S4334

An Act concerning school finances, amending P.L.2007, c.62, and making an appropriation.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 3 of P.L.2007, c.62 (C.18A:7F-38) is amended to read as follows:

3. a. Notwithstanding the provisions of any other law to the contrary, a school district shall not adopt a budget pursuant to sections 5 and 6 of P.L.1996, c.138 (C.18A:7F-5 and 18A:7F-6) with an increase in its adjusted tax levy that exceeds, except as provided in subsection e. of section 4 of P.L.2007, c.62 (C.18A:7F-39), the tax levy growth limitation calculated as follows: the sum of the prebudget year adjusted tax levy and the adjustment for increases in enrollment multiplied by [2.0 percent] the greater of the CPI as defined pursuant to section 3 of P.L.2007, c.260 (C.18A:7F-45) or two percent, and adjustments for an increase in health care costs, increases in amounts for certain normal and accrued liability pension contributions set forth in sections 1 and 2 of P.L.2009, c.19 amending section 24 of P.L.1954, c.84 (C.43:15A-24) and section 15 of P.L.1944, c.255 (C.43:16A-15) for the year set forth in those sections, [and,] in the case of an SDA district as defined pursuant to section 3 of P.L.2000, c.72 (C.18A:7G-3), during the 2018-2019 through the 2024-2025 school years, increases to raise a general fund tax levy to an amount that does not exceed its local share, and, in the case of a school district that is spending below adequacy as determined pursuant to section 1 of P.L.2018, c.67 (C.18A:7F-70), increases to raise a general fund tax levy up to the amount necessary for the district to be spending at adequacy.

b. (1) The allowable adjustment for increases in enrollment authorized pursuant to subsection a. of this section shall equal the per pupil prebudget year adjusted tax levy multiplied by EP, where EP equals the sum of:

(a) 0.50 for each unit of weighted resident enrollment that constitutes an increase from the prebudget year over [1%] one percent, but not more than [2.5%] two and one-half percent;

(b) 0.75 for each unit of weighted resident enrollment that constitutes an increase from the prebudget year over [2.5%] two and one-half percent, but not more than [4%] four percent; and

(c) 1.00 for each unit of weighted resident enrollment that constitutes an increase from the prebudget year over [4%] four percent.

(2) A school district may request approval from the commissioner to calculate EP equal to 1.00 for any increase in weighted resident enrollment if it can demonstrate that the calculation pursuant to paragraph (1) of this subsection would result in an average class size that exceeds [10%] 10 percent above the facilities efficiency standards established pursuant to P.L.2000, c.72 (C.18A:7G-1 et al.).

c. (Deleted by amendment, P.L.2010, c.44)

d. (1) The allowable adjustment for increases in health care costs authorized pursuant to subsection a. of this section shall equal that portion of the actual increase in total health care costs for the budget year, less any withdrawals from the current expense emergency reserve account for increases in total health care costs, that exceeds [2.0 percent] the greater of the CPI as defined pursuant to section 3 of P.L.2007, c.260 (C.18A:7F-45) or two percent of the total health care costs in the prebudget year, but that is not in excess of the product of the total health care costs in the prebudget year multiplied by the average percentage increase of the State Health Benefits Program, P.L.1961, c.49 (C.52:14-17.25 et seq.), as annually determined by the Division of Pensions and Benefits in the Department of the Treasury.

(2) The allowable adjustment for increases in the amount of normal and accrued liability pension contributions authorized pursuant to subsection a. of this section shall equal that portion of the actual increase in total normal and accrued liability pension contributions for the budget year that exceeds [2.0 percent] the greater of the CPI as defined pursuant to section 3 of P.L.2007, c.260 (C.18A:7F-45) or two percent of the total normal and accrued liability pension contributions in the prebudget year.

(3) In the case of an SDA district, as defined pursuant to section 3 of P.L.2000, c.72 (C.18A:7G-3), in which the prebudget year adjusted tax levy is less than the school district's prebudget year local share as calculated pursuant to section 10 of P.L.2007, c.260 (C.18A:7F-52), the allowable adjustment for increases to raise a tax levy that does not exceed the school district's local share shall equal the difference between the prebudget year adjusted tax levy and the prebudget year local share.

