Gov. Phil Murphy signed the new state budget into law on June 29. Passed by a party line vote, it spends $46.4 billion, a 15% increase from last year. This is due largely to an influx of federal aid through the American Rescue Plan and the sale of bonds to supplement the budget, the latter being permitted due to the pandemic state of emergency.
In total, the budget spends about $9.3 billion in direct aid on education. The spending plan will add $578 million more in formula aid to schools, the same increase first announced in February. Extraordinary Special Education funding was increased $125 million to $400 million. Although short of full funding for Extraordinary Special Education costs by $40 to $50 million, the new allocation represents a 45% boost in funding from last year. Increasing this aid category was a top priority for the NJSBA.
Additionally, the Legislature added $5 million for charter school facility improvements; $5 million for community schools; $500,000 for the Clayton Model program on socio-emotional learning; and $11 million ($26.5 million total) for the Office of School Linked Services.
Stabilization Aid, a $50 million grant program for districts seeing their state formula aid decreased, was included in the final budget. However, the Legislature included language prioritizing military-impacted districts in the grant process. Language was also included to correspond with the school regionalization bill that would allow participating districts to, if applicable, recapture approximately 19% of their state aid losses.
“We appreciate the increase in education formula aid,” said Dr. Lawrence S. Feinsod, NJSBA executive director. “The impressive new investment in Extraordinary Special Education Aid will provide relief for more than 500 districts, and the Stabilization Aid will help districts as they are adjusting to new funding levels required by the state’s funding formula.”
Tax Relief Initiatives Beyond education, the bill has several tax relief initiatives, including updating and expanding the Homestead Rebate and Earned Income Tax Credit programs. Additionally, households earning up to $150,000 with at least one dependent child, and single parents with at least one dependent child, will be eligible to receive tax rebates this summer worth up to $500. An estimated 750,000 families will qualify for this program.
The budget also makes the first full pension contribution in 25 years, and it will pay $505 million above the required amount. The amount the state will contribute to the pension system this year will total nearly $7 billion, a record amount.
Finally, a $3.7 billion “Debt Defeasement” program is established; $2.5 billion of which will be for retiring state debt early. The remaining $1.2 billion will pay for programs for which state bonds would normally be used. The $3.7 billion total corresponds with the amount of revenue raised by the state through COVID-relief emergency bonds. Subsequent federal aid and better-than-expected tax revenues made such funds unnecessary; however, the bonds could not be retired early. Consequently, the Legislature created this program for those bonds’ usage.
The budget passed on a party line vote, 25-15 in the Senate, and 49-26 in the Assembly, with Democrats voting in support.