S3917

An Act concerning school financing, amending P.L.2007, c.62 and P.L.2018, c.67, and amending and supplementing P.L.2007, c.260.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. (New section) Beginning with the first full school year following the date of enactment of P.L. , c. (C. ) (pending before the Legislature as this bill) and each school year thereafter, the Department of Education shall annually, within two days following the transmittal of the State budget message to the Legislature by the Governor pursuant to section 11 of P.L.1944, c.112 (C.52:27B-20), make publicly available on the department’s Internet website the calculation of each category of aid payable to each school district in the succeeding year pursuant to the provisions of P.L.2007, c.260 (C.18A:7F-43 et al.). The calculations shall be written in a user-friendly manner and shall include, at a minimum, explanations of the variables used to determine the district’s aid.

2. Section 3 of P.L.2007, c.62 (C.18A:7F-38) is amended to read as follows:

3. a. Notwithstanding the provisions of any other law to the contrary, a school district shall not adopt a budget pursuant to sections 5 and 6 of P.L.1996, c.138 (C.18A:7F-5 and 18A:7F-6) with an increase in its adjusted tax levy that exceeds, except as provided in subsection e. of section 4 of P.L.2007, c.62 (C.18A:7F-39), the applicable tax levy growth limitation [calculated as follows: the sum of the prebudget year adjusted tax levy and the adjustment for increases in enrollment multiplied by 2.0 percent, and adjustments for an increase in health care costs, increases in amounts for certain normal and accrued liability pension contributions set forth in sections 1 and 2 of P.L.2009, c.19 amending section 24 of P.L.1954, c.84 (C.43:15A-24) and section 15 of P.L.1944, c.255 (C.43:16A-15) for the year set forth in those sections, and, in the case of an SDA district as defined pursuant to section 3 of P.L.2000, c.72 (C.18A:7G-3), during the 2018-2019 through the 2024-2025 school years, increases to raise a general fund tax levy to an amount that does not exceed its local share] established pursuant to this section.

(1) In the case of a school district for which the prebudget year adjusted tax levy is less than the district’s budget year local share as calculated pursuant to section 10 of P.L.2007, c.260 (C.18A:7F-52), the tax levy growth limitation shall be the lesser of:

(a) the difference between the district’s local share for the budget year and the district’s prebudget year adjusted tax levy; or

(b) seven percent of the district’s prebudget year adjusted tax levy.

(2) In the case of a school district for which the prebudget year adjusted tax levy is greater than or equal to the district’s budget year local share, the tax levy growth limitation shall be equal to two percent of the district’s prebudget year adjusted tax levy.

(3) In the case of an SDA district, as defined pursuant to section 3 of P.L.2000, c.72 (C.18A:7G-3), for which the prebudget year adjusted tax levy is less than the district’s budget year local share, the tax levy growth limitation shall be equal to the difference between the district’s local share for the budget year and the district’s prebudget year adjusted tax levy.

(4) In the case of an SDA district, as defined pursuant to section 3 of P.L.2000, c.72 (C.18A:7G-3), for which the prebudget year adjusted tax levy is greater than or equal to the district’s budget year local share, the tax levy growth limitation shall be equal to two percent of the district’s prebudget year adjusted tax levy.

In addition to the tax levy growth limitation, a district shall be permitted to increase the adjusted tax levy to account for increases in enrollment, health care costs, and amounts for certain normal and accrued liability pension contributions set forth in sections 1 and 2 of P.L.2009, c.19 amending section 24 of P.L.1954, c.84 (C.43:15A-24) and section 15 of P.L.1944, c.255 (C.43:16A-15) for the year set forth in those sections.

b. (1) The allowable adjustment for increases in enrollment authorized pursuant to subsection a. of this section shall equal the per pupil prebudget year adjusted tax levy multiplied by EP, where EP equals the sum of:

(a) 0.50 for each unit of weighted resident enrollment that constitutes an increase from the prebudget year over 1%, but not more than 2.5%;

(b) 0.75 for each unit of weighted resident enrollment that constitutes an increase from the prebudget year over 2.5%, but not more than 4%; and

