As part of the state budget review process, the State Legislature has two committees dedicated to reviewing the Governor’s proposed budget for fiscal year 2026. An important part of that process is the ability of the public to comment on the proposed budget to members of the Senate and Assembly budget committees.
On April 3, 2025, NJPSA’s Government Relations Department submitted the following testimony on the proposed FY 2026 Budget Proposal.
NJPSA Testimony on FY2026 Proposed State Budget Before the Senate and Assembly Budget Committees
April 3, 2025
The NJ Principals and Supervisors Association (NJPSA) representing over 8,000 school leaders serving as principals, assistant principals, directors and supervisors in our public schools appreciates the opportunity to share our perspective on Governor Murphy’s Fiscal Year 2026 New Jersey State Budget proposal.
Introduction and Context
First and foremost, we thank Governor Murphy and the State Legislature for your strong commitment to funding and prioritizing the needs of our public schools, our educators and the students we serve. In these unprecedented times, where rising school costs are pervasive across school budgets, the economy is unstable and continued federal education funding is uncertain, NJPSA appreciates the financial commitment to public education demonstrated by the FY2026 budget proposal. We strongly support the full funding of the School Funding Reform Act (SFRA), as positively modified this year, resulting in an increase in formula aid of $386 million, raising the total SFRA formula aid amount to over $12 billion statewide. Additionally, our members applaud the State’s continued full payment of its pension obligations ($7.2 billion) to public employees, a practice that has stabilized the public pension systems like TPAF in our state. We recognize that making these pension payments has not been easy, and we thank you for honoring the State’s commitment to our members, all public employees and New Jersey taxpayers through the reduced long-term system costs that result when the state reduces the unfunded liabilities of the public pension systems. Multiple credit rating agencies have recognized these actions and upgraded New Jersey’s ratings as a result in recent years.
NJPSA also must acknowledge the responsiveness of the Administration to the efforts of the State Legislature and education stakeholder groups like NJPSA to address several recurring issues within the education funding system. The FY2026 budget proposal contains multiple key concepts raised in pending legislation as well as recommendations provided by NJPSA and other key stakeholders to the NJ Department of Education during its school funding public hearing process in January. As discussed herein, NJPSA supports proposed budget changes for FY 2026 that do the following:
- Revise the school funding formula to address current educational costs in 2025 through an updated base student amount, cost of living adjustments, and a more transparent Education Adequacy Report (EAR) process;
- Address the volatility and unpredictability of state aid distributions by including alternate approaches to the calculation of local wealth and local fair share requirements;
- Provide flexibility as well as fiscal incentives for school districts to work to reach their adequacy budgets to provide the education their students need;
- Fund the excess costs of special education based upon actual student enrollments, not through the artificial, census-based methodology contained in the SFRA that has failed to cover actual special education costs across the state;
- Continue to fund extraordinary special education costs that can devastate local district budgets in every type of school district across the state;
- Provide more flexibility in the current two percent tax levy cap barrier that limits districts’ ability to meet their local fair share; and
- Continue New Jersey’s commitment to core educational and student welfare goals including investments in preschool expansion, food security for all students, mental health services, literacy initiatives and high impact tutoring programs that are speeding the academic recovery of many students, and initiatives to address educator shortages across the state.
Analysis and Recommendations
In reviewing the Governor’s proposed budget, several areas stand out to us. We wish to bring them to the Legislature’s attention for consideration as the process goes forward.
Advance Notice
As the Legislature well knows, there is a natural dissonance between the required timelines for developing and adopting local school budgets and the equivalent process for the state budget. While this has always been problematic, the last several years have been particularly difficult with many districts experiencing unexpected, wide fluctuations in state aid.
In order to mitigate the effects of “surprise” large funding swings, this year the Department proactively notified school districts, prior to the Governor’s Budget Address, that no district would be reduced in state aid by more than three percent of their prior year state aid amount. This announced guardrail cooled the temperature around state aid as districts developed their local budgets.This effort is deeply appreciated by our members and by school districts. Although many ultimately did not receive positive news, receiving this information earlier has allowed them to react in a more methodical and reasoned manner, as opposed to the panicked reactions of previous years.
