Losing State Aid This Budget Year? The Legislature Is Considering Funding Options

Posted · Add Comment

Since the release of state aid figures following the Governor’s budget address on February 27th, many school districts have been struggling to understand what happened this year. Districts who may have anticipated state aid reductions, were shocked by the actual level of proposed reductions in aid this upcoming budget year.  

NJPSA members have shared their concerns and grappled with solutions, and NJPSA has been sharing your concerns with lawmakers.

There appears to be some light at the end of the tunnel for the 140 school districts in this situation.  

Legislation has been introduced that would create a pathway for districts losing state aid to recoup a good portion of their funding to maintain staff, programs, and services. The bill, A-4161 (Freiman), was considered Friday at the April 5 Assembly Education Committee meeting that was scheduled for the sole purpose of hearing this bill. NJPSA is advocating for its prompt passage. A-4161 is being fast-tracked as evidenced by the scheduling of an Assembly Appropriations Committee hearing on the bill on April 11, 2024. 


The Current Bill Provisions

Although the bill is still a work in progress, its current provisions (which could still change!) include the following:

  • The bill, if enacted into law, would provide an additional $71.4 million in aid to be dispersed to eligible districts through a  one-year grant program administered by the Commissioner of Education. Eligible districts are currently considered those districts experiencing reductions under  the S2 modifications to the funding formula and who act to meet the required provisions of the bill.
  • A Stabilization School Budget Aid grant program will be established within the NJDOE. The purpose of the program is to provide grants to eligible school districts of up to two-thirds of the amount of the district’s state aid reductions in the 2024-25 school year.  Districts will have to apply for the stabilization grant, it is NOT automatic.
  • The bill establishes conditions for a district to receive the state aid restoration including:


  • A district must utilize its “banked cap” funds;
  • A district must utilize all tax levy cap adjustments available to it under current law (health costs, pension, enrollment changes);
  • A district must agree not to reduce the total number of district employees compared to last year’s staffing totals except where the commissioner approves the district’s request to reduce staff due to an anticipated decline in enrollment.   


  • The bill will also grant some districts expanded authority to exceed the statutory tax levy cap in the upcoming fiscal year, but only in the event that it is not already able to recoup its aid loss through the exhaustion of its existing taxing authority as well as any Stabilized School Budget Aid Grant it is awarded. Such a school district would be permitted – but not required –  to request an increase to its general fund tax levy of up to one-third of its school aid reduction. However, there is a ceiling set on how much above cap a district can raise, as no school district will be permitted to increase its tax levy more than 9.9 percent, unless the full exhaustion of tax authority is otherwise greater than 9.9 percent. Such an increase would not be subject to voter approval, and this tax cap relief will be limited to the 2024-2025 school year.
  • The Commissioner of Education will develop an application program which must include:


  • A written plan explaining how the district will allocate aid and how the district will fund operations in future school year in which the district does not receive the aid;
  • A request to increase the general fund tax levy if sought by the district;
  • The eligible school district’s proposed budget, including the district’s proposed general fund tax levy, all tax levy adjustment amounts, any increases sought under the bill to the tax levy, and the percentage increase relative to the prior year;
  • The percentage difference between the pre-budget year adjusted tax levy and the adjusted tax levy of the prior fiscal year;
  • The estimated impact on the average homeowner if all tax levy adjustments, including any increases sought, are approved;
  • A description of how the district will use the funds raised through its proposed general fund tax levy, including any increases sought with a “particular focus on areas of instruction and support services;” and 
  • A resolution of the local school board approving the request to apply for the grant program under the bill. 


The legislation also includes modifications to the budget timeframes at the Commissioner’s discretion.  

The Assembly Education Committee favorably released A-4161 and A-4059 from committee. A-4059 (Lampitt) modifies the school budget calendar for districts losing state school aid to require the Commissioner of Education to permit the submission of these districts’ budgets after the enactment of the State Budget  which must occur on or before June 30, 2024.  

NJPSA will keep you informed about any changes to the bill as written, as well as steps you can take to support the legislation as it moves forward.