(2) A school district may request approval from the commissioner to calculate EP equal to 1.00 for any increase in weighted resident enrollment if it can demonstrate that the calculation pursuant to paragraph (1) of this subsection would result in an average class size that exceeds 10% above the facilities efficiency standards established pursuant to P.L.2000, c.72 (C.18A:7G-1 et al.).

c. (Deleted by amendment, P.L.2010, c.44)

d. (1) The allowable adjustment for increases in health care costs authorized pursuant to subsection a. of this section shall equal that portion of the actual increase in total health care costs for the budget year, less any withdrawals from the current expense emergency reserve account for increases in total health care costs, that exceeds 2.0 percent of the total health care costs in the prebudget year, but that is not in excess of the product of the total health care costs in the prebudget year multiplied by the average percentage increase of the State Health Benefits Program, P.L.1961, c.49 (C.52:14-17.25 et seq.), as annually determined by the Division of Pensions and Benefits in the Department of the Treasury.

(2) The allowable adjustment for increases in the amount of normal and accrued liability pension contributions authorized pursuant to subsection a. of this section shall equal that portion of the actual increase in total normal and accrued liability pension contributions for the budget year that exceeds 2.0 percent of the total normal and accrued liability pension contributions in the prebudget year.

(3) [In the case of an SDA district, as defined pursuant to section 3 of P.L.2000, c.72 (C.18A:7G-3), in which the prebudget year adjusted tax levy is less than the school district's prebudget year local share as calculated pursuant to section 10 of P.L.2007, c.260 (C.18A:7F-52), the allowable adjustment for increases to raise a tax levy that does not exceed the school district's local share shall equal the difference between the prebudget year adjusted tax levy and the prebudget year local share.] (Deleted by amendment, P.L. , c. ) (pending before the Legislature as this bill)

e. (Deleted by amendment, P.L.2010, c.44)

f. The adjusted tax levy shall be increased or decreased accordingly whenever the responsibility and associated cost of a school district activity is transferred to another school district or governmental entity.

(cf: P.L.2018, c.67, s.6)

3. Section 4 of P.L.2007, c.62 (C.18A:7F-39) is amended to read as follows:

4. a. (Deleted by amendment, P.L.2010, c.44)

b. (Deleted by amendment, P.L.2010, c.44)

c. A school district may submit to the voters at the annual school election, or on such other date as is set by regulation of the commissioner, a proposal or proposals to increase the adjusted tax levy by more than the allowable amount authorized pursuant to section 3 of P.L.2007, c.62 (C.18A:7F-38). The proposal or proposals to increase the adjusted tax levy shall be approved if a majority of people voting shall vote in the affirmative. In the case of a school district with a board of school estimate, the additional adjusted tax levy shall be authorized only if a quorum is present for the vote and a majority of those board members who are present vote in the affirmative to authorize the additional adjusted tax levy.

A school district without a board of school estimate may submit to the voters at a special school election authorized pursuant to section 2 of P.L.1995, c.278 (C.19:60-2), a proposal or proposals to increase the adjusted tax levy for the subsequent school budget year by more than the allowable amount authorized pursuant to section 3 of P.L.2007, c.62 (C.18A:7F-38). A proposal submitted at a special election shall comply with the requirements of this subsection and of paragraph (9) of subsection d. of section 5 of P.L.1996, c.138 (C.18A:7F-5). A proposal or proposals for additional funds may only be submitted on a date of a special election once during a school year. Nothing in this subsection shall be construed to prohibit the submission to the voters of a question or questions for the approval of a capital project or projects on the same special election date as the submission of a separate proposal or proposals for additional funds.

(1) A proposal or proposals submitted to the voters or the board of school estimate to increase the tax levy pursuant to this subsection shall not include any programs or services necessary for students to achieve the core curriculum content standards.

(2) All proposals to increase the tax levy submitted pursuant to this subsection shall include interpretive statements specifically identifying the program purposes for which the proposed funds shall be used and a clear statement on whether approval will affect only the current year, or result in a permanent increase in the levy. The proposals shall be submitted and approved pursuant to sections 5 and 6 of P.L.1996, c.138 (C.18A:7F-5 and 18A:7F-6).

d. (Deleted by amendment, P.L.2010, c.44)

e. A school district that has not been granted approval to exceed the cap pursuant to subsection c. of this section, may add to its adjusted tax levy in any one of the next three succeeding budget years, the amount of the difference between the maximum allowable amount to be raised by taxation for the current school budget year and the actual amount to be raised by taxation for the current school budget year , provided that the amount to be added in any one budget year pursuant to this subsection does not exceed two percent of the district’s prebudget year adjusted tax levy.

