For years, Trenton has been diverting millions of dollars in local property payments due to municipalities from gas and electric utilities to close state budget gaps.

What started as the state pocketing $26 million in 2008 has ballooned to $271 million in 2010.

East Windsor Mayor Janice Mironov says towns need that money, and she's hoping the legislature ends the practice. Mironov, who leads the New Jersey League of Municipalities, says the era of rising home prices fueling higher property taxes to fund increasing town budgets is over.

"Those days don't exist for municipalities and in fact, quite to the contrary we are not seeing very much new development and valuations for the most part continue to see declines with a large number of property tax appeals," she said.

The lingering foreclosure crisis continues to depress property values, and local governments have had to set aside millions of dollars to pay off thousands of successful tax appeals.

Local governments are held to a statutory 2 percent property tax cap and are now struggling to cover increases in basics like fuel and benefits for employees.

"In terms of health costs we moved into the state benefits program and did save money at the time. The certified increase for the coming year is 9.2 percent,' Mironov said. "Pensions costs are up for most towns this year."

Over the last few years local governments have balanced their budgets by turning to both layoffs and attrition eliminating several thousand positions

The Assembly's Appropriations Committee approved the Energy Tax Receipts Property Tax Relief Act last week. It would guarantee local governments get the proceeds from the tax levy on gas and electric utilities in their communities. It now heads to the full Assembly for a vote.

"Anytime this money is diverted that means every other property tax payer in a municipality is paying more to cover those costs," Assemblyman Daniel Benson, one of the bill's prime sponsor's said.