Federal Budget Fallout: NJ Cities Brace for Impact

In New Jersey, municipal officials are bracing for tens of millions of dollars in federal budget cuts due to the deal President Obama struck with the Republican Congress to cut $38 billion dollars in the current budget year.

Bill Dressel of the New Jersey League of Municipalities says it's bad timing that the cuts come in the midst of the fiscal year. "There is no phase-in period," says Dressel. "There is no transition period. These cuts are immediate cuts that will have a profound impact on those communities that rely upon them to balance their budget."

Dressel says cities like Newark, Elizabeth and Paterson could be especially hurt. The federal budget cuts are across the entire domestic side of the Federal bureaucracy. Everything from Department of Justice support for local law enforcement, worker training, public housing, clean water grants, and foreclosure prevention programs were all targeted.

Dressel says the cuts come as local governments have already resorted to layoffs to balance their budgets.

Chris Bollwage is the mayor of Elizabeth. He says the federal cuts to the Community Block Grant program. Out of the City's $200 million dollars annually around $3 million comes from CBG, Bollwage says the cuts will effect several of his city's most pressing initiatives.

"Issues like teenage pregnancy, teen jobs during the summer, the ability to create foreclosure advice and counseling," says Bollwage. The mayor said he was incensed that the cuts came on the heels of the deal to extend President Bush's tax cuts for the wealthiest U.S. households. "Frankly the rich are getting richer and the poor are getting poorer," says Bollwage.

The Federal cuts come at a precarious time for New Jersey's 566 municipalities that almost exclusively rely on the property tax to fund themselves and their local public schools. 

This is the first year they are dealing with the 2 percent property tax cap imposed by Trenton. The cap excludes the spike in health care premiums and pension payments they must make for their municipal workforce.

Local governments also face an unprecedented number of thousands of property tax appeals for homeowners, who say their homes aren't worth as much as the government assessed them to be. Throughout the state homeowners have been winning their appeals by documenting nearby foreclosure and short sales that are well below what had been considered market rate.