S2637

An Act concerning the limitation on local unit appropriations and amending various sections of statutory law.

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

1. Section 3 of P.L.1976, c.68 (C.40A:4-45.3) is amended to read as follows:

3. In the preparation of its budget a municipality shall limit any increase in said budget to 2.5% or the cost-of-living adjustment, whichever is less, over the previous year's final appropriations subject to the following exceptions:

a. (Deleted by amendment, P.L.1990, c.89.)

b. Capital expenditures, including appropriations for current capital expenditures, whether in the capital improvement fund or as a component of a line item elsewhere in the budget, provided that any such current capital expenditure would be otherwise bondable under the requirements of N.J.S.40A:2-21 and 40A:2-22;

c. (1) An increase based upon emergency temporary appropriations made pursuant to N.J.S.40A:4-20 to meet an urgent situation or event which immediately endangers the health, safety or property of the residents of the municipality, and over which the governing body had no control and for which it could not plan and emergency appropriations made pursuant to N.J.S.40A:4-46. Emergency temporary appropriations and emergency appropriations shall be approved by at least two-thirds of the governing body and by the Director of the Division of Local Government Services, and shall not exceed in the aggregate 3% of the previous year's final current operating appropriations.

(2) (Deleted by amendment, P.L.1990, c.89.)

The approval procedure in this subsection shall not apply to appropriations adopted for a purpose referred to in subsection d. or j. below;

d. All debt service, including that of a Type I school district;

e. Upon the approval of the Local Finance Board in the Division of Local Government Services, amounts required for funding a preceding year's deficit;

f. Amounts reserved for uncollected taxes;

g. (Deleted by amendment, P.L.1990, c.89.)

h. Expenditure of amounts derived from new or increased construction, housing, health or fire safety inspection or other service fees imposed by State law, rule or regulation or by local ordinance;

i. Any amount approved by any referendum;

j. Amounts required to be paid pursuant to (1) any contract with respect to use, service or provision of any project, facility or public improvement for water, sewerage, parking, senior citizen housing or any similar purpose, or payments on account of debt service therefor, between a municipality and any other municipality, county, school or other district, agency, authority, commission, instrumentality, public corporation, body corporate and politic or political subdivision of this State; (2) the provisions of article 9 of P.L.1968, c.404 (C.13:17-60 through 13:17-76) by a constituent municipality to the intermunicipal account; (3) any lease of a facility owned by a county improvement authority when the lease payment represents the proportionate amount necessary to amortize the debt incurred by the authority in providing the facility which is leased, in whole or in part; and (4) any repayments under a loan agreement entered into in accordance with the provisions of section 5 of P.L.1992, c.89;

k. (Deleted by amendment, P.L.1987, c.74.)

l. Appropriations of federal, county, independent authority or State funds, or by grants from private parties or nonprofit organizations for a specific purpose, and amounts received or to be received from such sources in reimbursement for local expenditures. If a municipality provides matching funds in order to receive the federal, county, independent authority or State funds, or the grants from private parties or nonprofit organizations for a specific purpose, the amount of the match which is required by law or agreement to be provided by the municipality shall be excepted;

m. (Deleted by amendment, P.L.1987, c.74.)

n. (Deleted by amendment, P.L.1987, c.74.)

o. (Deleted by amendment, P.L.1990, c.89.)

p. (Deleted by amendment, P.L.1987, c.74.)

q. (Deleted by amendment, P.L.1990, c.89.)

r. Amounts expended to fund a free public library established pursuant to the provisions of R.S.40:54-1 through 40:54-29, inclusive;

s. (Deleted by amendment, P.L.1990, c.89.)

t. Amounts expended in preparing and implementing a housing element and fair share plan pursuant to the provisions of P.L.1985, c.222 (C.52:27D-301 et al.) and any amounts received by a municipality under a regional contribution agreement pursuant to section 12 of that act;

u. (Deleted by amendment, P.L.2004, c.74.)

v. (Deleted by amendment, P.L.1990, c.89.)

w. (Deleted by amendment, P.L.2004, c.74.)

