Establishes certain valuation and reporting mechanisms related to school district liabilities for certain accumulated unused leave.

A5205

ASSEMBLY, No. 5205

STATE OF NEW JERSEY

222nd LEGISLATURE

�

INTRODUCED JUNE 4, 2026

Sponsored by:

Assemblywoman� ROSAURA "ROSY" BAGOLIE

District 27 (Essex and Passaic)

SYNOPSIS

���� Establishes certain valuation and reporting
mechanisms related to school district liabilities for certain accumulated
unused leave.

CURRENT VERSION OF TEXT

���� As introduced.

��

AAn Act
related to accumulated unused leave in school
districts, amending P.L.2007, c.62, and supplementing chapter 23 and chapter 30
of Title 18A of the New Jersey Statutes.

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

���� 1. Section 6 of P.L.2007, c.62
(C.18A:7F-41) is amended to read as follows:

���� 6.��� Notwithstanding the
provisions of any law or regulation to the contrary:

���� a.���� A board of education or
board of school estimate, as appropriate, may supplement a capital reserve
account through a transfer by board resolution at year end of any unanticipated
revenue or unexpended line-item appropriation amounts, or both, for withdrawal
in subsequent school years.

���� b.��� A board of education or
board of school estimate, as appropriate, may supplement a maintenance reserve
account through a transfer by board resolution at year end of any unanticipated
revenue or unexpended line-item appropriation amounts, or both, for withdrawal
in subsequent school years.�

���� c.���� A board of education or
a board of school estimate, as appropriate, may through the adoption of a board
resolution establish the following reserve accounts:

���� (1)�� Current expense
emergency reserve account.� The funds in the reserve shall be used to finance
unanticipated general fund current expense costs required for a thorough and
efficient education, or to finance school security improvements, including
improvements to school facilities. The account shall not exceed $250,000 or one
percent of the district's general fund budget up to a maximum of $1,000,000,
whichever is greater. A board of education may appropriate funds to establish
or supplement the reserve in the district's annual budget or through a transfer
by board resolution at year end of any unanticipated revenue and unexpended
line-item appropriation amounts.� Withdrawals from the reserve may be made at
any time and shall require the approval of the commissioner unless the
withdrawal is necessary to meet an increase in total health care costs in
excess of four percent, or the withdrawal is included in the original budget
certified for taxes to finance school security improvements, including
improvements to school facilities.

���� As used in this paragraph,
"school security improvements" means school security improvements,
including improvements to school facilities, which are limited to safety and
security measures involving building monitoring and communication technology
designed to address school crime and the safety of students, staff, and
visitors to school facilities.� School security improvements may include, but
need not be limited to: security cameras to monitor the school; an electronic
notification system that automatically notifies parents in case of a
school-wide emergency; an automatic door locking system for access control; and
a badge system for school employees.

���� (2)�� Debt service reserve
account in the debt service fund for proceeds from the sale of district
property. The funds in the reserve shall be used to retire outstanding debt
service obligations of the district. The reserve shall be liquidated within the
lesser of five years from its inception or the remaining term on the
obligations. Any remaining balance shall be used for tax relief.

���� (3)�� Federal impact aid
reserve account in the case of a school district that receives federal impact
aid pursuant to section 8002, 8003, 8007, or 8008 of the Elementary and
Secondary Education Act of 1965 (20 U.S.C. s.7702, 7703, 7707, or 7708). A
board of education may appropriate federal impact aid funds to establish or
supplement the reserve account in the district's annual budget, or through a
transfer by a two-thirds affirmative vote of the authorized membership of the
board between June 1 and June 30, for withdrawal in any subsequent school year.
Any transfer to the reserve account shall not exceed the total amount of
federal impact aid received in the fiscal year. The board, at its discretion,
may use the funds in the reserve account to finance the district's general fund
or to finance school facilities projects, in a manner consistent with federal
law. The total amount of funds on deposit in the reserve account shall not be
limited.

����
(4)� (a)� Leave liability
reserve account.� The funds in the reserve account shall only be used to
finance the payment of accumulated unused sick leave, accumulated unused
vacation leave, and any other liabilities for accumulated unused absences for
which an employee may be compensated, upon the employee�s retirement from a
State-administered or locally-administered retirement system or upon separation
from employment, as applicable.� A board of education may appropriate funds to
establish or supplement the reserve in the district's annual budget.�
Notwithstanding the provisions of section 2 of P.L.1979, c.294 (C.18A:22-8.1)
or any other law, rule, or regulation to the contrary, a board of education may
also establish or supplement the reserve account through a transfer by board
resolution of any unanticipated revenue and unexpended line-item appropriation
amounts, which transfer resolution may be adopted at any point during the
school year.� A withdrawal from the reserve account may be made at any time and
only after the adoption of a board resolution detailing the specific costs to
be supported by the withdrawal.�

����
(b)� The commissioner shall
promulgate, pursuant to the "Administrative Procedure Act," P.L.1968,
c.410 (C.52:14B-1 et seq.), rules and regulations as necessary related to the
establishment and maintenance of a leave liability reserve account.� The rules
and regulations shall, at a minimum, establish limits on balances that may
exist in the reserve account.

���� d. (1) All reserve accounts
shall be established and held in accordance with GAAP and shall be subject to
annual audit. Any capital gains or interest earned shall become part of the
reserve account. A separate bank account is not required, however, a separate
identity for each reserve account shall be maintained.

