As New Jersey local officials contend with ever-rising inflation, Gov. Mikie Sherrill is proposing a budget plan that only flat funds general state aid for municipalities.
In her $60.7 billion annual spending pitch, though, Sherrill is also dangling increased funding for state grants for local governments to share or pool services.
Her push to set aside more money for such incentives comes after the average local property tax bill rose last year to a record-high $10,570, according to Department of Community Affairs data.
New Jersey local governments rely heavily on property tax revenue to fund their annual budgets, which are under intense pressure due to the rising cost of everything from energy to employee health care benefits.
Big payoff, big demand
Shared services grants through LEAP, or the Local Efficiency Achievement Program — which is less than a decade old – are generating significant returns for taxpayers, according to budget documents released several weeks ago by the Sherrill administration.
In all, the LEAP initiative has generated an estimated $3,000 in savings for every $1,000 provided to local governments since its inception in 2019, according to administration estimates included in the budget documents.
The grant program, in recent years, has become so popular that sdemand far exceeds the amount of money set aside by lawmakers annually.
“The program is becoming well oversubscribed,” Community Affairs commissioner Jacquelyn Suarez said during a recent budget hearing in Trenton. “Typically we are out of funding within the first few weeks of figuring out what our allocation is going to be for the next fiscal year.”
If lawmakers go along with Sherrill’s budget plan, LEAP funding would be increased 50%, to $3 million, during the fiscal year that begins July 1.
“It’s a worthwhile program,” Suarez said.
The overall budget put forward by Sherrill, a first-term Democrat, calls for a modest increase in annual state spending.
New Jersey has 564 municipalities, a chief driver of property taxes because each typically runs and pays for schools, emergency services, courts and public works and other departments. The state has tried for decades to encourage regional cooperation to achieve economies of scale.
While general state aid for municipalities would be held flat, at $1.45 billion, overall municipal aid is due to go up, by more than $90 million year over year, budget documents show.
This includes the proposed LEAP increase, as well more funding for “transitional” aid awarded to about a dozen cities and towns facing fiscal distress, the budget documents say.
Since the 2020 fiscal year, more than 120 LEAP grants have been awarded, for more than $24 million in total, according to the budget documents.
Grant recipients have included counties, municipalities, school districts, commissions, authorities and fire districts, the budget documents say.
LEAP was funded with $6 million during the 2025 fiscal year under then-Gov. Phil Murphy.
Community Affairs received 66 funding applications and awarded 42 grants, according to budget documents compiled by the nonpartisan Office of Legislative Services.
Program funding, though, ell to $2 million under the fiscal year 2026 budget Murphy enacted during his final full year in office. As of last month, 45 applications for LEAP grants have been received, according to the Office of Legislative Services budget documents.
‘Lasting affordability’
Sherrill, a former congresswoman who is a newcomer to state government, has prioritized cost-savings and efficiency initiatives since taking office on Jan. 20.
A “Budget in Brief” released by her administration in March included a section on municipal aid that encourages local governments to use the same approach.
“At a time when many localities are facing financial pressures, the State recognizes the need to provide assistance; however, lasting affordability also requires local governments to pursue efficiencies and shared services that reduce costs for taxpayers,” the briefing states.
Suarez, appearing before lawmakers, portrayed the efforts to encourage local governments to pool service delivery as a part of a “whole-of-government” approach to addressing long-simmering concerns about high property taxes.
Other elements of this approach include the Anchor program, which is run by the Department of the Treasury. Anchor’s current rules call for the distribution of more than $2 billion in direct property tax relief benefits annually to income-qualified homeowners and renters.
The goal of Anchor, Suarez told lawmakers, “is actually to offset property taxes.”
The commissioner, though, also seemed to caution lawmakers against underestimating the benefits of shared government services, even in seemingly modest ways.
“When we talk about things like a shared tax accessor, or a shared (chief financial officer), it may seem like really low-hanging fruit,” Suarez said. “But that allows for communities to get comfortable in working together.”
“Once those relationships are formed, suddenly the conversation moves to, ‘Let’s do a shared court,’ ‘Let’s talk about regionalizing our police department, or maybe our codes office,’ and that’s what we’re seeing now,” she said.
This story is made possible in part by the Corporation for Public Broadcasting, a private corporation funded by the American people.
