On Monday, April 15, the full General Assembly approved legislation, A-4161, that would restore a portion of the state aid reductions various school districts would experience under the proposed state budget for fiscal year 2025. The bill would also grant such districts the ability to exceed the property tax levy cap (the “2% cap”) to make up for the balance of any fiscal year 2025 state aid losses. Furthermore, the bill would also provide tax cap flexibility to any district that has experienced a cumulative loss in state aid between fiscal year 2021 and fiscal year 2025.
This version of the bill is different than the bill that was released by the Assembly Education Committee on April 5, which was summarized in last week’s edition of School Board Notes. The revised legislation provides eligible districts with relief in several ways as described below.
Aid Grants and Tax Cap Flexibility First, the legislation establishes a “Stabilized School Budget Aid Grant Program.” Funded with a state appropriation of over $71 million, this program would allow any district anticipating an aid loss in fiscal year 2025 to apply to the commissioner of education for an aid grant equal to two-thirds of the amount of the district’s proposed school aid reduction. Unlike the previous version of the bill, a district would not need to first exhaust all of its existing taxing authority as a condition for receiving a grant.
These districts would also be able to recoup the remaining one-third of their state aid losses by exceeding the maximum amount permitted under the statutory tax levy cap law without the need to first obtain voter approval. However, such an increase would be limited to no more than 9.9% of the prior year levy.
As was the case with the previous version of the bill, districts receiving a grant would also be prohibited from reducing the total number of school employees for the next school year if the commissioner approves the district’s application. However, an exception would be made if the reduction in staff is being made due to an anticipated decline in student enrollment.
Additional Tax Cap Flexibility The bill provides additional tax levy cap relief to those who experienced cumulative state aid losses in recent years. Specifically, a district that has experienced a net reduction in state aid between fiscal year 2021 and fiscal year 2025 (but not necessarily in the fiscal year 2025 budget proposal itself) would be permitted to increase its tax levy beyond the existing cap. Any district that experienced a cumulative loss over this period of time would be able to exceed the cap in one of the following two ways:
- Districts Receiving Aid Grants If the district received an aid grant under the Stabilized School Budget Aid Grant Program, the permitted increase would be capped at the amount of the school district’s net reduction from 2020-2021 through 2023-2024 (the current and three prior fiscal years). Such a district’s aid loss for 2024-2025 would be recouped through the Stabilized School Budget Aid Grant Program summarized above.
- Districts Not Receiving Aid Grants Districts not eligible for an aid grant, because they are not anticipating a reduction in state aid in fiscal year 2025, would similarly be eligible for tax cap flexibility. These districts would be able to increase their levy beyond the maximum permissible amount up to the overall reduction between fiscal year 2021 and fiscal year 2025 (the prior four fiscal years and the fiscal year beginning July 1).
In both instances, the overall amount that any district would be allowed to increase its tax levy beyond the current permissible amount, without obtaining voter approval, would be capped at 9.9%.
SDA District Impact While they would be eligible for a restoration equal to two-thirds of their state reduction through the Stabilized School Budget Aid Grant Program, the bill’s provisions regarding tax cap flexibility would not apply to SDA districts. Such districts already have the ability to exceed the statutory cap up to their local fair share under existing law.
NJSBA Support The NJSBA, along with various other education organizations, strongly supports the legislation as passed by the full Assembly. NJSBA Director of Governmental Relations Jonathan Pushman testified before the Assembly Appropriations Committee on April 11, and the Association issued an Action Alert on Friday asking the membership to contact their local legislators and urge them to support the bill. The Association thanks all the members who heeded the call and encourages members to reach out to their representatives in the Senate and urge them to support the bill.
Next Steps The bill now heads to the Senate, where its companion bill, S-3081, sits in the Senate Budget and Appropriations Committee. It has yet to be scheduled for a hearing.
Other Education Measures Advance
The General Assembly also approved the following school-related bills:
Addressing the Bus Driver Shortage A-2180, which is intended to alleviate the school bus driver shortage, would create a new “Type S School Bus Certificate” to be issued by the New Jersey Motor Vehicle Commission. The certificate would authorize a person to operate a Type S school bus to transport children to and from school without obtaining a commercial driver’s license, passenger endorsement, or school bus endorsement. A Type S bus is a school transportation vehicle that has a gross vehicle weight rating of 3,000 pounds or more, and which was originally designed by the manufacturer with a maximum seating capacity of nine passengers or less, excluding the driver. The NJSBA supports the bill, which was unanimously approved by the Assembly. The bill now heads to the Senate for consideration.
November Separate Proposals for Future Years A-2784 would allow a school district that has moved its annual school election to November to submit to voters a separate proposal for additional funds beyond the district’s authorized tax levy cap to support a particular program or purpose for the budget year, or a separate proposal for additional funds for the subsequent budget year, or separate proposals for additional funds for each of those budget years. Current law provides that a school district may submit to the voters at the annual school election a separate question or proposal for permission to raise additional funds for the current budget year. The bill stipulates that if a November district submits a separate question for additional funds for the subsequent budget year and the separate question is approved, the school district may not increase its tax levy for that subsequent budget year by the amount of any “banked” tax levy that the district may have at its disposal under the cap banking provisions of the law. NJSBA supports the bill, which was approved by the Assembly. The bill now heads to the Senate for consideration.
Delaying Budget Submissions A-4059 would give districts receiving state aid reductions this year additional time to finalize their budgets. The bill requires the commissioner of education to permit school districts losing school aid to submit their budgets after enactment of the state fiscal year 2025 appropriations act. The commissioner would be authorized to make any adjustments to the school budget calendar that are necessary to conform with the provisions of the bill, including a compressed schedule by which a district can enact its budget.
The bill would only apply to districts that are proposed to receive a school aid reduction that is greater than the total amount of the district’s unused tax authority permitted under current law (i.e., “banked cap”). Under current law, a school district may add to its adjusted tax levy in any one of the next three succeeding budget years, the amount of the difference between the maximum allowable amount to be raised by taxation for the current school budget year and the actual amount to be raised by taxation for the current school budget year. The NJSBA supports the bill, which is permissive and would only apply to the 2024-2025 school year. Approved unanimously by the Assembly, the bill now heads to the Senate for consideration.
To view the full text of any of the bills summarized above, please visit the New Jersey Legislature’s website.