(4) In the case of a school district that is spending below adequacy as determined pursuant to section 1 of P.L.2018, c.67 (C.18A:7F-70), the allowable adjustment for increases to raise a tax levy up to the amount necessary for the district to be spending at adequacy shall not exceed the difference between the sum from the budget year of the district’s adequacy budget, as calculated pursuant to section 9 of P.L.2007, c.260 4 (C.18A:7F-51), special education categorical aid as calculated pursuant to section 13 of P.L.2007, c.260 (C.18A:7F-55), and security categorical aid as calculated pursuant to section 14 of P.L.2007, c.260 (C.18A:7F-56), and the sum from the prebudget year of the district’s equalization aid calculated pursuant to section 11 of P.L.2007, c.260 (C.18A:7F-53), special education categorical aid as calculated pursuant to section 13 of P.L.2007, c.260 (C.18A:7F-55), security categorical aid as calculated pursuant to section 14 of P.L.2007, c.260 (C.18A:7F-56), and the general fund tax levy.

e. (Deleted by amendment, P.L.2010, c.44)

f. The adjusted tax levy shall be increased or decreased accordingly whenever the responsibility and associated cost of a school district activity is transferred to another school district or governmental entity.

(cf: P.L.2018, c.67, s.6)

2. (New section) a. Notwithstanding the provisions of P.L.2007, c.260 (C.18A:7F-43 et al.) or any other law, rule, or regulation to the contrary, a school district, which is calculated as receiving a reduction in State school aid in the 2025-2026 school year according to the State school aid notice distributed to the district on February 27, 2025, shall receive an additional amount of State school aid to ensure that the district receives the amount of State school distributed to the school district in the 2024-2025 school year.

b. As used in this section, “State school aid” means:

(1) the amount of equalization aid, special education categorical aid, security categorical aid, transportation aid, and vocational expansion stabilization aid as calculated for a school district in the 2025-2026 school year according to the State school aid notice distributed to the district on February 27, 2025; and

(2) the amount of equalization aid, special education categorical aid, security categorical aid, transportation aid, adjustment aid, and vocational expansion stabilization aid distributed to a school district in the 2024-2025 school year.

3. There is appropriated from the Property Tax Relief Fund to the Department of Education the sum of $67,867,662 to provide additional State school aid pursuant to section 2 of this act.

4. This act shall take effect immediately and section 1 of this act shall first apply to adjusted tax levies raised in the second full school year following the date of enactment. Section 3 of this act shall take effect on July 1, 2025, and the amounts appropriated in section 3 of this act, for the purposes of effectuating the provisions of section 2 of this act, shall be distributed in the 2025-2026 school year.

STATEMENT

This bill modifies the school district tax levy cap law to require that the cap be the greater of the percentage increase in the Consumer Price Index or two percent. The bill also provides $67.9 million in additional State school aid to ensure that no school district receives an aid reduction in the 2025-2026 school year compared to the 2024-2025 school year.

Under current law, a school district is generally prohibited from increasing its property tax levy by more than two percent compared to the previous school year. This limited increase is often referred to as a “tax levy growth limitation” or a “tax levy cap.” This bill would require that the tax levy cap in a given school year be the greater of the increase in the Consumer Price Index or two percent.

While there is a general prohibition on increasing the school district tax levy by more than two percent, State law authorizes certain allowable adjustments to the general two percent limitation, thereby permitting a district to account for certain increases in items such as enrollment, health care costs, and certain normal and accrued liability pension contributions.

This bill would provide for another allowable adjustment for a school district that is spending below adequacy. Under current law, a school district is considered to be spending below adequacy if its prebudget year spending (defined as the sum from the prior school year of equalization aid, special education categorical aid, security categorical aid, and the school district’s tax levy) is below its projected adequacy spending (defined as the sum for the school year in which the budget will be implemented of its adequacy budget, special education categorical aid, and security categorical aid). For these districts, the allowable adjustment to the tax levy would be the amount necessary for the district to be spending at adequacy.

Finally, the bill appropriates $67.9 million in additional State school aid to ensure that no school district receives an aid reduction in the 2025-2026 school year compared to the 2024-2025 school year. It is estimated that this aid will support approximately 200 school districts.