(cf: P.L.2024, c.60, s.2)

4. Section 4 of P.L.2007, c.260 (C.18A:7F-46) is amended to read as follows:

4. a. The State Board of Education shall review and update the core curriculum content standards every five years. The standards shall ensure that all children are provided the educational opportunity needed to equip them for the role of citizen and labor market competitor.

The Commissioner of Education shall develop and establish, through the report issued pursuant to subsection b. of this section, efficiency standards which define the types of programs, services, activities, and materials necessary to achieve a thorough and efficient education.

b. By September 1 of 2010 and by September 1 every three years thereafter, the Governor, after consultation with the commissioner, shall recommend to the Legislature through the issuance of the Educational Adequacy Report for the three school years to which the report is applicable revisions to:

(1) the base per pupil amount based upon the core curriculum content standards established pursuant to subsection a. of this section;

(2) the per pupil amounts for full-day preschool;

(3) the weights for grade level, county vocational school districts, at-risk pupils, bilingual pupils, and combination pupils;

(4) the cost coefficients for security aid and transportation aid;

(5) the State average classification rate for general special education services pupils and for speech-only pupils;

(6) the excess cost for general special education services pupils and for speech-only pupils; [and]

(7) the extraordinary special education aid thresholds established pursuant to subsection b. of section 13 of P.L.2007, c.260 (C.18A:7F-55);

(8) the equalized total tax rate and adequacy spending thresholds to be used for the purposes of determining whether a school district shall be exempt from a reduction in State school aid pursuant to section 9 of P.L. , c. (C. ) (pending before the Legislature as this bill); and

(9) if deemed appropriate, the use of inflationary measures, other than the CPI, to adjust the base per pupil amount, the per pupil amounts for full-day preschool, the excess costs for general special education services pupils and for speech-only pupils, or the cost-coefficients for security aid and transportation aid, provided that the recommended inflationary measures are equal to or greater than the CPI, are recognized, evidence-based measures of cost change for the type of good or service, and have been disclosed in the Educational Adequacy Report.

The base per pupil amount, the per pupil amounts for full-day preschool, the excess costs for general special education services pupils and for speech-only pupils, and the cost-coefficients for security aid and transportation aid shall be adjusted by the CPI, or other inflationary measures disclosed in the most recently issued Educational Adequacy Report, for each of the two school years following the first school year to which the report is applicable.

The amounts published in the final version of the Educational Adequacy Report issued pursuant to this subsection shall be deemed approved for the three successive fiscal years beginning from the subsequent July 1, unless between the date of transmittal and the subsequent November 30, the Legislature adopts a concurrent resolution stating that the Legislature is not in agreement with all or any specific part of the report. The concurrent resolution shall advise the Governor of the Legislature's specific objections to the report and shall direct the commissioner to submit to the Legislature a revised report which responds to those objections by January 1.

c. The Educational Adequacy Report issued pursuant to subsection b. of this section may also include a commissioner-initiated review of any other element, variable, or metric used to determine allocations of State school aid pursuant to P.L.2007, c.260 (C.18A:7F-43 et al.). The commissioner shall publicly announce the intent to conduct a review pursuant to this section at the time that the decision to conduct the review is made and prior to initiating the review. An element, variable, or metric that is the subject of a commissioner-initiated review pursuant to this subsection shall not be decreased pursuant to the review.

During a year in which the report required pursuant subsection b. of this section is to be issued, the commissioner shall make a draft of the report available for public comment for a period of no less than 30 days.

During the public comment period, the commissioner shall ensure that members of the public are afforded the opportunity to provide remarks on, and recommend revisions to, the draft report at public hearings to be held at various locations across the State, as well as through the submission of written and electronic testimony.

After consideration of comments received through the public comment period, the commissioner shall issue a final version of the report.

