Bill Text: NJ A5208 | 2026-2027 | Regular Session | Introduced
Bill Title: Establishes certain mechanisms to address significant unanticipated cost increases experienced by school districts.
Sponsorship: Partisan Bill (Democrat 1)
Status: (Introduced) 2026-06-04 - Introduced, Referred to Assembly Education Committee [A5208 Detail]
Download: New_Jersey-2026-A5208-Introduced.html
Sponsored by:
.Assemblywoman ROSAURA "ROSY" BAGOLIE
District 27 (Essex and Passaic)
SYNOPSIS
Establishes certain mechanisms to address significant unanticipated cost increases experienced by school districts.
CURRENT VERSION OF TEXT
As introduced.
An Act concerning the fiscal condition of school districts, amending P.L.2007, c.62, and supplementing chapter 22 of Title 18A of the New Jersey Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 6 of P.L.2007, c.62 (C.18A:7F-41) is amended to read as follows:
6. Notwithstanding the provisions of any law or regulation to the contrary:
a. A board of education or board of school estimate, as appropriate, may supplement a capital reserve account through a transfer by board resolution at year end of any unanticipated revenue or unexpended line-item appropriation amounts, or both, for withdrawal in subsequent school years.
b. A board of education or board of school estimate, as appropriate, may supplement a maintenance reserve account through a transfer by board resolution at year end of any unanticipated revenue or unexpended line-item appropriation amounts, or both, for withdrawal in subsequent school years.
c. A board of education or a board of school estimate, as appropriate, may through the adoption of a board resolution establish the following reserve accounts:
(1) Current expense emergency reserve account. The funds in the reserve shall be used to finance unanticipated general fund current expense costs required for a thorough and efficient education, or to finance school security improvements, including improvements to school facilities. The account shall not exceed $250,000 or one percent of the district's general fund budget up to a maximum of $1,000,000, whichever is greater. A board of education may appropriate funds to establish or supplement the reserve in the district's annual budget or through a transfer by board resolution at year end of any unanticipated revenue and unexpended line-item appropriation amounts. Withdrawals from the reserve may be made at any time and shall require the approval of the commissioner unless the withdrawal is necessary to meet an increase in total health care costs in excess of four percent, or the withdrawal is included in the original budget certified for taxes to finance school security improvements, including improvements to school facilities.
As used in this paragraph, "school security improvements" means school security improvements, including improvements to school facilities, which are limited to safety and security measures involving building monitoring and communication technology designed to address school crime and the safety of students, staff, and visitors to school facilities. School security improvements may include, but need not be limited to: security cameras to monitor the school; an electronic notification system that automatically notifies parents in case of a school-wide emergency; an automatic door locking system for access control; and a badge system for school employees.
(2) Debt service reserve account in the debt service fund for proceeds from the sale of district property. The funds in the reserve shall be used to retire outstanding debt service obligations of the district. The reserve shall be liquidated within the lesser of five years from its inception or the remaining term on the obligations. Any remaining balance shall be used for tax relief.
(3) Federal impact aid reserve account in the case of a school district that receives federal impact aid pursuant to section 8002, 8003, 8007, or 8008 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. s.7702, 7703, 7707, or 7708). A board of education may appropriate federal impact aid funds to establish or supplement the reserve account in the district's annual budget, or through a transfer by a two-thirds affirmative vote of the authorized membership of the board between June 1 and June 30, for withdrawal in any subsequent school year. Any transfer to the reserve account shall not exceed the total amount of federal impact aid received in the fiscal year. The board, at its discretion, may use the funds in the reserve account to finance the district's general fund or to finance school facilities projects, in a manner consistent with federal law. The total amount of funds on deposit in the reserve account shall not be limited.
