Districts Notified of Pension Deferral, Aid Reductions

Districts Notified of Pension Deferral, Aid Reductions

In a letter to chief school administrators and school business administrators dated March 31, the New Jersey Department of Education said it would reduce the amount of state aid to regular and county vocational school districts for the 2008-2009 school year. This is being done in accordance with two recently enacted pieces of legislation. The reduction was triggered by S-15, enacted in March, which directs the Commissioner of Education to withhold state aid payments to districts in the amount equal to the deferred pension payment. The education department’s letter notes that the reduction will be the prorated amount of the lesser of 50 percent of a district’s PERS payment, 50 percent of its original budgeted PERS amount, or the district’s remaining state aid payment. Aid reductions will be spread over five payments from the state to districts between April 8 and June 8, 2009. The aid reduction is made possible by the passage of S-21 in March. That law permits local governments, including school districts, to defer half of their required Public Employees’ Retirement System (PERS) payments. County special services school districts, charter schools and educational service commissions do not have the deferral option and must pay the full 2008-2009 PERS liability. For all other districts, the pension payment deferral is optional. A board resolution is required for districts that opt to defer 50 percent of the payment. The board could adopt the resolution at its public budget hearing or can do so at its April board meeting. Under the law, state aid is reduced whether or not the district pays its full 2008-2009 pension liability or chooses to defer 50 percent of its payment. Districts must begin repaying the deferred amount starting in April 2012; the repayment period is 15 years. The reductions in state aid are being used to address a part of New Jersey’s fiscal year 2009 $3.6 billion revenue shortfall.

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