(cf: P.L.2007, c.260, s.4)

5. Section 13 of P.L.2007, c.260 (C.18A:7F-55) is amended to read as follows:

13. a. Special education categorical aid for each school district and county vocational school district shall be calculated as follows:

SE = (RE x SEACR x AEC x 1/3) x GCA

where

RE is the resident enrollment of the school district or county vocational school district;

SEACR is the State average classification rate for general special education services pupils;

AEC is the excess cost for general special education services pupils; and

GCA is the geographic cost adjustment as developed by the commissioner.

For the 2008-2009 school year the excess cost shall be $10,898 for general special education services pupils. The excess cost amount shall be adjusted by the CPI in the 2009-2010 and 2010-2011 school years as required pursuant to subsection b. of section 4 of [this act] P.L.2007, c.260 (C.18A:7F-46). For subsequent school years, the excess cost amount shall be established in the Educational Adequacy Report, with the amount adjusted by the CPI for each of the two school years following the first school year to which the report is applicable.

b. Extraordinary special education aid for an individual classified pupil shall be available when the student is educated in a general education classroom, special education program, including but not limited to a resource program or special class program, or any combination of general education and special education programs and services, subject to the requirements and thresholds set forth in this section.

(1) In those instances in which a pupil is educated in an in-district public school program with non-disabled peers, whether run by a public school or by a private school for the disabled, and the cost of providing direct instructional and support services for an individual classified pupil exceeds [$40,000] $35,000, for those direct instructional and support services costs in excess of [$40,000] $35,000 a district shall receive extraordinary special education State aid equal to 90% of the amount of that excess in accordance with the provisions of paragraph (4) of this subsection.

(2) In those instances in which a pupil is educated in a separate public school program for students with disabilities and the cost of providing direct instructional and support services for an individual classified pupil exceeds $40,000, for those direct instructional and support services costs in excess of $40,000 a district shall receive extraordinary special education State aid equal to 75% of the amount of that excess in accordance with the provisions of paragraph (4) of this subsection.

(3) In those instances in which a pupil is educated in a separate private school for students with disabilities and the tuition for an individual classified pupil exceeds $55,000, for tuition costs in excess of $55,000 a district shall receive extraordinary special education State aid equal to 75% of the amount of that excess in accordance with the provisions of paragraph (4) of this subsection.

(4) Extraordinary special education State aid for an individual classified pupil shall be calculated as follows:

EA = ((ADC-[$40,000] $35,000) x .90) + (((AIC - $40,000) + (ASC - $55,000)) x .75)

where

ADC equals the district's actual cost for the direct instructional and support services in an in-district public school program as set forth in paragraph (1) of this subsection;

AIC equals the district's actual cost for direct instructional and support services in a separate public school program as set forth in paragraph (2) of this subsection; and

ASC equals the district's actual cost for tuition paid to a separate private school as set forth in paragraph (3) of this subsection.

(5) The receipt of extraordinary special education State aid for an individual classified pupil shall be conditioned upon a demonstration by the district that the pupil's Individualized Education Plan requires the provision of intensive services, pursuant to factors determined by the commissioner.

c. In order to receive funding pursuant to this section, a district shall file an application with the department that details the expenses incurred on behalf of the particular classified pupil for which the district is seeking reimbursement. Additional State aid awarded for extraordinary special education costs shall be recorded by the district as revenue in the current school year and paid to the district in the subsequent school year.

d. A school district may apply to the commissioner to receive emergency special education aid for any classified pupil who enrolls in the district prior to March of the budget year and who is in a placement with a cost in excess of [$40,000 or $55,000, as applicable] the applicable extraordinary special education aid thresholds enumerated in subsection b. of this section. The commissioner may debit from the student's former district of residence any special education aid which was paid to that district on behalf of the student.

e. The department shall review expenditures of federal and State special education aid by a district in every instance in which special education monitoring identifies a failure on the part of the district to provide services consistent with a pupil's Individualized Education Plan.

f. The commissioner shall commission an independent study of the special education census funding methodology to determine if adjustments in the special education funding formulas are needed in future years to address the variations in incidence of students with severe disabilities requiring high cost programs and to make recommendations for any such adjustments. The study and recommendations shall be completed by June 30, 2010.

g. A school district may apply to the commissioner to receive additional special education categorical aid if the district has an unusually high rate of low-incidence disabilities, such as autism, deaf/blindness, severe cognitive impairment, and medically fragile. In applying for the aid the district shall: demonstrate the impact of the unusually high rate of low-incidence disabilities on the school district budget and the extent to which the costs to the district are not sufficiently addressed through special education aid and extraordinary special education aid; and provide details of all special education expenditures, including details on the use of federal funds to support those expenditures.

