P.O. Box 909 ● Trenton, NJ 08605-0909 ● Phone: 609.695.7600 ● Fax: 609.695.0413 ● Web: www.njsba.org/PI

Budget Watch: State to Defer June 2009 Aid Payments

TRENTON, May 20, 2009 — Citing steep drops in anticipated state revenue for 2008-2009, Gov. Jon S. Corzine last week announced that the Treasury will delay the next-to-last installment of state education aid – initially due to school districts June 8, 2009 – until early July, after the start of the new fiscal year.

Many school boards will have to hold special meetings before June 8 to authorize the borrowing of funds to close the gap created by the deferred payment.

The delayed installment, totaling $383 million, constitutes the second time that the state has used payment deferral to shore up its budget. In 2003, the McGreevey administration deferred the final aid installment to the next fiscal year. That delayed payment became permanent, with school districts now receiving final installments of each previous year’s state aid after July 1.

Need to Borrow With the last two aid payments now deferred, it is likely that a greater number of school districts will have to borrow to meet payroll and other expenses between June 8 and early July. Districts’ cash-flow difficulties may be further exacerbated by the 2-percent surplus limit established by the 2004 statute known as S-1701.

In 2003, to help districts facing cash-flow problems due to the delay of the final aid payment, the state Department of Education established a process to expedite bank loans. Through proposed legislation and procedural changes, NJDOE plans to alter that process to accommodate districts that will have to borrow money now that two payments – rather than one – will be deferred.

Adjusted Deadlines During a May 14 conference call with officials of NJSBA and other state education groups, Commissioner of Education Lucille E. Davy said she would urge school districts to immediately assess the impact of the deferred payments on cash flow. The following day, in a memo to school administrators, Assistant Commissioner for Finance Katherine Attwood said that NJDOE has extended the deadline for districts to apply to the county office to borrow funds until May 28.

“The department will issue approvals of the applications by June 3, which will provide sufficient time for districts to enter into agreements with [their] banks of choice by June 8, 2009,” stated Attwood.

Boards Must Authorize “Board approval is still required to borrow money,” she wrote. “The department recognizes the short timeframe for obtaining such approval and the Executive County Superintendent will accept an application for review pending approval. Legislation will be introduced shortly to amend [current law] to enable school districts the ability to borrow beginning June 8.”

A board must provide authorization at a public meeting to borrow.

• Boards of education that have not planned to meet between now and June 8 should consider scheduling a special meeting prior to that date (and provide the necessary notice under the Open Public Meeting Act), NJSBA advises. If, in the meantime, the business administrator determines that borrowing is not needed, then the board can simply cancel the meeting after providing public notice.


• School boards already scheduled to meet between now and June 8 will be able to consider recommendations by their administrators at those meetings.

NJSBA has posted online a copy of the NJDOE’s May 15 notice on its Web site.