Thursday, July 28, 2016

Steve Fulop: Flippant and Thankless Again

What is it about Steve Fulop that prevents him from treating state aid as a serious issue?

I don't like running negative posts about Steve Fulop, but time and time again, whenever Fulop has been questioned about the fairness of Jersey City's state aid he has either ignored the question or insulted the person asking the question.

Ciattarelli Asks, Fulop Insults (Again)

Lately, Steve Fulop has been bragging about how Jersey City has been able to go three years without increasing taxes while still dramatically increasing spending.  Since this is the exact opposite of what happens in most other New Jersey towns, Fulop's been boasting about it and implying that he could perform the same increase spending/cut taxes magic for the rest of New Jersey if he became governor.

‘Without increasing taxes, we have been able to hire 150 additional police officers, increase the city’s open space by 10%, implement the state’s first paid sick leave policy, increase minimum wage for all city employees, and construct housing for homeless veterans. We have also been able to lead the state in the number of construction starts, and have created more jobs than any other large city in New Jersey.’

This isn't Fulop's only recent in-your-face bragging about Jersey City becoming an "economic powerhouse."

After S&P increased Jersey City's credit rating Fulop sent out a similar press release where he boasted of Jersey City's economy and took all the credit for it:

Driven by strong local leadership, Jersey City has become an economic powerhouse. S&P’s report notes per-capita effective buying power of more than 120% of the national level and a total property value for the city that’s risen nearly 10% over the past year alone. With 450 new small businesses opening, more than 6,000 jobs created, and median household income and property values on the rise, Jersey City’s middle class is stronger than ever – and growing....

This boasting was too much for Assemblyman Jack Ciattarelli, who used Fulop's boasting about Jersey City's economic strength as an opportunity to question the fairness of Jersey City's state education aid and say, yet again, that Jersey City epitomized the need to redistribute state aid.

“What the mayor never boasts, despite Jersey City’s economic fortunes, is weaning his school district off a state subsidy paid for by the taxpayers of New Jersey. 
“Of Jersey City’s annual $665 million school budget, $420 $490 million million or 63 74 percent is paid for by citizens around the state – citizens who pay exorbitantly high property taxes because they’re subsidizing Jersey City’s school system. After all subsidies, Jersey City pays less than 20 cents on the dollar for its schools. 
“The mayor’s boasts, which only add insult to injury to taxpayers across the state, call attention to just how terribly flawed and blatantly unfair the current distribution of state school aid is. And it is exactly the reason we desperately need school funding reforms that are fair to taxpayers across the state.” [edits are mine]
This is part of a long-running line of criticism against Fulop from Ciattarelli:

“It’s easy for local policy makers to achieve tax reductions when the state subsidizes their services,” said the Assemblyman. “The fact is, fiscally speaking, we’re experiencing a very painful squeeze or crowding out effect with our state budget. Overly generous property tax abatements are one of the reasons why. These abatement are not only an exploitation of our state school funding formula, they are an injustice to property owners in places like Jersey City. In trying to solve the state’s problems, we need policy makers at all levels of government to take these issues seriously. In that respect, the statement issued by the Fulop camp is an embarrassment and a disservice – a disservice to the taxpayers of this state who fund Fulop’s school system.”


While the median district in New Jersey gets $550 less per student than SFRA says it needs, Jersey City gets $4,272 per student more per student from the state than SFRA says it needs.  Because of massive state aid, Jersey City only pays for 19% of the cost of its K-12 public schools.

That $4,272 per student is $130 million total in excess money that allows Jersey City to have a minimal school tax rate of 0.5, meaning someone with a $1 million property (if the assessment were accurate) would only pay $5,000 a year in school taxes.  The low school taxes enable Jersey Cityans to have spending power than people in most of the rest of the state don't have.

And because Jersey City's school taxes are so low, the municipal government can cannibalize its school system's tax base through PILOTing since property in Jersey City pays so little in school taxes anyway.  