h. Notwithstanding the provisions of any other law to the contrary, a school district’s receipt of extraordinary special education aid shall be equal to a percent of the amount calculated pursuant to paragraph (4) of subsection b. of this section according to the following schedule:

(1) 80 percent in the first full school year following the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill);

(2) 85 percent in the second full school year following the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill);

(3) 90 percent in the third full school year following the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill);

(4) 95 percent in the fourth full school year following the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill);

(5) 100 percent in the fifth full school year following the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill) and in each school year thereafter.

i. Notwithstanding the provisions of any law or regulation to the contrary, the amount of extraordinary special education aid received by a district pursuant to this section shall not be included in the calculation of a district’s tax levy growth limitation pursuant to section 3 of P.L.2007, c.62 (C.18A:7F-38) or in the total operating budget as used for the calculation of reduction adjustment aid pursuant to section 8 of P.L. , c. (C. ) (pending before the Legislature as this bill).

(cf: P.L.2007, c.260, s.13)

6. Section 4 of P.L.2018, c.67 (C.18A:7F-68) is amended to read as follows:

4. a. Notwithstanding the provisions of P.L.2007, c.260 (C.18A:7F-43 et al.) or any other law to the contrary, in the 2019-2020 through 2024-2025 school years, a school district or county vocational school district in which the State aid differential calculated is negative shall receive State school aid in an amount equal to the sum of the district's State aid in the prior school year plus the district's proportionate share of the sum of any increase in State aid included in the annual appropriations act for that fiscal year and the total State aid reduction pursuant to subsection b. of this section based on the district's State aid differential as a percent of the Statewide total State aid differential among all school districts and county vocational school districts for which the State aid differential is negative. Any increase in State aid pursuant to this subsection shall first be allocated to equalization aid, followed by special education categorical aid, security categorical aid, and transportation aid, except that no category shall exceed the total amount as calculated in accordance with the provisions of sections 11, 13, 14, and 15 of P.L.2007, c.260 (C.18A:7F-53, C.18A:7F-55, C.18A:7F-56, and C.18A:7F-57), respectively.

b. Except as provided pursuant to subsection c. of this section, and notwithstanding the provisions of P.L.2007, c.260 (C.18A:7F-43 et al.) or any other law to the contrary, in the 2019-2020 through 2024-2025 school years, a school district or county vocational school district in which the State aid differential is positive shall receive State school aid in an amount equal to the district's State aid in the prior school year minus a percent of the State aid differential according to the following schedule:

(1) 13 percent in the 2019-2020 school year;

(2) 23 percent in the 2020-2021 school year;

(3) 37 percent in the 2021-2022 school year;

(4) 55 percent in the 2022-2023 school year;

(5) 76 percent in the 2023-2024 school year; and

(6) 100 percent in the 2024-2025 school year.

c. (1) An SDA district that 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 recent available calendar year and is spending below adequacy as calculated pursuant to section 1 of P.L.2018, c.67 (C.18A:7F-70) shall not be subject to a reduction in State aid pursuant to subsection b. of this section.

(2) An SDA district that 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 recent available calendar year and is spending above adequacy as calculated pursuant to section 1 of P.L.2018, c.67 (C.18A:7F-70) shall be subject to a reduction not to exceed the amount by which the district is spending above adequacy multiplied by the corresponding percentage included in subsection b. of this section.

(3) A school district, other than an SDA district, that 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 recent available calendar year and is spending at least 10 percent below adequacy as calculated pursuant to section 1 of P.L.2018, c.67 (C.18A:7F-70) shall not be subject to a reduction in State aid pursuant to subsection b. of this section.

