In Atlantic City, New Jersey municipal officials ponder Whitman plan's consequences.

Representatives from 567 New Jersey municipalities met yesterday to consider how they will respond to unfunded mandates under a state government that is determined to cut taxes and costs.

Of particular concern at the New Jersey State League of Municipalities' 79th annual conference, held in Atlantic City, was what would happen to local property taxes because of Gov. Christinc Todd Whitman's four-year plan to reduce state income taxes by 30%.

Any unfunded mandates will probably come under the scrutiny of credit rating agencies. Analysts from Moody's Investors Service at the conference said Whitman's efforts to cut state spending could lead to munidlpal budget gaps and possible ratings downgrades.

"Everybody, both Democrats and Republicans, is worried about state aid," said Thomas Renkin, president of the league and deputy mayor of Toms River.

"The two biggest issues that local officials need to address are unfunded state mandates and the binding arbitration practices of New Jersey's powerful police and fire unions that put towns at a disadvantage," Rankin said.

He urged those attending the conference to support two measures now in the state legislature that would curtml unfunded mandates. One, passed in the state Senate in October and now pending in the Assembly, would repeal $30 million in current unfunded mandates. The other, passed in the Assembly and now pending in the Senate, is a constitutional amendment that would abolish all future unfunded mandates.

As for binding arbitration reform, the Senate on Nov. 10 passed a bill designed to help municipalities control the spiraling costs of labor agreements with police and firefighters. No date for action on the measure has yet been set in the Assembly.

Offering the state's point of view about municipalities' concerns, state Treasurer Brian Clymer told a luncheon meeting of New Jersey mayors that local governments will have to "do more with less."

Saying he is currently preparing the state budget for fiscal 1996, which begins July 1, 1995, Clymer said expenditures will remain at last year's levels.

In 1995, New Jersey closed the gap in its $15.5 billion budget with $1.5 billion of one-shot measures, Clymer said. In 1996, he said, the state expects to spend $15.3 billion and pull in $14.5 billion in revenues, leaving the state with a gap of $800 million.

At this point, "no decisions have been made on state aid," for fiscal 1996, Clymer said. In the meantime, the treasurer said, municipalities worfled about their budgets can turn to the Local Government Budget Review Team program, which is sponsored by Whitman and Clymer.

Louis Goetting, director of the voluntary program, said the review teams are nonpartisan and have no decisionmaking authority.

Two reviews have already been completed in the cities of Kearny and Ventnor. A total of 60 municipalities and a dozen school districts have already requested reviews, Goetting said.

The report on Keamy identifies a system that pays full-time salaries to 30-hour-a-week workers, has 14 years of uncollected tax delinquencies on its books, and keeps its revenues in noninterest bearing bank accounts.

But Bert Kendall, borough manager for Fair Lawn Borough, questioned the value of the budget teams. Municipalities are often saddled with funding state-mandated programs while catching flak from the state for spending too much, Kendall said.

"Every time I hear the term 'fully funded,' I know we're in for a beating," Kendall said.

He gave the Kearny report an "A for intent" but said the review teams, "need to work on understanding" how local budgets work.

"There's a lack of practicality in some of the Kearny report," Kendall said, calling portions of it "overinflated with campaign rhetoric."

Ultimately, municipalities will have to take a "wait and see attitude" until the state adopts its fiscal 1996 budget, said Marci Herzlinger Tavashi, an assistant vice president with Moody's.

"If the state cuts state aid, localities would have to make adjustments of their own. Whether the localities would make them appropriately is a credit concern," Tavashi said.

Paul Devine, a vice president at Moody's, said, "The real concern is mumcipalities that won't keep spending at current levels, that won't raise taxes, that will get less money from the state, and plug their budget gaps with one-shots."

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