(4) (a) Cost stabilization reserve account. The funds in the reserve account shall be used to finance general fund expenses, excluding staff salary costs, that during the school year cost significantly more than initially anticipated in the budget certified for taxes, including significant unanticipated increases in total health care costs to the extent that those costs are not supported by withdrawals made from the current expense emergency reserve account, student transportation expenses, special education and related services expenses, and other eligible categories of general fund expenses that may be established by rules and regulations promulgated pursuant to subparagraph (b) of this paragraph. A board of education may appropriate funds to establish or supplement the reserve in the district's annual budget. Notwithstanding the provisions of section 2 of P.L.1979, c.294 (C.18A:22-8.1) or any other law, rule, or regulation to the contrary, a board of education may also establish or supplement the reserve account through a transfer by board resolution of any unanticipated revenue and unexpended line-item appropriation amounts, which transfer resolution may be adopted at any point during the school year. A withdrawal from the reserve account may be made at any time and only after the adoption of a board resolution detailing the specific unanticipated cost increases to be supported by the withdrawal and justifying that the withdrawal is necessary for the provision of a thorough and efficient education; except that the withdrawal may require additional approval of the commissioner pursuant to rules and regulations promulgated pursuant to subparagraph (b) of this paragraph.
(b) The commissioner shall promulgate, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), rules and regulations as necessary related to the establishment and maintenance of a cost stabilization reserve account. The rules and regulations shall include, but not be limited to:
(i) limits on balances that may exist in the reserve account;
(ii) the conditions under which a board of education is required to seek the additional approval of the commissioner prior to withdrawing funds from the reserve account;
(iii) criteria for cost increases that would be considered significant and unanticipated and for which withdrawals from the reserve account may be used;
(iv) the establishment of eligible categories of expenses for which withdrawals from the reserve account may be used, in addition to those expressly enumerated in subparagraph (a) of this paragraph.
d. (1) All reserve accounts shall be established and held in accordance with GAAP and shall be subject to annual audit. Any capital gains or interest earned shall become part of the reserve account. A separate bank account is not required, however, a separate identity for each reserve account shall be maintained.
(2) A board of education that establishes a federal impact aid reserve account shall:
(a) report the amount of federal impact aid received, expended, and on deposit in the federal impact aid reserve account in its annual audit pursuant to N.J.S.18A:23-1, and in the budget made available in a "user-friendly" format using plain language pursuant to N.J.S.18A:22-8;
(b) report the amount of federal impact aid received, expended, and on deposit in the federal impact aid reserve account at each board of education meeting, and shall include the information in the board secretary's monthly report in a format to be determined by the commissioner; and
(c) provide any additional supporting documentation that may be required by the commissioner pursuant to subsection c. of section 5 of P.L.1996, c.138 (C.18A:7F-5).
(3) A board of education that establishes a cost stabilization reserve account shall:
(a) report the total balance in the reserve account, as well as deposits into and withdrawals from the reserve account, in its annual audit pursuant to N.J.S.18A:23-1;
(b) report the current total balance in the reserve account, as well as deposits into and withdrawals from the reserve account to date, as part of the board secretary's monthly report presented at the board of education meeting in which a board resolution is adopted to transfer funds into the account or to withdraw funds from the account; and
(c) provide any additional supporting documentation that may be required by the commissioner pursuant to subsection c. of section 5 of P.L.1996, c.138 (C.18A:7F-5).
(cf: P.L.2016, c.100, s.1)
2. (New section) a. (1) As part of the ongoing budget review process established pursuant to regulations of the State Board of Education, a board of education may apply to the Commissioner of Education for approval to make mid-year budget adjustments, following the adoption of a board resolution certifying the intention to apply for commissioner approval of a mid-year budget adjustment. The board resolution shall be adopted by a board no later than January 31 and confirm that actual costs of certain eligible general fund expenses of the school district are significantly higher than the amount that was able to be reasonably anticipated in the budget certified for taxes, including an explanation of any identifiable factors leading to the increase in actual costs compared to anticipated costs, and that the expenses are required for the provision of a thorough and efficient education.
(2) In addition to other eligible categories of general fund expenses that may be established by the commissioner, general fund expenses for which a board of education may apply for a mid-year budget adjustment pursuant to this section shall include significant unanticipated increases in health care costs and in tuition payments for resident students attending approved private schools for students with disabilities.
