Bill Text: NJ A4608 | 2024-2025 | Regular Session | Introduced
Bill Title: Provides that school districts with unpaid balances on certain borrowed funds are not subject to State school aid reductions; requires use of surplus funds to repay borrowed funds.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced) 2024-06-20 - Introduced, Referred to Assembly Education Committee [A4608 Detail]
Download: New_Jersey-2024-A4608-Introduced.html
Sponsored by:
Assemblyman ALEX SAUICKIE
District 12 (Burlington, Middlesex, Monmouth and Ocean)
SYNOPSIS
Provides that school districts with unpaid balances on certain borrowed funds are not subject to State school aid reductions; requires use of surplus funds to repay borrowed funds.
CURRENT VERSION OF TEXT
As introduced.
An Act concerning school finances, amending P.L.2006, c.15, and supplementing P.L.2007, c.260 (C.18A:7F-43 et al.).
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 3 of P.L.2006, c.15 (C.18A:7A-56) is amended to read as follows:
3. a. The Commissioner of Education shall recommend to the State Treasurer whether an advance State aid payment should be made to a school district for which a State monitor has been appointed. The commissioner's recommendation shall be based on whether the payment is necessary to ensure the provision of a thorough and efficient education. An advance State aid payment shall be recorded by the school district as revenue for budget purposes in the school year in which the advance State aid payment is provided.
b. The advance State aid payment shall be repaid by the school district through automatic reductions in the State aid provided to the school district in subsequent years; except that State aid shall not be reduced pursuant to this subsection in the case of a school district that is subject to the provisions of section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill) and applies the full amount of its undesignated general fund balance pursuant to paragraph (2) of subsection c. of this section. The term of the repayment shall not exceed 10 years, but may be for a shorter term as determined by the State Treasurer. At any time during the term of the repayment the State Treasurer, in consultation with the Commissioner of Education, may determine to impose interest on the unpaid balance; except that interest shall not be imposed in the case of a school district for which a State monitor is appointed within 90 days of the effective date of [this act] P.L.2006, c.15 (C.18A:7A-54 et seq.). The commissioner shall transfer the amount of the reduction in State aid to the account established pursuant to section 5 of [this act] P.L.2006, c.15 (C.18A:7A-58).
c. [In] (1) Unless otherwise provided in paragraph (2) of this subsection, in any year in which the school district's undesignated general fund balance is greater than [1.5%] 1.5 percent of general fund expenditures, the amount which exceeds [1.5%] 1.5 percent shall be an additional amount applied to the following year's repayment of the advance State aid payment and the school district's State aid shall be reduced by this additional amount in that following year.
(2) In the case of a school district that receives an advance State aid payment and is subject to the provisions of section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill), the full amount of the district's undesignated general fund balance shall be appropriated to the repayment of the advance State aid payment. The appropriation of the undesignated general fund balance shall be reflected in the school budget adopted pursuant to section 5 of P.L.1996, c.138 (C.18A:7F-5).
(cf: P.L.2006, c.15, s.3)
2. (New section) a. (1) Notwithstanding the provisions of P.L.2007, c.260 (C.18A:7F-43 et al.) or of any other law, rule, or regulation to the contrary, a school district, which in the budget year has an unpaid balance on borrowed funds from the State, shall not receive a reduction in State school aid pursuant to the provisions of P.L.2007, c.260 (C.18A:7F-43 et al.) compared to the amount of State school aid provided to the district in the prebudget year. A school district exempt from a State school aid reduction pursuant to this section shall appropriate the full amount of its undesignated general fund balance, as calculated pursuant to section 7 of P.L.1996, c.138 (C.18A:7F-7), to the repayment of the borrowed funds. The appropriation of the undesignated general fund balance shall be reflected in the school budget adopted pursuant to section 5 of P.L.1996, c.138 (C.18A:7F-5).
(2) In the case of a school district that has an unpaid balance on an advance State aid payment, the appropriation of the full amount of its undesignated general fund balance shall be made in accordance with paragraph (2) of subsection c. of section 3 of P.L.2006, c.15 (C.18A:7A-56).
b. As used in this section, "borrowed funds from the State" means:
(1) advance State aid payments provided to a school district pursuant to section 3 of P.L.2006, c.15 (C.18A:7A-56); and
(2) emergency aid that is provided to a school district following a district needs assessment and for which the Commissioner of Education has required repayment from the district.
3. This act shall take effect immediately and shall first apply in the first full school year following the date of enactment.
STATEMENT
This bill provides that a school district, which has an unpaid balance on certain borrowed funds from the State, is not subject to a State school aid reduction. A school district exempt from a State school aid reduction under the bill, however, is required to apply the full amount of its undesignated general fund balance (i.e., surplus funds) to the repayment of the borrowed funds.
One of the types of borrowed funds referenced in the bill is advance State aid payments that are authorized under current law. Under current law, the commissioner may recommend to the State Treasurer whether an advance State aid payment should be made to a school district experiencing certain budgetary deficiencies. The advance State aid payment is required to be repaid by the school district through automatic reductions in State aid in subsequent years. Instead of the automatic reductions in State aid required under current law, this bill requires certain districts to appropriate their undesignated general fund balances to the repayment of the advance State aid payments. This requirement applies to a district that has an outstanding balance on an advance State aid payment and is otherwise supposed to experience a reduction in State school aid pursuant to the school funding formula law.
The bill also references emergency aid provided to a school district. Recent appropriations acts have authorized the appropriation of funds for emergency aid to school districts, following a district needs assessment conducted by the Department of Education. In providing for emergency aid, the commissioner is authorized to determine the repayment terms, if any, that will be assessed to a school district. The commissioner may also appoint a State monitor to a school district receiving emergency aid. Under the bill, a district, which has an unpaid balance on emergency aid funds and is otherwise subject to a reduction in State school aid pursuant to the school funding law, is required to appropriate its undesignated general fund balance to repayment of the funds.
Certain school districts have been forced into financial hardship due to state aid cuts through the implementation of P.L.2018, c.67, commonly known as "S2." One school district represented by the sponsor has applied to the Department of Education for an advance State aid payment, and the sponsor is aware of at least one other school district that has outstanding debt to the department. Still others have considered applying for such loans.
The district represented by the sponsor has had state aid reduced by more than $22 million during implementation of S2. That district was forced to cut over 200 employees and to eliminate advanced placement courses, sports teams and more. For the 2024-2025 school year, the district faces a $25 million shortfall that cannot be effectively addressed by any reasonable program cuts, property tax increases, or combination thereof. Even raising the property tax levy to the maximum amount permitted under P.L.2024, c.13 would not close the gap.
As a condition of the district's application, the Commissioner of Education appointed a state fiscal monitor to the district. After reviewing the district's finances, the monitor stated that the district does not have a spending problem, but rather a revenue problem. The sponsor, among many other observers, finds it clear that the greatest source of this revenue problem is the enormous reduction of state aid over the years.
As the need for this borrowing has arisen due to the State's actions, the sponsor believes it is appropriate that the State hold affected districts harmless from additional aid reductions while they have unpaid balances on any borrowed funds from the State.
