New Jersey's Zero Sum Gamble

Any real-estate agent can tell you the immutable law of suburban real-estate: the value of a home is directly proportional to the quality of the local public school system.

Don't take my word for it: here is Sharon Alva, an agent in Alameda, Calif., with the relevant studies: "UCLA economist Sandra E. Black calculated that parents are willing to pay 2.5 percent more for housing per 5 percent increase in test scores," Alva wrote in a local paper recently. Nor are test scores the only factor home buyers are willing to pay for. "Proficiency tests, expenditure per pupil, pupil-to-teacher ratio, teacher salary and student attendance rates are 'consistently capitalized' into housing prices," notes Alva.

This fact of suburban life is what makes the current debate in New Jersey over property taxes so painful to watch. In his state budget announced last month, Governor Chris Christie proposed cutting state aid to localities by $800 million, at the same time pushing for a cap on increases to local property taxes.

In New Jersey, some 53 percent of local budgets go to education. Simultaneously cutting back aid to municipalities while boxing out new revenues from homeowners will certainly mean pushing back teacher pay, expanding pupil-to-teacher ratios and lowering expenditures per pupil, as an similar cap in Massachusetts did in the early 1980s, until the state government made up shortfalls with direct aid.

Those who support Christie's plan say there is fat in school budgets that can be trimmed to cover the half-million dollars or so that a typical small town would lose. They point to "extra layers of administration" as well as pay raises for teachers of 4 percent and more in the middle of a recession. Christie has promoted the view that teachers are overpaid by offering to restore some aid to school districts that agree to a salary freeze.

The alternative to the cuts, some New Jersey legislators say, is to restore a special income-tax surcharge on those making $400,000 or more annually that expired last December. Christie has vowed to veto that measure, or any tax hike, saying that wealthy residents will find someplace else to live.

This is not simple read-my-lips Republicanism. Christie's campaign against property-tax increases is a heartfelt response to real pain felt by homeowners: an annual tax bill of $20,000 on a house already costing $800,000 is not uncommon in the northeastern part of the state, near New York City. The question for New Jersey suburbanites is whether they will end up paying anyway--if not in higher taxes, then in lost real-estate values over the longer term.

Photo of Chris Christie by Hoboken Condo