(4) [A] Except as provided in section 8 of P.L. , c. (C. ) (pending before the Legislature as this bill), a school district that is a participating district under an application that is approved for a grant pursuant to subsection a. of section 4 of P.L.2021, c.402 (C.18A:13-47.4) or a school district that is a participating district under an application that receives preliminary approval pursuant to subsection b. of section 4 of P.L.2021, c.402 (C.18A:13-47.4) and that has a State aid differential that is positive may elect to receive State school aid in an amount equal to the district's State aid in the prior school year minus a percent of the State aid differential according to the following schedule:

(a) 30 percent in the 2021-2022 school year;

(b) 37 percent in the 2022-2023 school year;

(d) 55 percent in the 2024-2025 school year;

(e) 65.5 percent in the 2025-2026 school year;

(f) 76 percent in the 2026-2027 school year;

(g) 88 percent in the 2027-2028 school year; and

(h) 100 percent in the 2028-2029 school year.

A school district with a State aid differential that is positive, which is a participating district under an application that is approved for a grant pursuant to subsection a. of section 4 of P.L.2021, c.402 (C.18A:13-47.4) or that receives preliminary approval under subsection b. of section 4 of P.L.2021, c.402 (C.18A:13-47.4) but has not created or joined a limited purpose or all purpose regional school district within two years following the grant application approval or preliminary approval shall not be eligible to receive State aid according to the schedule enumerated in this paragraph.

As used in this paragraph, "participating district" means a school district whose board of education by resolution certifies a commitment to participate in a feasibility study submitted as part of an application under the grant program established pursuant to section 2 of P.L.2021, c.402 (C.18A:13-47.2).

(5) Notwithstanding the provisions of section 32 of P.L.1996, c.138 (C.18A:7F-32) or any other law, rule, or regulation to the contrary, a school district that is a regional school district created following the approval of a grant application pursuant to section 4 of P.L.2021, c.402 (C.18A:13-47.4) shall, from the first full school year following the creation of the regional school district through the 2028-2029 school year, receive State school aid in an amount that is the greater of:

(a) the amount of State school aid that the newly created regional school district would receive as a regional school district; or

(b) the sum of the amount of State school aid received by each school district constituting the newly created regional school district prior to the creation of such regional school district.

(6) A school district shall not be not be subject to a reduction in State aid pursuant to this section provided that:

(a) the district is a regional school district consisting of at least five constituent school districts;

(b) the district has mitigated costs of regionalization, as determined by the Commissioner of Education;

(c) for the most recent school year for which data is available, the district's administrative costs per pupil are 15 percent lower than the Statewide average administrative costs per pupil for regional school districts; and

(d) the district's general fund tax levy has been increased by the maximum amount permitted pursuant to section 3 of P.L.2007, c.62 (C.18A:7F-38) in each of the last five school years.

A school district that is exempt from a reduction in State aid pursuant to paragraph (6) of subsection c. of this section shall provide courtesy busing to pupils who reside in the district, provided that the district was providing courtesy busing prior to the school year in which it is exempt from a reduction in State aid.

d. Any decrease in State aid pursuant to subsection b. or c. of this section shall first be deducted from a school district's or county vocational school district's allotment of adjustment aid. Any additional reduction shall be deducted from the school district's or county vocational school district's allotment of non-SFRA aids, followed by equalization aid, special education categorical aid, security aid, and transportation aid.

e. Any remaining adjustment aid or non-SFRA aids shall be reallocated to other State aid categories in a manner to be determined by the commissioner.

(cf: P.L.2023, c.140, s.1)

7. Section 5 of P.L.2018, c.67 (C.18A:7F-69) is amended to read as follows:

5. a. In the 2019-2020 school year, and in each school year thereafter, a county vocational school district shall receive vocational expansion stabilization aid in such an amount to ensure that the district receives the greater of the amount of State aid calculated pursuant to the provisions of P.L.2018, c.67 (C.18A:7F-67 et al.) or the sum of the district's State aid received in the 2017-2018 school year.

b. In the first full school year following the date of enactment of P.L. , c. (C. ) (pending before the Legislature as this bill) and each school year thereafter, the amount of vocational expansion stabilization aid (VESA) received by a county vocational school district shall be adjusted to accommodate growth in resident enrollment. Provided that the difference between the resident enrollment in the budget year and the resident enrollment in the prebudget year is positive, the adjustment for resident enrollment shall be calculated as follows:

VESA adjustment = ENRG x VA x GCA

where

ENRG means the difference between the resident enrollment in the budget year and the resident enrollment in the prebudget year;

VA means the base per pupil amount established pursuant to section 7 of P.L.2007, c.260 (C.18A:7F-49) multiplied by 0.31; and

GCA is the geographic cost adjustment as developed by the commissioner.