And because Jersey City is an Abbott district, all parents there, no matter how high their income is, get two-years of "free" state-funded Pre-K for their children.  This $70 million a year subsidy injects spending power into Jersey City's economy that most other NJ towns don't get.

Ciattarelli has also criticized Fulop and Jersey City for granting tax abatements profusely. The granting of PILOTs also makes Jersey City's tax base appear smaller than it actually is and thereby sustains the elevated school aid level:

“This [Jersey City municipal report] reveals the tip of an iceberg that is vast and mostly underwater.  Short-term property tax abatements, under very special circumstances, may have their place. What’s happening in Jersey City and elsewhere is crony capitalism at its worst and an injustice to all New Jersey taxpayers. 
“Jersey City can afford to siphon property tax revenues from their schools because the state provides such large subsidies.  In Jersey City, the state contributes 60 74 percent of its [K-12] school funding. This subsidy is so overly generous that local taxpayers pay only 15 19 cents on the dollar for their [K-12] schools.”  [my edits]

It is new PILOTed buildings being built and putting more money into the municipal government that is the major reason Steve Fulop can increase spending and keep taxes flat.  Brigid D'Souza of Civic Parent has demonstrated this repeatedly.

After these latest criticisms of Jersey City's state aid Steve Fulop has been flippant and attacked Jack Ciattarelli.

First, Fulop rubbed Jersey City's flat taxes and economic growth in the rest of the state's face
“Jersey City had a tax reduction last year and just today we will adopt a budget without a tax increase.  Jersey City has led the state in job creation just as we had a credit upgrade last year.
Then Fulop insulted Jack Ciattarelli:
Nevertheless, we are excited that after 25 years in elected office, Ciattarelli finally decided to speak up on an issue. We look forward to hearing about his next policy stance in the year 2040 as directed by a new generation of Republican officials.

And after the latest criticism, City spokeswoman Jennifer Morrill said Ciattrelli should "do his homework and look in the mirror."

Fulop then blamed Jack Ciattarelli for something that happened decades before Ciattarelli entered the legislature and has nothing to do with state aid anyway.

"Jersey City schools have been under state control for the last 30 years of which he has been part of the Trenton establishment"

The Fulop counterattack is preposterous. It is Steve Fulop and Jersey City who "haven't done their homework."

First, Jack Ciattarelli has been in the Assembly since 2011, so that's 5.5 years, not 30.

Second, state aid and state control of the Jersey City Public Schools have zero to do with each other. Jersey City gets a lot of state aid because it was poor in the 1980s and the NJ Supreme Court forced the state to fund the Jersey City Public Schools ABOVE the level of DFG I and J districts. Jersey City was put under state control because of systematic corruption and patronage in the administration of the schools.

Bridgeton gets a huge amount of state aid, but Bridgeton isn't under state control because it hasn't had any scandals; Lakewood gets relatively little state aid, but it is under state monitoring because it has had scandals.

Get it??  And now that Jersey City is an "economic powerhouse," there is no justification for it to only carry 19% of its K-12 education system.  As Jersey City Councilman Michael Yun has admitted, Jersey City's state aid "doesn't make sense."  

Corporate Tax Subsidies: Jersey City's Other Megasubsidy

Yet Ciattarelli actually understates his case against Jersey City because he misses the other half of New Jersey's oversubsidization of Jersey City, which are tax subsidies for corporations who relocate to Jersey City or for real estate development there.

Although New Jersey has a large tax subsidy program, most towns in the state is not qualifying locations for (re)location subsidies because the towns are not considered "urban transit hubs," "distressed cities," or the handful of other qualifications for corporate subsidization.
You don't hear about it often, but
Chris Christie
has done a lot maybe too much for
Jersey City.

Under the Grow NJ and Economic Development & Growth tax-incentive programs, Jersey City is considered both a "Distressed City" and an "Urban Transit Hub."

Because Jersey City meets two of the major qualifications for subsidies,  businesses qualify for tax breaks there they couldn't get elsewhere. These state subsidies allow Jersey City to outcompete the rest of New Jersey because of state policy not because Jersey City has a fantastic mayor.  

