Schools Enter the Squeeze

News reports indicate that a budget deal may be in place by the end of the day.

A number of New Jersey school districts could begin feeling the financial pinch of the ongoing state budget impasse and government shutdown as early as this week.  For public schools, the squeeze involves the inability of the state to send out the final 2005-06 school aid payment—totaling approximately $400 million—because of the government shutdown.

Why wasn’t the final state aid payment for 2005-06 delivered before June 30?  For the past three years, delayed payment of the final school aid installment has been business as usual.  It’s a fiscal gimmick that results from language first inserted into the state budget in 2003-04 and which, since then, has reappeared in each year's appropriations act.

The budget language authorizes the state treasurer to postpone the issuance of the 20^th and final state aid payment of the year—which would normally be sent on June 15—until after July 1, the start of the new fiscal year.  In the past, the practice required many school districts to borrow funds or to dip into their reserves to meet payroll and other contractual commitments through the end of the fiscal year.

From the start, NJSBA opposed the concept of delaying payment of the final state aid installment to school districts.  Now with the delay extended due to the state budget impasse, the prospect of serious cash-flow problems could present itself to some districts.

In past years, the state check usually arrived in school district business offices by July 5.  But not this year.  The state’s hands are tied, according to officials.

Constitutionally Prohibited “The state is constitutionally prohibited from withdrawing from the state treasury funds to make … state aid payments,” Lucille E. Davy, acting commissioner of education wrote in a July 4 letter to chief school administrators and school board presidents.

“We share your deep concern about this situation. All state aid payments will be processed as soon as the Legislature passes a Fiscal Year 2007 appropriations bill and the bill is signed into law,” Davy wrote. “Unfortunately, the shutdown also means that there will be no staff available at the department to answer any questions about state aid payments.

“It is our hope that the Legislature will act quickly to pass a budget the governor can sign so that we will be able to resume normal operations as quickly as possible,” Davy added.

Stand-off Continues As of this morning, the Administration and Legislature remained deadlocked over the budget, with Assembly Speaker Joe Roberts leading opposition to Gov. Jon S. Corzine’s proposal to increase the state sales tax by one-cent to close a budget gap.

Governor Corzine this morning appeared before the Legislature for a third consecutive day, urging lawmakers to propose a budget bill that the two sides could agree upon and which would bring and end to the state shutdown.  Published newspaper reports indicate that legislators introduced a budget bill in the Assembly yesterday that did not include a one-cent sales tax increase.  Another appropriations bill, however, may be introduced today.

Under the state constitution, the state budget must originate in and pass the Assembly, before moving to the Senate for consideration.