���� (2)�� A board of education
that establishes a federal impact aid reserve account shall:

���� (a)�� report the amount of
federal impact aid received, expended, and on deposit in the federal impact aid
reserve account in its annual audit pursuant to N.J.S.18A:23-1, and in the
budget made available in a "user-friendly" format using plain language
pursuant to N.J.S.18A:22-8;

���� (b)�� report the amount of
federal impact aid received, expended, and on deposit in the federal impact aid
reserve account at each board of education meeting, and shall include the
information in the board secretary's monthly report in a format to be determined
by the commissioner; and

���� (c)�� provide any additional
supporting documentation that may be required by the commissioner pursuant to
subsection c. of section 5 of P.L.1996, c.138 (C.18A:7F-5).

(cf: P.L.2016, c.100, s.1)

���� 2. �(New section) �a.� (1)� A school
district shall, in the annual audit required pursuant to N.J.S.18A:23-1, calculate
and report the total value of accrued liabilities for compensated absences of
district employees.� The reporting required pursuant to this paragraph shall be
consistent with the generally accepted accounting principles established by the
Governmental Accounting Standards Board.� The annual audit shall also include
test measures to ensure that a district is maintaining proper documentation with
regards to the tracking of the value of accrued liabilities for compensated
absences of district employees.

���� (2)�� A school district shall
maintain a current schedule of accrued liabilities for compensated absences
that details:

���� (a)�� total liabilities for
compensated absences to date;

���� (b)�� year-over-year change in
the total liability for compensated absences; and

���� (c)�� projected future payments
for compensated absences based on employee retirement schedules, turnover
rates, and the terms of collective bargaining agreements.

���� b.��� The superintendent, or a
designee, shall provide the board of education with monthly and quarterly
financial reports containing the information maintained pursuant to paragraph
(2) of subsection a. of this section.

���� c.� The Commissioner of
Education, or the executive county superintendent as the commissioner�s
designee, shall examine a school district�s level of liabilities for
compensated absences, and whether the district is sufficiently prepared for the
fiscal impact of making future payments of the liabilities, as part of the
ongoing budget review process established pursuant to regulations of the State
Board of Education and as part of the comprehensive review under the New Jersey
Quality Single Accountability Continuum pursuant to section 11 of P.L.1975,
c.212 (C.18A:7A-11).�

���� d.� As used in this section,
�liabilities for compensated absences� means leave time that is required to be
recognized under Governmental Accounting Standards Board Statement No. 101,
Compensated Absences, or any subsequent statement on compensated absences
published by the Governmental Accounting Standards Board.

���� 3.� (New section)� Notwithstanding
any law, rule, or regulation to the contrary, a collective bargaining agreement
or other contract that includes provisions related to payments for liabilities
for compensated absences shall incorporate:

���� a.���� a clear statement of
the district�s obligations to make payments related to liabilities for
compensated absences; and

���� b.��� an analysis of the
fiscal impact of the district�s obligation to make payments related to liabilities
for compensated absences at the time of approval of the contract or agreement.

���� 4. This act shall take effect
immediately and shall first apply to the first full school year following the
date of enactment.

STATEMENT

���� This bill establishes certain
valuation and reporting mechanisms related to school district liabilities for
accumulated unused leave.

���� The bill requires a school
district, in its annual audit conducted pursuant to current law, to calculate
the total value of accrued liabilities for compensated absences of district
employees.� Under the bill, the annual audit would also include test measures
to ensure that a district is maintaining proper documentation with regards to
the tracking of the value of accrued liabilities for compensated absences of
district employees.� As defined by the Governmental Accounting Standards Board,
a compensated absence is leave for which employees may receive compensation in
the form of cash payments when the leave is used for time off; other cash
payments, such as payment for unused leave upon termination of employment; or
noncash settlements, such as conversion to defined benefit postemployment
benefits.�

���� The bill also requires a
school district to maintain a current schedule of accrued liabilities for
compensated absences that details: various information on total liabilities;
year-over-year changes in the total liabilities; and projected future payments
for compensated absences based on employee retirement schedules, turnover
rates, and the terms of collective bargaining agreements.� Under the bill, the
superintendent, or a designee, is required to provide the board of education
with monthly and quarterly financial reports containing this information. �

���� The bill further requires the Commissioner
of Education, or the executive county superintendent as the commissioner�s
designee, to examine a school district�s level of liabilities for compensated
absences, and whether the district is sufficiently prepared for the fiscal
impact of making future payments of the liabilities, as part of certain
existing review processes.�

���� The bill requires a collective
bargaining agreement or other contract that includes provisions related to
payments for liabilities for compensated absences to incorporate: a clear
statement of the district�s obligations to make payments related to liabilities
for compensated absences; and an analysis of the fiscal impact of the
district�s obligation to make payments related to liabilities for compensated
absences at the time of approval of the contract or agreement.

���� Finally, the bill permits a
board of education to establish a leave liability reserve account.� Funds in
the reserve account may only be used to finance the payment of accumulated
unused sick leave, accumulated unused vacation leave, and any other liabilities
for accumulated unused absences for which an employee may be compensated. The
bill directs the commissioner to promulgate rules and regulations as necessary
related to the establishment and maintenance of a leave liability reserve
account.� The rules and regulations are required to, at a minimum, establish
limits on balances that may exist in the reserve account.