Absent an unlikely change to the statutory timelines around budgeting, we strongly recommend formalizing this type of communication as common practice going forward.
Formula Adjustments and Guardrails
Although the aid equalization formula laid out in S2 has run its course, local districts’ experiences under the SFRA have revealed several new issues within the formula that require legislative modifications. One such issue has been the definition of wealth under the SFRA which is equally defined by local income and property value. In recent years, due to wide fluctuations in property values in some areas of the state, some school districts have suffered significant losses in state aid. Other districts continuing to feel the effects of significant reductions under S2 are seeing those losses compounded in additional losses in this cycle, even if those losses are capped. To address this, legislation like S-3917 (Gopal) proposes several different approaches including the establishment of guardrails to minimize the deep reductions experienced by some districts under the SFRA as currently distributed.
To mitigate the effects of sudden and significant swings, and to allow districts leeway to react with better consideration, this budget has capped reductions in state aid at 3% and increases at 6%. While no district wants to hear that it is losing funds, or that they are getting less than they thought, this policy has given districts a better sense of stability than they might have otherwise in this year’s challenging budget climate. This solution is however a one-year “fix” for the upcoming budget year and continuing conversations will be needed to address this ongoing formula issue.
Local Fair Share
One particular area of weakness for the SFRA is in its ability to account for and adapt to changing economic conditions, especially those that were not significant factors when it was being developed. In the current post-COVID economic climate, for instance, inflation and real estate volatility are wreaking havoc with property values and wealth determinations. As a result, a given district’s “fair share” determination is potentially subject to large year-over-year swings, resulting in the sudden and dramatic gains and losses in funding discussed earlier in this testimony. Similarly, the formula predates the 2% growth cap and has no mechanism to account for a district’s ability to respond to a sudden negative change in its fair share determination. We are encouraged to see that the administration has attempted to address these concerns using a two-pronged approach.
First, switching to a three year average in calculating wealth is an adjustment NJPSA and our education colleagues have called for a number of years. This change has the potential to allow both the Department and the districts to identify and respond to trends rather than placing them at the whim of year-to-year uncertainties.
Likewise, we applaud the proposed establishment of a $20 million incentive funding pool for districts that must or should exceed the 2% cap to meet their adequacy budget as established by the formula. An “adequacy budget” is the amount required by law to provide all students in the district with a constitutionally required thorough and efficient education. Currently, there are over 170 school districts that are spending under adequacy. This proposal has the potential to allow districts to appropriately raise funds while simultaneously shielding individual taxpayers from a sudden significant rate hike.
NJPSA is broadly supportive in concept of both proposals and we look forward to seeing the full details of each.
Rising Costs
NJPSA is pleased that the Education Adequacy Report (EAR), upon which this year’s state aid is calculated, has been updated to reflect the rising costs that school districts face in providing for the safety, welfare and education of students. In addition to cost of living adjustments and adjustments made to formula components based upon actual costs such as updated salaries and benefits for school personnel, several important changes are reflected in this year’s EAR that were not a part of the base funding amount in prior SFRA aid calculations. In today’s context, school districts face personnel, technology and facilities costs to provide a secure school environment. Similarly, the mental health needs of students have expanded exponentially since the pandemic and school districts have absorbed these necessary mental health costs for many years. We appreciate the fact that the updated EAR has acknowledged these core costs and included them in the base formula amount per pupil, the amount utilized as a starting point to calculate the state aid for each student and school district in our state.
Special Education
Meeting the needs of our most vulnerable students is a key responsibility of our state, our federal government and our school districts. With the legal mandates of the Individuals with Disabilities Education Act (IDEA) and our moral commitment to our students with disabilities, school districts face significant challenges in balancing the needs of general education and special education students. Since the enactment of the SFRA in 2008, we have raised concerns about the use of the census-based funding approach to special education aid which bases special education categorial aid on statewide classification rates not actual student enrollments in a district. The FY2026 budget proposal modifies this approach by funding special education with the most recent actual district enrollment data multiplied by an updated (cost adjusted) excess cost calculation. We appreciate this shift in the upcoming budget that results in a significant increase (30%) in special education categorical aid ($400 million) assisting school districts statewide.
