NJSBA Outlines Facts of Aid Freeze; Asks Legislature to Eliminate 2010 Budget Election

Executive Order 14, which freezes $475 million in current-year state school aid, will have a serious and negative impact on school district budgeting in 2010-2011, a representative of NJSBA testified to the Assembly Budget Committee on Wednesday.

For the current school year, the aid freeze may not affect school programs, Michael Vrancik, NJSBA director of governmental relations, told the lawmakers. That’s because it will not exceed the excess surplus and portions of reserve accounts on hand in school districts.

“For next school year, 2010-2011, Executive Order 14 will create a very different scenario,” explained Vrancik.

In the testimony, NJSBA provided the following facts to the committee:

• Some 500 school districts have accumulated excess surplus as a result of financial prudence. Many of them feel that Executive Order 14 penalizes them for responsible fiscal management. For 2010-2011, these districts will not be able to use the excess surplus to control property tax levies, as directed by state law. “They tell us that the aid freeze and resultant use of surplus will leave them with three options: seek higher property taxes or cut education programs or implement a combination of the two,” said Vrancik.
• Executive Order 14 also authorizes school districts to tap into certain accounts, such as capital reserve, to make up for the state aid loss. “In the interest of sound financial management, districts should replenish these reserve accounts next year,” Vrancik said. “But such prudent action could force a district to direct less of its limited resources to the classroom.”

Impact on Districts Vrancik provided specific examples of Executive Order 14’s impact next year on a wide variety of school districts, including Bernards Township, Greater Egg Harbor Regional, Lumberton, Montgomery, Paramus, Paterson, Pennsauken and South Brunswick.

Uncertain Future “For school districts, one of the most difficult aspects of this cut is that it comes mid-year and will have unanticipated consequences for their finances in 2010-2011,” said Vrancik.

“The situation adds to the uncertainty already facing districts as they try to develop their school budgets for 2010-2011. They are not likely to know the administration’s state aid recommendations until mid-March. That will leave them only five weeks before they have to present proposed budgets to voters—in an extremely volatile atmosphere.”

Eliminate Budget Election The Association suggested a way the Legislature could resolve some of the uncertainty for school districts this year: by eliminating the requirement that school budgets within cap go to referendum. “It’s a change that will give districts much needed time to work with the changes created by Executive Order 14, as well as potential issues arising from the state aid recommendations,” said Vrancik. “And it will spare municipalities and school districts the time-consuming and, often, painful exercise of negotiating over rejected budgets that are bare bones to begin with.”

NJSBA testimony and key documents about the aid freeze are available online.

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