LEGISLATIVE FISCAL ESTIMATE
SENATE COMMITTEE SUBSTITUTE FOR
SENATE, No. 3917
STATE OF NEW JERSEY
221st LEGISLATURE
DATED: JULY 3, 2025
SUMMARY
|
Synopsis: |
Makes various changes to school funding law and Education Adequacy Report; establishes Special Education Funding Review Task Force. |
|
Type of Impact: |
Annual State expenditure increase. |
|
Agencies Affected: |
Department of Education. |
|
Office of Legislative Services Estimate |
||
|
Fiscal Impact |
Annual |
|
|
State Expenditure Increase |
Indeterminate |
|
|
|
|
|
· The Office of Legislative Services (OLS) finds that this bill would result in an indeterminate increase in State costs. The provision of the bill that would require the appropriation for extraordinary special education aid, or the percentage of eligible costs reimbursed through this aid, to increase in each year compared to the previous year would result in an indeterminate increase in State costs.
· Additionally, the OLS notes that there are potential State cost increases associated with the codification of municipal overburden protections that ensure that school districts that meet certain criteria do not experience a reduction in State school aid or experience limited reductions in State school aid.
BILL DESCRIPTION
This bill makes various changes to extraordinary special education aid and the Educational Adequacy Report, and establishes the Special Education Funding Task Force.
Under current law, a school district is reimbursed for certain special education costs in the form of extraordinary special education aid. However, in recent years the State’s appropriation for extraordinary special education aid has covered only a portion of eligible costs, with the percentage covered fluctuating from year to year. The bill requires the State to increase the appropriation from year to year, or otherwise ensure that the percentage of a school district’s costs reimbursed through extraordinary special education aid increases compared to the previous fiscal year.
The bill also establishes certain municipal overburden protections to prevent a school district from receiving a reduction in State school aid. Pursuant to the bill, an SDA district would not be subject to a reduction in State school aid if it is located in a municipality in which the equalized total tax rate is greater than the Statewide average equalized total tax rate for the most recently available calendar year and if the district is spending below adequacy. In the case of a school district other than an SDA district, the district would not be subject to a reduction in State school aid if it is located in a municipality in which the equalized total tax rate is at least 10 percent greater than the Statewide average equalized total tax rate for the most recently available calendar year and is spending at least 10 percent below adequacy. These municipal overburden protections would also apply to a regional school district if 50 percent or more of the district’s constituent districts or municipalities met either of the aforementioned qualifying criteria. An SDA district that is spending above adequacy would not be subject to a reduction in State school aid that exceeds the amount by which the district is spending above adequacy.
Additionally, the bill: requires the Department of Education to post on its website each school district’s State school aid calculation; includes certain other parameters in the three-year review of metrics used to calculate State school aid; requires certain elements of the next Educational Adequacy Report to be reviewed by a diverse group of stakeholders; allows the Department of Education to initiate a review of elements of the school funding formula; requires that the Educational Adequacy Report be made available for public comment for at least 30 days; and establishes the Special Education Funding Review Task Force.
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
The OLS finds that this bill would result in an indeterminate increase in State costs, described in further detail below.
Extraordinary Special Education Aid
The bill includes a provision that would require that, in each fiscal year, the appropriation for Extraordinary Special Education Aid increases compared to the previous year or otherwise ensures that the percentage of eligible costs reimbursed increases compared to the previous fiscal year. Based on recent trends in eligible costs, illustrated by the table below, this provision would likely result in indeterminate State cost increases to ensure that the percentage of costs reimbursed or the total appropriation increases. However, the OLS notes that if the amount of eligible costs Statewide decreases in any year, it may be possible, depending on the magnitude of the decrease, for appropriations to decrease while funding a higher reimbursement percentage.
|
Fiscal Year |
Appropriation |
Eligible Costs |
Percentage of Eligible Costs Reimbursed |
|
2020 |
$250,000,000 |
$176,057,585 |
58.7% |
|
2021 |
$275,000,000 |
$164,708,559 |
62.5% |
|
2022 |
$400,000,000 |
$43,951,165 |
90.1% |
|
2023 |
$420,000,000 |
$80,595,948 |
83.9% |
|
2024 |
$420,000,000 |
$165,447,924 |
71.7% |
|
2025 |
$420,000,000 |
$259,846,350 |
61.8% |
Municipal Overburden Protections
The bill also codifies municipal overburden protections that ensure that school districts that meet certain criteria do not experience a reduction in State school aid or experience limited reductions in State school aid. The municipal overburden protections included in the bill are the same as those that existed under P.L.2018, c.67, commonly known as “S2.” These municipal overburden protections would result in a potential expenditure increase for the State as a result of providing increased aid to qualifying districts. The OLS notes, for the purposes of illustration, that in the last year that municipal overburden protections were in place, 10 school districts were eligible, increasing State costs by approximately $57.1 million. However, actual cost increases would vary in any given year based on the number of districts qualifying for the municipal overburden protections and the amount of State school aid allocated to those districts.
Several provisions of the bill would likely have no cost, including: the requirement that the Department of Education make publicly available each district’s State aid calculations; additional reporting requirements for the Educational Adequacy Report and the ability to conduct reviews of any element, variable, or metric used to determine State school aid; and the establishment of the Special Education Funding Review Task Force.
|
Section: |
Education |
|
Analyst: |
Senior Fiscal Analyst |
|
Approved: |
Thomas Koenig Legislative Budget and Finance Officer |
This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.
This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).