x. Amounts expended to aid privately owned libraries and reading rooms, pursuant to R.S.40:54-35;

y. (Deleted by amendment, P.L.1990, c.89.)

z. (Deleted by amendment, P.L.1990, c.89.)

aa. Extraordinary expenses, approved by the Local Finance Board, required for the implementation of an interlocal services agreement;

bb. Any expenditure mandated as a result of a natural disaster, civil disturbance or other emergency that is specifically authorized pursuant to a declaration of an emergency by the President of the United States or by the Governor;

cc. Expenditures for the cost of services mandated by any order of court, by any federal or State statute, or by administrative rule, directive, order, or other legally binding device issued by a State agency which has identified such cost as mandated expenditures on certification to the Local Finance Board by the State agency;

dd. Expenditures of amounts actually realized in the local budget year from the sale of municipal assets in extraordinary cases and with the permission of the Local Finance Board;

ee. Any local unit which is determined to be experiencing fiscal distress pursuant to the provisions of P.L.1987, c.75 (C.52:27D-118.24 et seq.), whether or not a local unit is an "eligible municipality" as defined in section 3 of P.L.1987, c.75 (C.52:27D-118.26), and which has available surplus pursuant to the spending limitations imposed by P.L.1976, c.68 (C.40A:4-45.1 et seq.), may appropriate and expend an amount of that surplus approved by the director and the Local Finance Board as an exception to the spending limitation. Any determination approving the appropriation and expenditure of surplus as an exception to the spending limitations shall be based upon:

1) the local unit's revenue needs for the current local budget year and its revenue raising capacity;

2) the intended actions of the governing body of the local unit to meet the local unit's revenue needs;

3) the intended actions of the governing body of the local unit to expand its revenue generating capacity for subsequent local budget years;

4) the local unit's ability to demonstrate the source and existence of sufficient surplus as would be prudent to appropriate as an exception to the spending limitations to meet the operating expenses for the local unit's current budget year; and

5) the impact of utilization of surplus upon succeeding budgets of the local unit;

ff. Newly authorized operating appropriations for the municipal court or violation's bureau when approved by the vicinage Presiding Judge of the Municipal Court after consultation with the mayor and governing body of the municipality;

gg. (Deleted by amendment, P.L.2004, c.74.)

hh. (Deleted by amendment, P.L.2004, c.74.)

ii. Subject to the approval of the Local Finance Board, expenditures related to the cost of conducting and implementing a total property tax levy sale pursuant to section 16 of P.L.1997, c.99 (C.54:5-113.5);

jj. Amounts expended for a length of service award program pursuant to P.L.1997, c.388 (C.40A:14-183 et al.);

kk. Amounts expended to provide municipal services or reimbursement amounts to multifamily dwellings for the collection and disposal of solid waste generated by the residents of the multifamily dwellings. This subsection shall cease to be operative at the end of the first local budget year in which the municipality has fully phased in its reimbursement amount expenses;

ll. Amounts expended by a municipality under an interlocal services agreement [entered into pursuant to the "Interlocal Services Act," P.L.1973, c.208 (C.40:8A-1 et al.) entered into after the effective date of P.L.2000, c.126 (C.52:13H-21 et al.)]. [The] Subject to the approval of the Director of the Division of Local Government Services, the governing body of the municipality that will receive the service may choose to allow the amount of projected annual savings to be added to the amount of final appropriations upon which its permissible expenditures are calculated pursuant to section 2 of P.L.1976, c.68 (C.40A:4-45.2);

mm. Amounts expended under a joint contract entered into pursuant to the "Consolidated Municipal Service Act," P.L.1952, c.72 (C.40:48B-1 et seq.) entered into after the effective date of P.L.2000, c.126 (C.52:13H-21 et al.) or the "Uniform Shared Services and Consolidation Act," P.L.2007, c.63 (C.40A:65-1 et seq.). [The] Subject to the approval of the Director of the Division of Local Government Services, the governing body of each participating municipality may choose to allow the amount of projected annual savings to be added to the amount of final appropriations upon which its permissible expenditures are calculated pursuant to section 2 of P.L.1976, c.68 (C.40A:4-45.2);

nn. (Deleted by amendment, P.L.2004, c.74.)

