Debt Service Cut Would Add to Budget Pain

In addition to the recommended $820 million reduction in formula aid for school districts, the Christie administration’s proposed budget would reduce debt service aid by 15 percent. It would also require those school districts that opted for direct grants, rather than aid, under the 2000 school construction act to pay part of the state’s carrying costs for the awards.

For school districts that receive debt service aid, the proposed budget would provide $56.1 million statewide in 2010-2011, a $6.8 million cut.

Districts that opted for up-front grants through the Education Facilities Construction and Financing Act of 2000 would be assessed a total of $21.8 million, which would be subtracted from their state aid allotments. The construction grants, equivalent to a minimum of 40 percent of eligible costs, enabled school districts to reduce their bonded indebtedness and were a major factor in gaining voter approval of many projects. They were funded through bonds floated by the state’s Economic Development Authority.

The proposed budget calls for an assessment “representing 15% of their proportionate share of the fiscal 2011 principal and interest payments on the outstanding bonds issued for the program,” states The Budget in Brief, a document produced by the Department of Treasury.

In addition to 2010-2011 state aid recommendations, the Budget in Brief provides an overview of policy changes sought by the Christie Administration to help municipalities and school districts control costs. They include amendments to collective bargaining law, a proposed Constitutional amendment to cap local tax levy growth at 2.5 percent (the existing cap is 4%), and Executive County Superintendent review of teacher contracts. The Treasury Department has posted the Budget in Brief online.

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