(3) The commissioner shall establish application procedures, timelines, and evaluation criteria in a manner to ensure that boards of education are not unduly delayed in addressing significant unanticipated cost increases and to integrate the application procedures into existing processes for ongoing school budget review.
b. A board of education's application for a mid-year budget adjustment pursuant to this section shall include:
(1) the board resolution certifying the board's desire to apply for commissioner approval of a mid-year budget adjustment as required pursuant to subsection a. of this section;
(2) documentation detailing the specific categories of general fund expenses for which actual costs are significantly higher than the amount that was able to be reasonably anticipated in the budget certified for taxes, the magnitude and nature of the cost increases, and that the cost increases were not able to be reasonably anticipated at the time of budget approval. The commissioner shall provide guidance on the forms of acceptable documentation to be submitted as part of the application process;
(3) an explanation of any identifiable factors that prevented the district from anticipating the cost increase upon adoption of the budget and an affirmation that the request for a mid-year budget adjustment is not the result of poor planning or error;
(4) an explanation of the impact that the cost increase will have on the district's financial position and whether the board is projecting a year-end deficit in the general fund as a result of the significant unanticipated cost increase; and
(5) actions that the board has taken to date to mitigate the significant unanticipated cost increases.
c. The commissioner shall review applications for mid-year budget adjustments submitted pursuant to this section and determine the appropriate scope of adjustments to be made, including:
(1) advising the board on the implementation of all adjustments to the budget that may be made pursuant to other sections of law, including the authority to transfer amounts among line items and program categories in accordance with section 2 of P.L.1979, c.294 (C.18A:22-8.1) and section 3 of P.L.1979, c.294 (C.18A:22-8.2) and to make withdrawals from reserve accounts established pursuant to section 6 of P.L.2007, c.62 (C.18A:7F-41); and
(2) directing such budgetary reallocations and programmatic adjustments as necessary to support the significant unanticipated cost increases of the school district, provided that the budgetary reallocations and programmatic adjustments do not hinder the provision of a thorough and efficient education.
d. Mid-year budget adjustments determined necessary by the commissioner pursuant to subsection c. of this section shall be presented to the board of education and subsequently approved by a recorded roll call majority vote of the board's full membership. Any adjustments approved by the board of education shall be reported to the executive county superintendent.
3. This act shall take effect immediately and shall first apply to the first full school year following the date of enactment.
STATEMENT
This bill authorizes a board of education to establish a cost stabilization reserve account and to apply to the Commissioner of Education for mid-year budget adjustments for significant unanticipated cost increases.
Under the bill, funds in a cost stabilization reserve account would be used to finance general fund expenses, excluding staff salary costs, that, during the school year, cost significantly more than initially anticipated in the budget adopted for the school year. Costs for which withdrawals from the account may be used include unanticipated increases in total health care costs, student transportation expenses, special education and related services, and other eligible categories of general fund expenses that may be established by rules and regulations of the Commissioner of Education. A board of education may appropriate funds to establish or supplement the reserve in the district's annual budget or through a transfer by board resolution of any unanticipated revenue and unexpended line-item appropriation amounts. A withdrawal from the reserve account may be made at any time and only after the adoption of a board resolution detailing the specific unanticipated cost increases to be supported by the withdrawal and justifying that the withdrawal is necessary for the provision of a thorough and efficient education.
The bill requires the commissioner to promulgate rules and regulations as necessary related to the establishment and maintenance of a cost stabilization reserve account. The rules and regulations would include, but not be limited to: limits on balances that may exist in the reserve account; the conditions under which a board of education is required to seek the additional approval of the commissioner prior to withdrawing funds from the reserve account; criteria for cost increases that would be considered significant and unanticipated; and the establishment of additional eligible categories of expenses for which withdrawals from the reserve account may be used.
The bill also permits a board of education to apply to the Commissioner of Education for approval to make mid-year budget adjustments to address significant unanticipated cost increases in general fund expenses, including increases in health care costs and in tuition payments for resident students attending approved private schools for students with disabilities. The commissioner is directed to establish application procedures, timelines, and evaluation criteria in a manner that ensures boards of education are not unduly delayed in addressing the cost increases and to integrate the application procedures into existing processes for ongoing school budget review. Boards of education are required to provide various materials to justify the need for a mid-year budget adjustment.
The commissioner is required to review applications for mid-year budget adjustments and determine the appropriate scope of adjustments to be made, including: advising the board on the implementation of all adjustments to the budget that may be made pursuant to current law, including the authority to transfer amounts among line items and program categories and to make withdrawals from reserve accounts; and directing budgetary reallocations and programmatic adjustments as necessary to support the cost increases of the school district.