oo. Amounts appropriated in the first three years after the effective date of P.L.2003, c.92 (C.18A:7F-5b et al.) for liability insurance, workers' compensation insurance and employee group insurance;

pp. Amounts appropriated in the first three years after the effective date of P.L.2003, c.92 (C.18A:7F-5b et al.) for costs of domestic security preparedness and responses to incidents and threats to domestic security;

qq. Amounts required to be paid by a municipality pursuant to the provisions of section 4 of P.L.2007, c.311 (C.13:1E-96.5);

rr. Increases in pension contributions and accrued liability for pension contributions in excess of 3.5 percent.

In the first full year when an existing appropriation or expenditure that is subject to budget limitations is made an exception to budget limitations, a municipality shall deduct from its final appropriations upon which its permissible expenditures are calculated pursuant to section 2 of P.L.1976, c.68 (C.40A:4-45.2), the amount which the municipality expended for that purpose during the last full budget year, or portion thereof, in which the purpose so excepted was funded from appropriations in the municipal budget.

In the first full year when an existing appropriation or expenditure that is not subject to budget limitations is made subject to budget limitations, a municipality shall add to its final appropriations upon which its permissible expenditures are calculated pursuant to section 2 of P.L.1976, c.68 (C.40A:4-45.2), the amount which the municipality expended for that purpose during the last full budget year, or portion thereof, in which the purpose so excepted was funded from appropriations in the municipal budget.

If a municipality has received Local Finance Board approval pursuant to subsection ee. of this section for at least two consecutive prior budget years, the Local Finance Board may authorize the local unit to permanently add to its appropriations cap base the amount of the cap waiver as approved by the Director of the Division of Local Government Services.

(cf: P.L.2007, c.311, s.17)

2. Section 5 of P.L.1990, c.89 (C.40A:4-45.3d) is amended to read as follows:

In addition to the exceptions to the limit on increases in final appropriations for any budget year, listed in section 3 of P.L.1976, c.68 (C.40A:4-45.3), the Local Finance Board shall have the authority to grant additional exceptions, applicable to all municipalities and only effective for the local budget year in which the exception is granted, upon a finding of extraordinary circumstances that result in an unanticipated increase in expenditures for a good or service essential to the health, safety and welfare of the residents of the State.

(cf: P.L.1990, c.89, s.5)

3. Section 13 of P.L.2007, c.62 (C.40A:4-45.3e) is amended to read as follows:

13. In addition to the exceptions to the limits on increases to municipal appropriations set forth in section 3 of P.L.1976, c.68 (C.40A:4-45.3) and to the county tax levy set forth in section 4 of P.L.1976, c.68 (C.40A:4-45.4), an increase in appropriations that represents expenditures made by a municipality or county for the purpose of funding the provision of health insurance shall be exempt from the limits on increases to municipal appropriations and to the limits on increases to the county tax levy in county budgets, respectively, for any budget year, to the extent that the increases in health care costs equal that portion of the actual increase in total health care costs for the budget year that is in excess of [four] 3.5 percent of the total health care costs in the prior year, but is not in excess of the product of the total health care costs in the prior year and the average percentage increase of the State Health Benefits Program, as annually determined by the Division of Pensions and Benefits in the Department of the Treasury.

(cf: P.L.2007, c.62, s.13)

4. Section 3 of P.L.1983, c.49 (C.40A:4-45.13) is amended to read as follows:

a. In any budget year subsequent to 1982, whenever a county or municipality shall have lawfully assumed, during the immediately preceding budget year, or at any time during the current budget year prior to the final adoption of the budget, the provision of any service or function funded during the immediately preceding budget year wholly by a local public utility, a local public authority or a special purposes district, and where the provision of that service or function by the county or municipality is the result of the lawful dissolution of the public utility, public authority, or special services district previously providing the service or function, the county or municipality shall add to the final appropriations for the current budget year upon which its permissible expenditures are calculated, or upon which its permissible county tax levy is calculated, the amount certified by the Local Finance Board for appropriation by the county or municipality to fund that service or function in the current budget year.