The Goya relocation illustrates the unfairness of the tax subsidy situation to other towns in New Jersey.

Goya had been headquartered in Secaucus since 1974, but after it got an offer for tax subsidies from New York State, it used the threat of relocation to extract tax subsidies from New Jersey.

Goya's New HQ/warehouse in JC got an
$82 million "Urban Transit Hub"
Tax Credit Even Though it isn't realistically
To keep Goya in New Jersey, in 2012 the Economic Development Authority in 2012 approved $81.9 million in tax credits to stay in New Jersey and build a headquarters on the western edge of Jersey City.  The tax credits were through the "Urban Transit Hub" program, even though the Goya site is nowhere near viable public transit and contains at least 7 acres of parking.  (Jersey City also threw in a $8 million tax abatement.)

Although Goya's new headquarters was literally just one mile from its old headquarters, the Jersey City location counted as a transit-hub and the Secaucus location didn't.

I accept that the state has to give out corporate tax subsidies to be competitive, but Steve Fulop needs to give the rest of New Jersey credit for Jersey City's growth.

Here are all subsidy approvals worth over $5 million for corporations and law firms in Jersey City from 2014 and 2015.

Note: the subsidy awards are paid out over a number of years upon certain investment benchmarks being reached; there are often retained jobs to go along with new jobs. I have not listed retained jobs, nor construction jobs.

Why Can't Steve Fulop Admit State Aid is Unfair?

Steve Fulop likes to present Jersey City as an example of a city that is both very progressive and very high growth.  Fulop uses Jersey City as an argument that there is no tension between growth and progressivity.

Some people believe it:

“Time and again we’ve heard from New Jersey conservatives that government must take the low road of austerity, but Jersey City’s success shows that progressive policies and fiscal responsibility go hand in hand,” said Analilia Mejia, executive director of New Jersey Working Families.
But Jersey City isn't this proof because its progressivism and spending increases haven't required tax increases.  Fulop has been able to have progressivism without paying for it.

Through massive state subsidies, Jersey City can have progressivism without increasing its own taxes because other taxpayers already pay for so much its services.  Jersey City can attract businesses galore because a business in Jersey City would pay lower state taxes and lower property taxes than it would elsewhere in New Jersey.

Hey, Steve Fulop has been dealt a strong hand in Jersey City, but rhetorically, he can't have it both ways: he can't brag about Jersey City becoming an "economic powerhouse" and still support Jersey City's $420 million in K-12 aid.

I don't understand what Steve Fulop is thinking politically.  How fatal could it be for him as mayor of Jersey City to admit that Jersey City gets more state aid than it economically and morally is entitled to?  As gubernatorial candidate, how can Steve Fulop not admit that Jersey City gets more than its fair share?

Fulop owes it to New Jersey to treat the issue with respect.  He owes Jack Ciattarelli an apology too.

At a certain point, the mayors of other towns where development wouldn't be subsidized will feel insulted that Steve Fulop doesn't acknowledge that the design of NJ's corporate subsidy program is tilted in favor of Jersey City and that Jersey City's growth is not simply amazing municipal government.  In the meantime, can't Steve Fulop say "thanks"?

Between Fulop's opposition to a Jersey City reval and flippancy on state aid, I see him as politically tone-deaf.  He's young.  He has years of political viability ahead of him.  But I see him less and less as New Jersey's next governor.


See Also,
"The Phantom Budgetary Salvation: Cutting Tax Subsidies."  (about Phil Murphy)


  1. PS 5 - michael conti school in one of the nicer areas of Jersey City (village/harsimus cove) still has a student body that is 68% economically disadvantaged. are you really advocating that money be taken away from this school and put into the NJ suburbs where you have sub 10% students who are economically disadvantaged ?

  2. Lex,

    What I advocate for is for Jersey City to carry a higher share of the costs of its school system, not for its schools to necessarily have less money. What should happen is for Jersey City's Adjustment Aid (which is excess aid) to be gradually reduced and replaced by local tax dollars. The Michael Conti school should have the same amount it has now, but more if its budget should be from city taxes, not state aid.

