SENATE BUDGET AND APPROPRIATIONS COMMITTEE
STATEMENT TO
SENATE COMMITTEE SUBSTITUTE FOR
SENATE, No. 3917
STATE OF NEW JERSEY
DATED: JUNE 26, 2025
The Senate Budget and Appropriations Committee reports favorably a Senate Committee Substitute for Senate Bill No. 3917.
As reported, this committee substitute makes various changes to extraordinary special education aid and the Educational Adequacy Report. The substitute also establishes the Special Education Funding Review Task Force.
The committee substitute 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. The information is required to be posted each year within two days of the Governor’s Budget Message.
Additionally, the committee substitute 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 substitute, 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 between reports. Additionally, the substitute 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.
During the development of the next Educational Adequacy Report following enactment of this committee substitute, 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 abilities of the Department of Education and school districts to predict and anticipate State school aid amounts from year to year; possible methods of improving upon the existing preschool funding methodology; and possible adjustments to deadlines pertaining to the development, submission, and adoption of school district budgets. The substitute requires the commissioner to publish a summary of the findings and recommendations in the Educational Adequacy Report.
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 provided in state, with the percentage covered fluctuating from year to year. The committee substitute 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 committee substitute also establishes certain municipal overburden protections to prevent a school district from receiving a reduction in State school aid. Pursuant to the amended 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.
Finally, the committee substitute establishes the Special Education Funding Review Task Force for the purpose of assessing the effectiveness of State aid provided to support special education costs, examining the possibility of a tier-based model for special education funding, making recommendations regarding the implementation of a tier-based funding model, and providing recommendations for responses to changes in special education revenues, including federal revenues. The task force is to consist of 11 members, each of whom is to have a background in, or special knowledge of, the legal, policy, and administrative aspects of special education in New Jersey. The task force is to issue a final report detailing its findings and recommendations to the Governor and the Legislature no later than one year after the organization of the task force.
FISCAL IMPACT:
The Office of Legislative Services (OLS) finds that this bill would result in an indeterminate increase in State costs. Several provisions of the bill would likely have no or only marginal associated costs, 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.
However, the provision of the bill requiring 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. The OLS notes that the appropriation of $420.0 million included in the previous three annual appropriations acts has resulted in a smaller percentage of eligible costs being reimbursed in each successive year.
Additionally, the OLS notes that there are potential State cost increases associated with the codification of municipal overburden protections that ensure that school districts meeting certain criteria either: 1) do not experience a reduction in State school aid; or 2) experience limited reductions in State school aid. The municipal overburden protections included in the bill are essentially an extension of the same protections that existed under P.L.2018, c.67, commonly known as “S2.” In the last year that municipal overburden protections were in place, 10 school districts qualified, increasing State costs by $57.1 million.