LEGISLATIVE FISCAL ESTIMATE
ASSEMBLY, No. 5577
STATE OF NEW JERSEY
220th LEGISLATURE
DATED: NOVEMBER 9, 2023
SUMMARY
Synopsis: Requires five-year average of equalized property valuation be used in
calculation of local share under State school funding formula.
Type of Impact: State cost increase; local revenue increases and decreases.
Agencies Affected: Department of Education; school districts.
Office of Legislative Services Estimate
Fiscal Impact Year 1 Year 2 and thereafter
State Cost Increase $239.1 million Indeterminate
School District Revenue - $3.2 million to $13.9 million
Indeterminate
Increases and Decreases per school district
 The Office of Legislative Services (OLS) estimates that this bill would result in an increase in
State costs of approximately $239.1 million in the 2024-2025 school year. School districts
would experience estimated changes in revenue ranging from a decrease of $3.2 million to an
increase of $13.9 million, with actual amounts varying by school district.
BILL DESCRIPTION
This bill makes changes to the calculation of a school district’s local share in determining the
district’s State school aid by requiring the use of a five-year average amount of equalized property
valuation in that calculation. Local share is a component in calculating a school district’s allotment
of equalization aid, which is the largest category of State Aid for local school districts. Pursuant
to the current school funding formula law, a district’s local share is the amount that the formula
determines a district can afford to raise locally for educational purposes. To determine a school
district’s equalization aid allotment, the local share amount is subtracted from the district’s
adequacy budget, which is the formula’s calculation of the amount of revenue a school district
requires to provide a thorough and efficient education.
Office of Legislative Services Legislative Budget and Finance Office
State House Annex Phone (609) 847-3105
P.O. Box 068 Fax (609) 777-2442
Trenton, New Jersey 08625 www.njleg.state.nj.us
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Current law calculates a school district’s local share by multiplying the district’s prebudget
year equalized valuation by the Statewide property value rate, divided by two, and adding this to
the product of the district’s income and the Statewide income rate, divided by two. This bill
amends the calculation to use the district’s average equalized valuation over the preceding five
school years instead of the district’s prebudget year equalized valuation.
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
The OLS estimates that this bill would result in an increase in State costs of approximately
$239.1 million in the 2024-2025 school year. The OLS bases its estimate on information available
for the 2023-2024 school year, including per pupil amounts, district income, and geographic cost
multipliers, as well as equalized property valuation data over the past five school years. The OLS
assumed in its calculations that the State would provide additional funds for State Aid equal to the
amount of additional funds provided in the 2023-2024 school year, multiplied by the average
growth in funding throughout the implementation of P.L.2018, c.67 (commonly referred to as
“S2”). As a result, the OLS estimates that the bill would result in an overall increase in aid to
school districts of approximately $239.1 million in the 2024-2025 school year, compared to the
amount of aid that school districts might expect to receive in the same year under current law.
The impact of the bill on each school district would differ depending on the variation in
property values for that district from year to year. The OLS’ analysis of the bill indicates that, in
the 2024-2025 school year, 296 school districts would receive more State Aid compared to the
amounts the districts might expect to receive under current law, 16 school districts would receive
less aid under the bill, and the remaining school districts would see no change in their State Aid
amounts. The largest reduction in State Aid to a single school district would be $3.3 million,
which represents a 3.98 percent reduction in that district’s aid amount. The largest increase in
State Aid to a single school district would be $13.9 million, which represents a 52.57 percent
increase in that district’s aid amount. The average school district would receive an increase of
approximately $419,000, or 2.28 percent, in State Aid.
The OLS notes that certain factors used in the calculation of State Aid, including per pupil
costs and geographic cost multipliers, are likely to change in the calculation for FY 2025 State
Aid. Additionally, property values, and consequently equalized property valuation amounts, may
change for certain districts. To the degree that these factors change from FY 2024 to FY 2025, the
estimated impact of this bill could also change.
Section: Education
Analyst: Abigail Chambers
Associate Fiscal Analyst
Approved: Thomas Koenig
Legislative Budget and Finance Officer
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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.).


Statutes affected:
Introduced: 18A:7F-52