the adopted (proposed) 2010 budget, the owner of a home assessed at the borough average of $65,000 will pay $2,395 in municipal (school/county) taxes, a rise of $99.70 from last year or 4.4 percent.
- The fiscal year
- The average home assessment
- The total amount of that average municipal/school/county tax bill
- The total dollar increase in the average tax bill
- The percent increase in the average tax bill
- Guide to NJ budgets
- Budget primer
- Great worksheet
- Spreadsheet version
- Rutgers’ intro to budgeting
- More tips from Claude
- 20 more tips from IRE