By Debra Bradley, Esq.
Governor Murphy’s Budget Address on Tuesday, Feb. 25, signaled the official start of the state budget process in New Jersey which culminates with a constitutionally mandated balanced budget enacted by the State Legislature by June 30, 2025. The Governor cited some recurrent themes of his past budget proposals as he called for a budget that supports a “stronger, fairer and more future-prepared New Jersey.” The Governor’s FY 2026 Budget Proposal is a $53 billion budget with education representing approximately one third (38%) of the proposal (22.2 billion). Murphy also disseminated a summary of his budget proposal, the FY ‘26 Budget in Brief, which details specific spending proposals in each sector of state government.
Two days later, on February 27, the New Jersey Department of Education (NJDOE) issued state aid notices to school districts. You may view district-by-district, countywide and preschool aid allocations on the New Jersey Department of Education’s website.
Now that school districts have received their state aid numbers, local school district budgets are being further developed after the initial planning stages. Districts that are experiencing state aid reductions or special issues can raise their concerns with their local legislators or during the State Budget Public Hearing Process. Although the dates and times of the public hearings have not yet been released, NJPSA will keep you advised of the dates and times of the hearings. You may sign up to speak at these hearings or you can submit written comments to the Senate and Assembly budget committees.
The Education Details of the FY 26 Budget Proposal
K-12 Formula Aid – Amounts and Proposed Formula Updates
After years of inconsistency in formula funding, the Murphy administration has steadily funded the School Funding Reform Act, ramping up spending, according to a schedule negotiated with the Legislature, to finally reach full formula funding during the last fiscal year (FY 25). The Governor proposes to once again fully fund the SFRA for the second consecutive year. This equates to approximately $12.06 billion in formula aid – a $386 million (3.3%) increase over fiscal year 2025.
Additionally, the Administration’s proposal is responsive to the recommendations of the public and statewide education organizations, including NJPSA, to address recurring formula problems, update the cost components within the formula, and address the issues of predictability and volatility within the formula. For example, the proposal limits the year to year increases or decreases a district can experience as a percentage of the district’s prior year’s state aid. As announced by the NJDOE on Feb. 18, the state plans to limit, by a maximum of 3%, decreases in the four main categories of state aid for each district. (equalization, special education, security and transportation aid.) On the other end of the spectrum, the budget proposal restricts increases in those four main categories of aid at 6%. (Please note that the proposal changes to other aid categories, (Choice Funding, Military Impact Aid, County Vocational Stabilization Aid and Educational Adequacy Aid) which are determined through factors such as annual participation or enrollment – are not among the categories being held to that reduction cap.
Another important formulaic change that is being proposed is to utilize three-year averages for property values and income when calculating a district’s local fair share. The purpose of this change is to avoid wide fluctuations in the calculations of a district’s wealth which is then used to determine a community’s ability to support its education costs. NJPSA supported this proposal in testimony on S-3917 (Gopal) and before the NJDOE public hearing process on school funding.
A third major improvement is in the area of tax cap relief for districts who are spending below their “adequacy budget”, the amount determined to be necessary to provide a thorough and efficient education to district students. The administration is proposing the creation of “a mechanism for additional tax levy growth cap flexibility for some districts.” We are awaiting more details of this proposal, but reports mention that the proposal will include an allocation of $20 million for new “tax levy incentive aid,” which would provide additional state funding to support districts that increase local revenue.
The budget proposal also includes significant updates to the cost components of the formula and even a new methodology for calculating special education aid. First, as required by law, the formula updates costs components on a three year cycle. This budget proposal includes updated cost data for such items as salaries and benefits, but also includes for the first time, the inclusion of district cost factors for mental health and security costs in the base formula amounts. Additional cost updates cover transportation and security costs. As a result, security aid will increase by $ 59 million (16.1%), transportation costs will increase by $139 million (36.7%).
Finally, the proposal makes a long-overdue change in the calculation of general special education costs, moving away from a census-based approach to one based upon actual enrollment numbers. General special education aid is set to increase from fiscal year 2025 by almost $403 million (29.5%). The funding for extraordinary special education costs is held at $420 million, the FY 2025 level.
Preschool Aid
The Governor continues his strong commitment to early education by both continuing to fund existing programs but also expanding preschool aid ($10 m) to fund new programs. The proposal would increase preschool education aid by $34.6 million (2.8%), for a total of $1.27 billion. The proposal also looks beyond the end of the Governor’s term by including an initiative to provide cost-sharing as part of those expansion grants to help accelerate universal pre-K.
The Governor announced in his State of the State Address his commitment to promoting full day kindergarten in every New Jersey school district. Approximately 11 districts do not have full day kindergarten. The Governor and Legislature are working to support those districts in reaching this goal.
Academic, Meals and Other Budget Programs
The budget proposal includes information on several other priorities and initiatives:
- Implementation of the Literacy legislative package which includes funding for the creation of the Office of Learning and Academic Recovery within the NJDOE
- High Impact Tutoring: The proposal also includes $7.5 million in new grant funding to support districts offering high-impact tutoring to students in need of extra academic support.
- Cell Phone Initiative: The budget proposal contains $3 million in grant funding to promote cell phone free
- School Meals: funding for over 17,000 New Jersey students’ meals through the Working Class Families Anti-Hunger Act
- Student Mental Health Supports – funding to support the NJ4S regional mental health support network ($43million)
- $2 million in new funding for school lead filters.
- Regionalization Incentive Grants: The proposal decreases FY 25 level funding to Local Efficiency Achievement Program and School Regionalization Efficiency Program grants to $3 million from $8 million in FY 25.
- The budget proposal would decrease funding for teachers’ scholarships, stipends and loan redemption from $15 million to $3.5 million.
- The proposal includes $1 million in new “Youth Vote Expansion Grants” to “local government leaders across New Jersey to create new opportunities for 16- and 17-year-olds to vote in local school board elections.”
School Facilities and Construction
The proposal includes flat funding for school construction in fiscal year 2026. The administration signaled its intent to disburse an additional $350 million from the $1.9 billion that was appropriated to the Schools Development Authority in 2022 “for current projects and to help the SDA move forward on projects identified in its 2019 Statewide Strategic Plan.” And, like the current budget year, $50 million of additional general fund appropriations will be available to support capital grants in SDA districts.
Pension Payments – A Strong Commitment to Educators
And last, but certainly not least, the Governor’s budget proposal continues the strong state commitment to make the full pension payment due in FY 26 for all public employees. The budget proposal includes a $7.2 billion payment for the State’s pension system this fiscal year. NJPSA applauds the Governor and the Legislature’s commitment to public employees through this critical fiscal payment.
What Is Next?
Within the next two weeks, The Legislature will announce its schedule of Budget committee hearings to allow the public and stakeholders to weigh in on the governor’s proposal. At the end of March, both the Senate and General Assembly will take the so-called “budget break” to focus on the state budget proposal. Instead of considering legislation, the Senate and Assembly budget committees will receive testimony from executive branch agency heads. In May or early June a budget bill will be introduced, discussed, and passed for the governor’s signature in advance of the June 30, 2025, constitutional deadline. NJPSA will keep you advised of the committee hearing schedule and all future budget developments as the process continues.