On Friday, April 5, the Assembly Education Committee approved legislation, A-4161, designed to provide a pathway to mitigate school aid reductions some districts will experience under Gov. Phil Murphy’s fiscal year 2025 budget proposal.

The bill would establish a Stabilized School Budget Aid Grant Program that would permit a district facing an aid cut to apply to the commissioner of education for up to two-thirds the amount of the district’s proposed aid reduction. As a condition for applying for such a grant, a district would first have to fully exhaust all of its existing taxing authority, such as the health care and enrollment allowable adjustments, as well as any “banked cap” under the 2% property tax cap law. Such districts would also be precluded from reducing the total number of school employees for the next school year if the commissioner approves the district’s application, although an exception would be made if the reduction in staff is being made due to an anticipated decline in student enrollment. The bill also provides that a district will be ineligible for an aid grant if the district’s full exhaustion of its existing tax authority results in an additional raising of funds greater than its overall state aid reduction. The bill appropriates $71.4 million to support the program, which is equal to approximately two-thirds of the cumulative aid reductions in districts that will experience a loss in fiscal year 2025.

The bill will also grant some districts expanded authority to exceed the statutory tax levy cap in the upcoming fiscal year, but only in the event that it is not already able to recoup its aid loss through the exhaustion of its existing taxing authority as well as any Stabilized School Budget Aid Grant it is awarded. Such a school district would be permitted – but not required –  to request an increase to its general fund tax levy of up to one-third of its school aid reduction. However, there is a limit to how much above cap a district can request, as no school district will be permitted to increase its tax levy more than 9.9%, unless the full exhaustion of tax authority is otherwise greater than 9.9%. Such an increase would not be subject to voter approval, and this tax cap relief will be limited to the 2024-2025 school year.

A district’s aid application must include the following information:

  1. A written plan explaining how the district will allocate the aid grant and how the district will fund operations in future school years in which the district does not receive the aid grant.
  2. A request to increase the general fund tax levy above cap, if applicable and if sought by the school district.
  3. The eligible school district’s proposed budget.
  4. The percentage difference between the prebudget year adjusted tax levy and the adjusted tax levy of the year prior to the prebudget year.
  5. The estimated impact on the average homeowner if all tax levy adjustments are approved.
  6. A description of how the district will use the funds raised through its proposed general fund tax levy, with a particular focus on areas of instruction and support services.
  7. A school board resolution approving the request to apply for aid.

The New Jersey School Boards Association testified in support of the bill, while also urging the Legislature to provide additional tax cap flexibility and financial relief to school districts experiencing declines in state aid.

The bill next heads to the Assembly Appropriations Committee, which is scheduled to consider the bill on Thursday, April 11.

Delaying Budget Submissions The committee also approved A-4059, which would give districts receiving state aid reductions this year additional time to finalize their budgets.  The bill requires the commissioner of education to permit school districts losing school aid to submit their budgets after enactment of the state fiscal year 2025 appropriations act.  The commissioner would be authorized to make any adjustments to the school budget calendar that are necessary to conform with the provisions of the bill, including a compressed schedule by which a district can enact its budget.

The bill would only apply to districts that are proposed to receive a school aid reduction that is greater than the total amount of the district’s unused tax authority permitted under current law (i.e., “banked cap”).  Under current law, a school district may add to its adjusted tax levy in any one of the next three succeeding budget years, the amount of the difference between the maximum allowable amount to be raised by taxation for the current school budget year and the actual amount to be raised by taxation for the current school budget year.

The NJSBA supports the bill, which is permissive and would only apply to the 2024-2025 school year.

To view the full text of any of the bills summarized above, please visit the New Jersey Legislature’s website.