New Jersey Senate Bill S1696

New Jersey 2022-2023 Regular Session

• Introduced: 2/28/22
• Refer: 2/28/22

Caption

Caps State use portion of energy tax revenues and ensures balance of such revenues are paid annually as municipal aid.

Impact

The primary impact of S1696 is to enhance financial support for local governments by mandating that any additional energy tax revenues beyond the established cap must be distributed as municipal aid. This change is intended to counteract previous practices where state budgets often favored state retention of revenue growth, leaving municipalities with stagnant funding levels despite rising tax collections. As a result, municipalities stand to benefit from increased property tax relief, providing them with more resources to directly address local fiscal needs.

Summary

Senate Bill S1696 aims to modify the allocation and distribution of energy tax revenues in New Jersey, specifically capping the state's retention of these revenues. The bill establishes a limit on the amount of energy tax revenues that the state can retain as general revenue, specifically setting this cap at $403 million, which corresponds to the amount skimmed by the state in fiscal year 1998. Any excess revenues collected must be distributed to municipalities, ensuring they receive greater support from growing energy tax collections.

Contention

Debate surrounding S1696 may center on the fairness and practical implications of reallocating energy tax revenues. Supporters of the bill advocate that it will restore equity in funding between the state and municipalities, arguing that local governments require a fair share of energy tax revenues to fund vital services. Conversely, opponents may raise concerns about state revenue loss and the potential implications for state funding priorities, particularly if economic conditions change or municipal reliance on these funds increases significantly.