The EAR further notes that the average cost of special education services is now only about $1,000 away from the $40,000 threshold for “extraordinary” special education, which has been held static since 2008. Since thresholds and markers like this are among the important benchmarks by which we judge comparative costs, we strongly encourage the Legislature to consider the EAR’s implicit suggestion to review the threshold to make it more reflective of current fiscal reality and on-the-ground need.
Most importantly, the overall pot of extraordinary special education aid funding needs to be increased reflective of the rising costs of out-of-district high cost placements. This funding category, set at $420 million, has not been increased for the past two budget years. With rising costs and flat funding of extraordinary aid, districts have only been receiving 62% of the funding they were entitled to in recent years. This is one area where NJPSA recommends an increase in the funding amount contained in the FY 2026 budget proposal in order to assist school districts statewide.
Education Policy Issues
NJPSA and its partners in education advocacy have consistently called for support in a number of other policy areas as well, and we are pleased to see that many have been directly addressed as state education priorities.
At the top of this list is further funding for expansion of pre-school. We are deeply appreciative of the unwavering support this issue has received since the Governor began writing it into his proposals and the Legislature has funded these critical programs. We also welcome this year’s prioritization of full day kindergarten in all school districts. The funds included this year’s budget proposal will push us even further towards achieving universal pre-K access for New Jersey students.
We are likewise pleased to see significant commitment in student health through expanded funding for food security programs and continued investment in the NJ4S program. Students who are happy, healthy, and fed are students who have a strong learning platform, and we thank the Governor and Legislature for keeping this a central part of education funding.
We also strongly support the inclusion of funding to support learning and recovery programs like high impact tutoring and the literacy initiative. This is the critical work of NJPSA members and we appreciate state funding of these important learning supports. These programs put learning resources where they are needed most and provide vital resources to students who need them. We are grateful that they continue to be funded at appropriate levels.
Two Areas For Additional Funding to Support School Staffing and Retention
In the area of educator staffing shortages, NJPSA would like to respectfully recommend some changes. We note that the student teacher stipend program has been reduced from $15 million to $3.5 million. The extremely high cost burden born by our student teachers was a central point of focus during the Governor’s Task Force on Public School Staffing Shortages, and this program serves as an important incentive to new prospective teachers working through the pipeline towards certification. NJPSA recommends that this program not just return to its former funding point, but be expanded to meet the demonstrated demand for it.
Finally, NJPSA has been working with legislators, the Governor’s Office, the NJ Department of Education and other stakeholders to address a notable gap in support for educators who become supervisors. These individuals represent the only professional educator role in the state that does not have a required mentorship program, which is mandatory for teachers and every other level of administration and leadership. Such a program would provide an investment in strengthening the school leadership pipeline by supporting novice supervisors in their first year in that role. The investment would quickly pay dividends in strengthening these young leaders, promoting efficiencies and in supervisor retention and development. It would also provide an incentive for career advancement to individuals who might otherwise avoid such a step for fear of failure due to lack of support.
Legislation to establish a supervisor mentorship program has been making its way through the Legislature in the form of A5075 and S3933. The pilot program that it would create requires an investment of $500,000 and NJPSA respectfully requests that this funding be included in the FY2026 budget.
Closing Thoughts
A budget document, as we are often reminded in both word and action, is a statement of priorities. The robust and thorough discussions of recent years have reaffirmed how highly this state prioritizes education and the care and safety of its children. NJPSA is deeply appreciative to the administration and to the Legislature for their continuing commitment to public education in this FY2026 budget document. It is the key to the future of our students, and indeed to the success of our state. We look forward to continuing this discussion until the final document is passed. Please do not hesitate to reach out to our staff if we can offer any assistance or if we can answer any questions. Thank you.
Submitted by:
Debra J. Bradley, Esq.
NJPSA Director of Government Relations
Chris Nelson
NJPSA Assistant Director of Government Relations