    Here’s why.

    Jersey City has, by far, NJ's largest tax base. Jersey City's Local Fair Share is $330 million, which is 60% larger than the next largest in NJ (Edison’s). If you counted Jersey City’s PILOTed property, the tax base would be closer to $400 million.

    And what is Jersey City’s actually school tax levy? $114 million. It’s only the 17th highest in NJ and is lower than that of many smaller and sometimes poorer towns, like Clifton, West Orange, and South Orange-Maplewood.

    If state aid were redistributed some of it would end up in suburban towns with low-FRL rates, but more of it would end up in poor towns, who may or may not be suburban. Other Abbotts, like Newark, Paterson, and especially New Brunswick and Plainfield, would gain millions. Non-Abbott’s with FRL rates that are equal to or higher than Jersey City’s, like Bayonne, Bound Brook, Prospect Park, Clifton, Belleville, and Freehold Boro would gain the most of all.

    It’s totally false to present state aid redistribution as Jersey City versus “suburbs.” There are plenty of towns who would lose aid along with Jersey City and the towns who would gain might be rural or urban too.

    The term “suburb” doesn’t even have a socioeconomic meaning any more. Suburban poverty is higher than its ever been and there are many poor, dense towns (e.g., Prospect Park, Woodlynne, Belleville) for which it’s impossible to say if it’s “urban” or “suburban.” One of the worst things about Abbott is that it set a hard, artificial, either/or demarcation between “urban” and “suburban” which has created tremendous unfairness.

    “Suburban,” “rural,” “urban” shouldn’t determine state aid. What should determine state aid are student demographics and tax base.

    I underexplained these points in my post because I’ve talked about them elsewhere on my blog, but here are a few other posts you might be interested in.

    1. Thank you - great question, great response

    2. Another point: this shift (shifting tax burden from state taxpayers to local taxpayers), while necessary and appropriate given the increased wealth of the city, will have a disproportionately unfair impact on the poorer residents in JC. Because: the PILOTed residents will not be impacted since they'll stick to their PILOT (which is contractually determined and not subject to changes in the tax rate over time), the wealthier residents living in non-PILOTed housing will assume the higher tax burden, BUT...those unable to assume the higher tax burden will suffer. And those very residents - the ones most vulnerable to unpredictable shifts in the tax burden - are who state aid is intended for the most. As a JC resident and JCPS parent, I'd love to see Jersey City residents and leadership get ahead of this issue, to help lessen the shock when change does come.

    3. BDS,

      State aid redistribution is definitely a complex issue and Jersey City’s assumption of a higher share of the budget burden would definitely be hard for some taxpayers. As a whole Jersey City can pay a much higher school tax levy, but yes, there are people who can't.

      If you hear anything about what elected officials in JC actually think of the kind of sane redistribution of state aid that Steve Sweeney is proposing I’d like to hear it. Fulop has dissed Jack Ciattarelli and Mike Doherty multiple times and the JC BOE came out forcefully against Christie’s proposal, but, as far as I know, JC officials have been silent on Sweeney’s much fairer, progressive proposal.

      It hurts me that there are apparently a lot of people in Jersey City who think that the point of aid redistribution is to help affluent suburbs, when this is not the case at all. The point of redistribution is to help districts like Bayonne and Kearny and even some Abbotts too.

      In 1989-90, Jersey CIty's school tax levy was actually $90 million. After Abbott II came out the levy was allowed to drop to $72 million and apparently Jersey CIty officials thought it would stay there forever due to a provision in the Abbott II decision that said that Parity Funding didn't depend on the willingness of Abbott BOEs to pay taxes (Yvonne Balcer always relates this about the supposed permanency of the $72 million tax levy.)

      I don't know if JC officials really thought that JC would never have to raise school taxes, but they were allowed to keep the tax levy at $72 million for nine years and thereafter only required to increase the tax levy very slowly.

      Since they had so much state aid coming in and the school system had more money than it knew what to do with for a few years, it's no wonder the JC City Council implemented the "PILOT Everything" policy.