On Monday, June 30, the New Jersey Legislature adopted the state budget for fiscal year 2026, which Governor Murphy then signed into law. The overall budget totals $58.8 billion and covers the year from July 1, 2025 to June 30, 2026.

The educational components of the Appropriations Act (S-2026/A-5800) largely align with the governor’s proposed budget, which he announced in February, and which was covered in depth in a previous article in School Board Notes. The breakdown below provides an overview of funding items most relevant to members of the New Jersey School Boards Association and highlights key differences between the proposed budget and final budget.

K-12 Formula Aid

The final budget allocates approximately $12.09 billion to fund the School Funding Reform Act (SFRA) formula, a 3.6% increase over FY25. Formula funding remained identical to the governor’s budget message from February.

The budget includes some significant developments regarding the funding formula that reflect various advocacy priorities of the NJSBA. First, the budget includes several tools to decrease aid volatility and increase predictability. As announced by NJDOE on Feb. 18, the state will limit, by a maximum of 3%, decreases in the four main categories of state aid for each district. (Those categories are equalization, special education, security and transportation aid. Changes to other aid categories, including Choice Funding, Military Impact Aid, County Vocational Stabilization Aid, and Educational Adequacy Aid – which are determined through factors such as annual participation or enrollment – are not among the categories being held to that reduction cap.) The budget will also cap year-over-year increases in aid in those four main categories at 6%. Additionally, the Administration will use three-year averages for property values and income when calculating a district’s local fair share. Finally, the proposal includes a switch in calculating special education aid using actual enrollment numbers. These changes were accounted for in the calculations of state aid provided to districts earlier this year.

Because these changes were made through budget language rather than traditional legislation, they will only be applicable to FY26, unless additional legislation is passed to make any or all of them permanent. However, there is language in the appropriations act that would require NJDOE to “undertake an examination of codifying school funding policies and ensuring that these policies are enacted through distinct and non-temporary legislation.” NJDOE will need to engage stakeholders and file a report with the administration by December 1.

Tax Levy Incentive Aid

The Administration’s proposal for Tax Levy Incentive Aid was approved in the final budget. This aid, which would divide $20 million among districts that increase local revenue above the 2% tax levy cap, is being made available to districts who are raising below their local fair share and spending below adequacy. The governor’s proposal also allowed these districts to exceed the two-percent property tax levy cap to help them achieve adequacy. Eligible districts were notified of this flexibility in March and were required to apply to NJDOE in April. The Legislature added a language provision in the FY2026 Appropriations Act stipulating that districts who are permitted to exceed their tax levy will only be able to use the increased revenues to retain classroom staff and to fund programs that directly involve students. It explicitly prohibits using the increased revenues for administrative purposes, for increases in staff salaries that are not contractually obligated, or to fund school facilities or other capital projects.

Preschool Aid

The budget will increase preschool education aid by $34.6 million (2.8 percent), for a total of $1.27 billion. This funding will fully fund programs started in 2024-2025 and will include $10 million to expand programs into new districts.

Extraordinary Special Education Aid

The budget will maintain funding for Extraordinary Special Education Aid at its FY24 and FY25 levels: $420 million.

Academic Programs

The budget includes funding for several academic initiatives:

  • The budget includes a total of $4.9 million for literacy initiatives, following the literacy package Gov. Murphy signed in 2024.
  • The budget also includes $7.5 million in new grant funding to support districts offering high-impact tutoring to students in need of extra academic support.
  • The budget includes $1 million in extended funding for computer science and artificial intelligence education initiatives.

Student Health

The final budget includes:

  • $3 million for a new grant program to support schools in removing cell phones from classrooms.
  • $2 million in new funding for school lead filters.
  • $20 million in funding for school meals through the Working-Class Families Anti-Hunger Act (an increase of $8 million from FY25).
  • Level funding ($43 million) for the New Jersey Statewide Student Support Services (NJ4S) network of regional hubs launched in 2023 to coordinate and deliver youth mental wellness services at various community locations, including schools. To date, services have been provided to over 460,000 students.

School Facilities and Operations

The budget includes flat funding for school construction in FY26. The Administration plans to disburse an additional $350 million from the $1.9 billion that was appropriated to the Schools Development Authority in 2022 “for current projects and to help the SDA move forward on projects identified in its 2019 Statewide Strategic Plan.” And, like the previous budget year, $50 million of additional General Fund appropriations will be available to support capital maintenance and emergent projects in SDA districts.

The proposal also includes a decrease in funding to Local Efficiency Achievement Program (LEAP) and School Regionalization Efficiency Program (SREP) grants. Funding for those grant programs, which support shared services and school district consolidation efforts, totaled $8 million in FY25, while the budget only appropriates $1 million in the upcoming budget year.

Other Initiatives

The budget will decrease funding for teachers’ scholarships, stipends and loan redemption from $15 million to $4.3 million.

Finally, the governor’s initial budget proposal included $1 million in new “Youth Vote Expansion Grants” that would have been made available to “local government leaders across New Jersey to create new opportunities for 16- and 17-year-olds to vote in local school board elections.” However, the final approved budget no longer includes this line item.

More details on the fiscal year 2026 appropriations can be found in the documents below:

FY26 Governor’s Proposed Budget (from February 2025)