K-12 education formula aid would increase by $336 million, or 3.9%, under Gov. Phil Murphy’s proposed $40.9 billion 2020-2021 state budget introduced Tuesday.

In his third annual budget address, Governor Murphy also proposed a new $50 million allocation, termed “stabilization aid,” for school districts that are scheduled for funding reductions. The Budget in Brief document describes the aid category as “one-time assistance for districts that are implementing plans to adjust to new funding levels as determined by the school funding reform legislation that the Governor worked with the Legislature to enact in 2018.”

During a briefing on Tuesday morning, a Murphy administration official indicated that districts would have to apply for the aid and meet certain criteria. 

Health Benefits Costs The governor’s proposal anticipates reductions of $174 million in employee health benefits expenses by reining in services provided by costly out-of-network providers. At the same time, it incorporates provisions of proposed legislation, A-1137, that would restrict employee contributions to health care premiums to an amount equal to 2% to 8% of salary.

The contribution levels would be significantly less than the maximums established under the “Chapter 78” pension and health benefits reform legislation enacted in 2011. Chapter 78 set a maximum contribution of 35% of premium. Although that law expired, most boards of education have retained the maximum level, or have used it as a point of negotiation to secure other cost efficiencies that helped preserve educational programming.

Pension Payment Boost Murphy also announced plans to contribute $4.6 billion in next year’s budget to the public employee pension funds – an increase of $794 million over last year. In addition, he said that he would also allocate $279 million in leftover money in the current state budget to the pension fund, for a total payment of nearly $4.9 billion.

Revenue Sources To pay for the budget, the governor is asking the Legislature to approve a “millionaires’ tax” that he said would require the wealthiest 22,000 New Jerseyans to pay two cents more in income tax for every dollar they make over $1 million. He estimated the new tax would generate approximately $500 million in revenue. A proposed hike in the cigarette tax would add $200 million more.

Education components of the governor’s $40.9 billion state budget include:

  • Formula aid: The budget would add $336 million in formula aid, bringing the total to slightly more than $9 billion. Individual district state aid figures will be issued on Thursday, Feb. 27. Under statute, school districts must receive state aid notices within 48 hours of the budget address.
  • Pre-kindergarten: About $83 million would be added to expand access to pre-kindergarten programs, bringing total state support of pre-kindergarten to $889.2 million.
  • Extraordinary special education aid: The proposed budget would provide $250 million for high-cost special education placements, the same amount as for the current school year.
  • Debt service aid: The proposed budget would provide $110.1 million in debt service aid, an increase of $9.6 million.

“Going forward, NJSBA will examine the proposed budget in detail and assess Thursday’s release of the state aid allotment to individual school districts,” said Dr. Lawrence S. Feinsod, NJSBA executive director. “Based on our analysis, we will be presenting our positions through testimony and communication with legislative leaders.”

The state is required by law to adopt a budget by June 30.