A county vocational school district for which the difference between the resident enrollment in the budget year and the resident enrollment in the prebudget year is less than or equal to zero shall receive the amount of vocational expansion stabilization aid determined pursuant to subsection a. of this section. Nothing in this section shall be construed as allowing a district’s allocation of vocational expansion stabilization aid to be decreased from the amount of vocational expansion stabilization aid received in the prebudget year.

(cf: P.L.2018, c.67, s.5)

8. (New section) a. As used in this section, “total operating budget” means the sum of a district’s general fund revenues from local sources, State sources, federal sources, and other sources. Total operating budget shall not include withdrawals made by the district from any reserve account established pursuant to section 6 of P.L.2007, c.62 (C.18A:7F-41) or reimbursements paid to the district for extraordinary special education aid pursuant to section 13 of P.L.2007, c.260 (C.18A:7F-55).

b. Notwithstanding the provisions of P.L.2007, c.260 (C.18A:7F-43 et al.), P.L.2018, c.67 (C.18A:7F-67 et al.), or any other provision of law, rule, or regulation to the contrary, and beginning with the first full school year following the date of enactment of P.L. , c. (C. ) (pending before the Legislature as this bill) and each school year thereafter, a school district shall receive an allocation of reduction adjustment aid to ensure that the amount of State school aid provided to a school district shall not be decreased by more than two percent of the district’s prebudget year total operating budget. In no school year shall a school district receive an amount of State school aid that has been reduced from the amount of aid disbursed in the prebudget year by an amount that exceeds two percent of the district’s prebudget year total operating budget.

9. (New section) a. Notwithstanding the provisions of P.L.2007, c.260 (C.18A:7F-43 et al.), P.L.2018, c.67 (C.18A:7F-67 et al.), or any other law, rule, or regulation to the contrary, a school district, other than a regional school district, shall not be subject to a reduction in State school aid in any school year, beginning with the first full school year following the date of enactment of P.L. , c. (C. ) (pending before the Legislature as this bill) and each school year thereafter, if:

(1) in the case of an SDA district, the district 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 recent available calendar year and the district is spending below adequacy as calculated pursuant to section 1 of P.L.2018, c.67 (C.18A:7F-70); or

(2) in the case of a school district other than an SDA district, the district 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 recent available calendar year and is spending at least 10 percent below adequacy as calculated pursuant to section 1 of P.L.2018, c.67 (C.18A:7F-70).

b. Notwithstanding the provisions of P.L.2007, c.260 (C.18A:7F-43 et al.), P.L.2018, c.67 (C.18A:7F-67 et al.), or any other law, rule, or regulation to the contrary, a regional school district shall not be subject to a reduction in State school aid in any school year, beginning with the first full school year following the date of enactment of P.L. , c. (C. ) (pending before the Legislature as this bill) and each school year thereafter, if 50 percent or more of the constituent districts or municipalities of the regional school district meet either of the following criteria:

c. Notwithstanding the provisions of P.L.2007, c.260 (C.18A:7F-43 et al.), P.L.2018, c.67 (C.18A:7F-67 et al.), or any other law, rule, or regulation to the contrary, an SDA district that is spending above adequacy as calculated pursuant to section 1 of P.L.2018, c.67 (C.18A:7F-70) shall not be subject to a reduction in State aid that exceeds the amount by which the district is spending above adequacy.

10. (New section) In developing the Educational Adequacy Report to next be issued following the date of enactment of P.L. , c. (C. ) (pending before the Legislature as this bill), the Commissioner of Education shall engage a diverse group of stakeholders to review:

a. the calculation of local share pursuant to section 10 of P.L.2007, c.260 (C.18A:7F-52) and whether the metrics used in that calculation are best able to estimate a district’s ability to pay for the costs of education through local revenue, in addition to ensuring that the calculation of local share accurately assesses a district’s ability to levy funds on the basis of residents’ purchasing power;

b. the impact and feasibility of using multi-year averages in the calculation of local share pursuant to section 10 of P.L.2007, c.260 (C.18A:7F-52) in place of single-year values of equalized valuation and district income;

c. the feasibility of implementing a tier-based model of funding for determining special education aid pursuant to section 13 of P.L.2007, c.260 (C.18A:7F-55) and whether the census-based model of special education funding is an appropriate methodology;

d. the abilities of the Department of Education and school districts to predict and anticipate State school aid amounts from year to year;

e. possible methods of improving upon the existing preschool funding methodology; and

f. possible adjustments to deadlines pertaining to the development, submission, and adoption of school district budgets.

