NJSBA Beliefs on Budget Caps

NJSBA has long-standing policy supporting reasonable caps on revenues and spending. However, the definition of a “reasonable cap” must include allowances for cost increases that are not within a local school board’s control. A balance must be struck between controlling property taxes and ensuring adequate services.

This past year, for example, local school boards were hit with an unexpected 20 percent to 25 percent increase in health insurance premiums. Another steep increase is probable next year. While NJSBA strongly supports the recent law requiring all school district employees to contribute to the cost of health insurance, this needed change will not by itself make up for such steep cost increases. Other costs not within a school district’s control include state- and federally required special education services, utilities and insurance.

A cap must also recognize the increased costs school districts encounter as a result of spikes in enrollment, as well as the start-up costs for a new school building, such as staffing and classroom/curricular materials.

The allowable percentage increase in the cap should bear a relationship to current economic conditions, including costs to operate a local school district, as well as consumer prices.

NJSBA also believes that the concept of “cap banking” encourages long-range financial planning by school districts and should be included in budget cap legislation. Cap banking permits a school district to apply the unused portion of the cap to future years’ budgets.

NJSBA also supports the ability of a school district to propose to voters expenditures above cap. Such questions should require approval of a simple majority of voters. Current law, in place since 2007, requires 60 percent of voters to approve over-cap expenditures. But even prior to the “super-majority” requirement, school districts were cautious in proposing “over-cap” questions—only a small minority of districts presented second questions to voters in a given year. And the voters were very discerning. The approval rate for these second questions has always been far lower than that for school district base budgets—even when simple majority approval was required.

NJSBA believes that budget caps, whether they are placed on school district spending or on local tax levies, should be implemented through legislation, rather than being permanently memorialized in the state Constitution.

Since 1977, school districts and municipalities have been subject to various forms of budget caps. From a taxpayer’s perspective, some worked better than others. Some did not work at all. For example, the local school district budget cap in place during the 1980s changed annually and included a factor tied to increases in property valuation. Due to dramatic increases in property values during that decade, local spending caps wound up exceeding 15 percent in some communities. That cap was changed through legislation.

Enabling the Legislature to make corrections is necessary. Adjustments can be made much more expeditiously through legislation than by “re-amending” the Constitution.

Copyright © 2010 New Jersey School Boards Association. All rights reserved.