Limits and clarifies use of cap banking by school districts.

A1245

ASSEMBLY, No. 1245

STATE OF NEW JERSEY

222nd LEGISLATURE

�

PRE-FILED FOR INTRODUCTION IN THE 2026 SESSION

Sponsored by:

Assemblyman MICHAEL INGANAMORT

District 24 (Morris, Sussex and Warren)

Assemblywoman DAWN FANTASIA

District 24 (Morris, Sussex and Warren)

SYNOPSIS

���� Limits and clarifies use of cap banking by school
districts.

CURRENT VERSION OF TEXT

���� Introduced Pending Technical Review by Legislative
Counsel.

��

An Act
concerning increases in the adjusted tax levy of school
districts and amending P.L.2007, c.62.

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

���� 1.��� 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.

���� (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
subject to the provisions of paragraphs (2) and (3)
of this subsection
, 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.

����
(1)�� For the purposes of
determining 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, a school district may consider
in its calculations a decrease in the school district�s adjusted tax levy for
that school budget year.� The amount of the difference may be added to the
school district�s adjusted tax levy in any one of the next three succeeding
budget years, subject to the provisions of paragraphs (2) and (3) of this
subsection.

����
(2)�� A school district
that adds an amount to its adjusted tax levy for a school budget year that is
more than the allowable amount authorized pursuant to section 3 of P.L.2007,
c.62 (C.18A:7F-38), as permitted under the provisions of this subsection, shall
not under any circumstance add an amount to its adjusted tax levy that
represents an increase of more than six percent as compared the school
district�s adjusted tax levy in the immediately preceding school budget year.

����
(3)�� Notwithstanding any
provision of this subsection to the contrary, a school district that adds an
amount to its adjusted tax levy for a school budget year that is more than the
allowable amount authorized pursuant to section 3 of P.L.2007, c.62 (C.18A:7F-38),
as permitted under the provisions of this subsection, and subject to the
provisions of paragraph (2) of this subsection, shall not add an amount to its
adjusted tax levy that is more than the allowable amount authorized pursuant to
section 3 of P.L.2007, c.62 (C.18A:7F-38) in any of the next two succeeding
budget years.�

(cf: P.L.2011, c.202, s.3)

���� 2.��� This act shall take
effect immediately.

STATEMENT

���� This bill clarifies current
law to provide that a school district may consider in its calculations a
decrease in the school district�s adjusted tax levy for a school budget year
for the purposes of determining 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.�
Under current law, the amount of that difference may be added to the school
district�s adjusted tax levy above the maximum allowable amount permitted by
law in any one of the next three succeeding budget years, which is a practice
commonly referred to as �cap banking.�

���� The bill also amends current
law, with respect to �cap banking,� to provide that that under no circumstances
will a school district be permitted to add an amount to its adjusted tax levy
that represents an increase of more than six percent as compared to the school
district�s adjusted tax levy in the immediately preceding school budget year.�
In other words, this bill will prohibit a school district from using the �cap
banking� provision of law to increase its adjusted tax levy more than six
percent in any school budget year.

���� Finally, the bill amends
current law to provide that a school district that adds an amount to its
adjusted tax levy that is more than the allowable amount permitted by law in a
school budget year will not be permitted to do so in any of the next two succeeding
school budget years.� In other words, the bill will eliminate any amount that
remains in the school district�s �cap bank� in any year that the school
district uses the �cap banking� provision of law, thereby requiring the school
district to build up its �cap bank� in order to utilize the �cap banking�
provision of law in future school budget years.

���� The intent of this legislation
is to provide school districts with an appropriate amount of flexibility when
utilizing the �cap banking� provision of law, but also to prevent school
districts from using their �cap bank� to increase the adjusted tax levy by an
exorbitant amount in any given school budget year.� By placing sensible
limitations on the use of �cap banking,� this bill provides assurances to New
Jersey residents that they will not be subject to burdensome property tax
increases due to a school district�s use of its �cap bank.