The commissioner shall publish a summary of the findings and recommendations resulting from the reviews in the Educational Adequacy Report.

11. Sections 1 and 8 through 10 of this act shall take effect immediately. Sections 2, 3, 5, 6, and 7 of this act shall take effect immediately and shall first apply to the first full school year following the date of enactment. Section 4 of this act shall take effect immediately and shall first apply to the Educational Adequacy Report to next be issued following the date of enactment.

STATEMENT

This bill makes various changes to State school aid, including the local tax levy cap, extraordinary special education aid, and vocational expansion stabilization aid, and establishes reduction adjustment aid. The bill also includes certain additional requirements for the issuance of the Educational Adequacy Report.

The bill requires the Department of Education to make available on the department’s Internet website the calculation of aid payable to each school district in the succeeding year in a user-friendly manner, including explanations of the variables used to determine the district’s aid.

Under current law, a school district is generally limited to a two percent increase in any single year to its local tax levy, plus adjustments for increases in enrollment, health care costs and pension contributions. The bill would amend this tax levy increase cap and allow a district to increase its tax levy up to the lesser of: the district’s local share, which is the amount that the current school funding formula determines that a district can afford to raise locally; or a seven percent increase from the prior year tax levy. However, SDA districts would be permitted to increase their tax levies up to the district’s local share. Any district, including SDA districts, for which the tax levy is already greater than the local share would be permitted to increase its tax levy by two percent of the prebudget year tax levy.

Under current law, a school district is reimbursed for certain special education costs in the form of extraordinary special education aid. Eligible costs are: 90 percent of costs in excess of $40,000 for students educated in an in-district public school program with non-disabled peers; 75 percent of costs in excess of $40,000 for students educated in a separate public school program for students with disabilities; and 75 percent of tuition costs in excess of $55,000 for students educated in a separate private school for students with disabilities. The bill decreases the cost threshold from $40,000 to $35,000 for students educated in public school programs that are integrated into the classroom. The bill also provides for a gradual phase-in of full funding of extraordinary special education aid over the span of five years.

Additionally, the bill provides that, for a county vocational school district that receives vocational expansion stabilization aid, the amount of vocational expansion stabilization aid received is to be adjusted to allow for increases in resident enrollment. The adjustment is to equal the number of additional students enrolled in the district multiplied by the additional cost per pupil for county vocational school districts and the geographic cost adjustment.

The bill also establishes certain municipal overburden protections to prevent a school district from receiving a reduction in State 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 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.

The bill also establishes reduction adjustment aid to ensure that the amount of State school aid provided to a school district is not to be decreased by more than two percent of the district’s prebudget year total operating budget. The total operating budget is defined as the sum of a district’s general fund revenues from local sources, State sources, federal sources, and other sources, less any withdrawals from reserve accounts and reimbursements for extraordinary special education aid.

Additionally, the bill makes certain changes to the Educational Adequacy Report, which is submitted to the Legislature every three years to update the various parameters used to calculate State aid to school districts. Pursuant to the bill, the Commissioner of Education may initiate a review of certain elements of the school funding formula, including the metrics for adjusting costs in intervening years. Additionally, the bill requires that a draft of the Educational Adequacy Report be made available for public comment for at least 30 days, during which time members of the public may provide remarks on the draft report at public hearings to be held at various locations across the State and through the submission of written and electronic testimony.

Finally, during the development of the next Educational Adequacy Report following enactment of this bill, the commissioner is to engage a diverse group of stakeholders to review and make recommendations concerning: the calculation of a district’s local share and whether the metrics used are best able to estimate a district’s potential adjusted tax levy; the impact and feasibility of using multi-year averages in the calculation of local share; the feasibility of implementing a tier-based model of funding for determining special education categorical aid; the abilities of the Department of Education and school districts to predict and anticipate State school aid amounts from year to year; and possible methods of improving upon the existing preschool funding methodology.