b. In any budget year subsequent to 1982, whenever a county shall have lawfully assumed, during the immediately preceding budget year, or at any time during the current budget year prior to the final adoption of the budget, the provision of any service or function funded during the immediately preceding budget year wholly or partially by one or more municipalities within the county from appropriations in the municipal budget, the county shall add to the final appropriations for the current year upon which its permissible county tax levy is calculated the amount certified by the Local Finance Board for appropriation by the county to fund that service or function in the current budget year.

c. The Local Finance Board shall approve the assumption of any service or function for the purpose of its eligibility under the provisions of this section. The board shall approve the assumption if it finds: that the assumption was lawfully made; that the assumption does not deleteriously affect the health, safety or welfare of the residents of a county or municipality; and that the assumption represents an efficient and feasible means of providing the service or function. The board shall, in approving the assumption, certify to the county or municipality assuming the service or function the amount of appropriation to fund the service or function which shall be eligible for the provisions of this section.

d. Whenever a municipality or a county shall have lawfully assumed, during the immediately preceding budget year, or at any time during the current budget year prior to the final adoption of the budget, the provision of any service or function funded during the immediately preceding budget year wholly or partially by a private entity or a non-profit entity, the municipality or county shall add to the final appropriations for the current year upon which its permissible expenditures are calculated, or upon which its permissible county tax levy is calculated, the amount certified by the Local Finance Board for appropriation by the county or municipality to fund that service or function in the current budget year.

e. Whenever a municipality or a county, during the immediately preceding budget year or at any time during the current budget year prior to the final adoption of the budget, shall directly provide any service or function for which it had previously contracted with a private or non-profit entity to provide, the municipality or county shall add to the final appropriations for the current year upon which its permissible expenditures are calculated, or upon which its permissible county tax levy is calculated, the amount certified by the Local Finance Board for appropriation by the county or municipality to fund the direct provision of that service or function by the municipality or county in the current budget year.

(cf: P.L.1983, c.49, s.3)

5. This act shall take effect immediately and shall apply to municipal budget years beginning after the date of enactment.

STATEMENT

The bill makes certain changes to the statutory limitations on municipal appropriations.

Current law, under section 3 of P.L.1976, c.68 (C.40A:4-45.3), requires that a municipality limit appropriation increases to 2.5 percent or the cost-of-living adjustment, whichever is less, over the previous year's final appropriations, but provides for certain exceptions. The bill would add increases in pension contributions and accrued liability for pension contributions in excess of 3.5 percent to an existing list of allowable exceptions

That statute also currently allows municipalities that are experiencing fiscal distress to appropriate and expend an amount of surplus approved by the Director of the Division of Local Government Services (director) in the Department of Community Affairs and the Local Finance Board (board) as an exception to the spending limitation. Under certain circumstances, the bill would allow the board to authorize a municipality to permanently add to its appropriation cap base an amount of surplus as approved by the director.

The bill also requires approval of the director for a municipality participating in an interlocal or shared services agreement to add the amount of projected annual savings to the amount of final appropriations upon which its permissible expenditures are calculated.

Additionally, section 5 of P.L.1990, c.89 (C.40A:4-45.3d) currently allows the board to grant exceptions upon a finding of extraordinary circumstances that result in an unanticipated increase in expenditures for a service essential to the health, safety and welfare of the residents of the State. The bill also allows such exceptions for goods essential to the health, safety and welfare of the residents of the State.

The bill also increases the total health care costs available for an exemption under current law, section 13 of P.L.2007, c.62 (C.40A:4-45.3e), for amounts in excess of 3.5 percent above, rather than four percent above, total health care costs in the prior year.

Finally, the bill provides for adjustment of county and municipal cap bases to reflect transfers of financing responsibility for a service or function previously funded, in whole or in part, by a private entity or a non-profit entity.

The bill would take effect immediately and apply to municipal budget years beginning after that date.