LEGISLATIVE FISCAL ESTIMATE
ASSEMBLY, No. 5575
STATE OF NEW JERSEY
220th LEGISLATURE
DATED: JUNE 26, 2023
SUMMARY
Synopsis: Establishes exemption from State school aid reductions for certain
school districts.
Types of Impact: State expenditure increases in FY 2024 and FY 2025;
Revenue increases to certain school districts in FY 2024 and FY 2025.
Agencies Affected: Department of Education and certain school districts.
Office of Legislative Services Estimate
Fiscal Impact FY 2024 FY 2025 FY 2026
State Expenditure Increase $6,763,723 $8,900,000 $0
School District Revenue Increase $6,763,723 $8,900,000 $0
 The Office of Legislative Services (OLS) projects that the limited exemption from State school
aid reductions would increase State expenditures and the revenue of certain school districts by
$6,763,723 in FY 2024 and $8.9 million in FY 2025. No fiscal impact would occur thereafter.
Currently, only the Freehold Regional School District would qualify for the exemption.
 As a caveat, the OLS estimate assumes that the Department of Education would implement the
bill relative to the FY 2023 baseline and in addition to P.L.2023, c.32, which offset two-thirds
of the FY 2024 State school aid reductions to certain school districts, including the Freehold
Regional School District, under pre-existing law.
BILL DESCRIPTION
Under current law, school districts’ annual State school aid will be calculated in accordance
with the formula stipulated in the School Funding Reform Act of 2008 starting in FY 2026.
During the current transitional period, school districts whose State school aid is higher than
under the formula in the 2008 law are subject to graduated annual school aid reductions.
This bill would exempt certain school districts from the graduated reductions during the
transitional period through FY 2025. The exemption would apply to regional school districts
comprised of five or more constituent school districts that: have mitigated the costs of
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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regionalization; spend 15 percent less on administration per pupil than the Statewide average
for regional school districts; and have increased the district’s general fund tax levy by the
maximum permitted by statute in each of the last five years. As a condition of being exempt
from State aid reductions, eligible districts would be prohibited from eliminating courtesy
busing to students who reside in the district.
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
The OLS estimates that the bill would increase State school aid expenditures and the revenue
of certain school districts by $6,763,723 in FY 2024 and $8.9 million in FY 2025. There would
be no fiscal impact thereafter. As a caveat, the OLS assumes that the Department of Education
would implement the bill relative to the FY 2023 baseline and in addition to P.L.2023, c.32.
While the OLS cannot ascertain which school districts would meet the criterion of mitigating
costs of regionalization, based on the other three criteria for eligibility, the OLS determines that
this bill would currently apply only to Freehold Regional School District. However, additional
school districts may qualify in FY 2025, resulting in additional concurrent increases in school
district revenues and State expenditures.
According to the Department of Education, Freehold Regional School District is to incur a
reduction of $6,763,723, or 22.1 percent, in its FY 2024 State school aid, absent the mitigating
effects of P.L.2023, c.32. The district’s State aid would fall from $30.6 million in FY 2023 to
$23.8 million in FY 2024.
The bill would thus increase FY 2024 State school aid expenditures and FY 2024 Freehold
Regional School District revenue by $6,763,723. Because the data to run the FY 2025 school
funding formula are not yet available, the OLS estimates that the amount of State aid needed to
maintain the district’s FY 2023 State aid in FY 2025 would approximate $8.9 million, based on
FY 2024 school aid data. The bill would be without effect starting in FY 2026.
The OLS notes that the bill’s fiscal impacts in FY 2024 could decrease to $2,299,666 if the
Department of Education were to interpret the bill in conjunction with P.L.2023, c.32. That law
provided Supplemental Stabilization Aid to school districts that were to receive reduced school aid
in FY 2024. The one-time payments equaled two-thirds of the FY 2024 State school aid reductions
with Freehold Regional School District receiving $4,464,057. Supplemental Stabilization Aid is
not available for FY 2025 under current law.
Section: Education
Analyst: Jessica S. Rueb
Assistant Research 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-68