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A2425 FISCAL ESTIMATE
LEGISLATIVE FISCAL ESTIMATE
ASSEMBLY, No. 2425
STATE OF NEW JERSEY
222nd LEGISLATURE
DATED: JULY 1, 2026
SUMMARY
Synopsis:
Establishes educational service agencies for procuring
custodial and food services in schools and ensures certain employee rights
for affected employees.
Type of Impact:
Potential annual impact on State expenditures and local
school district
expenditures and revenues.
Agencies Affected:
Department of Education; certain school districts.
Office of
Legislative Services Estimate
Fiscal Impact
Annual
State Cost Impact
Indeterminate
Local Cost Impact
Indeterminate
Local Revenue Impact
Indeterminate
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The Office of Legislative Services (OLS) determines that school
districts that join educational service agencies will experience an
indeterminate impact on the annual cost of delivering those services. The
objective of the educational service agencies would be to facilitate cost
savings for the provision of food and custodial services; however, the extent
of any savings is dependent on contract parameters as well as educational
service agency expenses.
�
The OLS also finds the bill could lead to a potential increase in
State expenditures and an equal revenue increase for certain school districts.
The bill stipulates that school districts are not required to undertake any
additional expenditures as a result of implementing the provisions of this
bill. If the savings achieved through the master contracts are not sufficient
to offset the increase in administrative costs of the educational service
agency, the State is required to fund the difference for a five-year
transitional period.
BILL DESCRIPTION
����� This bill mandates the consolidation of procurement of
food and custodial services through educational service agencies established at
the county level. The objective of these educational service agencies would be
to facilitate cost savings through economies of scale, while preserving
school district control over core school district functions.
����� The bill establishes an educational service agency in
each county, which will serve as a cooperative of school districts to contract
for custodial and food services. Membership in an agency will be automatic for
each school district in that county that uses a private contractor with respect
to a covered service, except that in cases in which the district has chosen to
contract for only one type of covered service its membership will be automatic
only for that specific covered service. A member school district may acquire a
contracted service only through the master contract of the educational service
agency. Under the bill, the agency will operate as a cooperative pricing
system.
����� The bill establishes a representative assembly for the
educational service agency that is comprised of one representative from each
member school district. The bill requires the representative assembly to
annually adopt a budget for the ensuing fiscal year, which contains the estimated
cost of providing each service, and submit the budget to the board of directors
for approval. The members of the board of directors would serve without
compensation; however, the members are entitled to reimbursement for all
reasonable and necessary expenses. The board is required to appoint a secretary
and may employ such other persons as are necessary to perform its
administrative duties.
����� Member school districts are required to pay a fee to
the educational service agency which is proportionate to the district�s share
of the total student enrollment of all member districts. The educational
service agency may also contract with nonpublic schools for the provision of
covered services, and each nonpublic school is required to pay a fee to the
educational service agency which is not less than the fee that would be charged
to an equivalently sized member school district.
����� A school district is not required to undertake any
additional expenditures to implement the provisions of this bill, and if the
savings in contract and administrative costs are not sufficient to offset any
additional expenditures, the executive county superintendent will estimate the
difference between the school district�s relevant direct expenditures, adjusted
for inflation, prior to its adhesion to the master contract, and its direct
expenditures as a member school district. The State will pay the difference
during a five-year transition period.
FISCAL ANALYSIS
EXECUTIVE BRANCH
����� None received.
OFFICE OF LEGISLATIVE SERVICES
����� The OLS estimates that the enactment of this bill
would have indeterminate annual impacts on local school district and State
expenditures. By requiring the consolidation of the provision of covered
services through master contracts awarded by county educational service
agencies, the bill aims to reduce the costs to school districts associated with
providing those services. Whether the cost savings achieved through the master
contracts negotiated by an educational service agency would be sufficient to offset
additional expenditures needed for the operation of the agency would be
dependent on a number of factors and would vary from district to district. The
bill would impact an indeterminate number of school districts which already use
a private contractor to provide the covered services, or districts that choose
to join the educational service agency and use the master contracts negotiated
by the agency.
����� The objective of the bill is to achieve a decrease in
cost to school districts associated with providing food and custodial services.
Any school district that contracts with a private provider for these services
at the time of enactment would be required to join the educational service
agency of the district�s county and adhere to the master contracts negotiated
by the educational service agency. By utilizing a cooperative pricing system,
the educational service agency would seek to operate as an economy of scale,
wherein a larger unit, in this case the educational service agency, is able to
obtain cost advantages over a smaller unit, such as an individual school
district. However, the size of the advantage, and therefore the amount of
savings, would vary from district to district based on the size of the
districts, the number of districts and nonpublic schools comprising the
educational service agency, the prior contracts entered into by each district
for the provision of covered services, the terms of newly negotiated master
contracts entered into by the educational service agency, and any
administrative expenditures associated with forming and maintaining an
educational service agency.
����� The fee owed by each school district and nonpublic
school to the educational service agency would be dependent on the size of the
district or school as well as the cost of providing the covered services as
determined by the master contracts awarded by the educational service agency.
The fees owed to an educational service agency by a member district will be
determined by the agency and as such cannot be estimated by the OLS.
����� The board of directors of the educational service
agency is required to employ an individual as its secretary, and may employ any
additional persons as are necessary to perform the administrative duties of the
agency. All such persons are entitled to compensation and the same rights and
benefits as a person holding office, position, or employment under a school
district board of education. In addition to the annual costs associated with
the function of the agency, there may be one-time costs associated with the
formation of the educational service agency. Under the bill, any administrative
employee whose position is eliminated due to the implementation of the bill is
entitled to terminal leave compensation. An educational service agency will
determine the rate of compensation for any employees of the agency and any
additional expenses of the agency will be determined by the agency, and as such
cannot be estimated by the OLS.
����� The OLS also finds the bill could lead to a potential
increase in State expenditures and an equal revenue increase for certain school
districts. The bill stipulates that school districts are not required to
undertake any additional expenditures as a result of implementing the
provisions of this bill. If the savings achieved through the master contracts
are not sufficient to offset the increase in administrative costs of the
educational service agency, the State is required to fund the difference for a
five-year transitional period. The amount received by a district would be
determined by the executive county superintendent by estimating the difference
between the district�s relevant direct expenditures prior to adhesion to the
master contracts, adjusted for inflation, and its direct expenditures as a
member school district. The size of the potential increase in State
expenditures would be dependent on the number of districts requiring additional
State funding and the amount of funding needed by each district.
Section:
Education
Analyst:
Amanda Bastelica
Senior Research Analyst
Approved:
Thomas Koenig
Legislative Budget and Finance Officer
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.).