Debt repayments school districts make to the state for construction projects are increasing more than 60 percent in 2013-14.
In some cases, the debt payment will reduce or even cancel out entirely any state aid increase for the schools next year. Some districts have anticipated an increase in property taxes and budget cuts.
For most local districts, the increases amount to less than $25,000. But for districts with recent large construction projects, the impact is much larger.
Locally, Barnegat Township will see the largest assessment increase of $367,981 to more than $1.1 million.
Egg Harbor Township must pay an extra $264,402, Greater Egg Harbor Regional’s increase is $215,398 and Buena Regional’s is $146,126. Buena’s increase more than doubles the payment they were required to make this year.
In his budget address, Gov. Chris Christie said no district would lose state aid for the next school year. But he included only formula aid and not debt repayments on construction contracts through the state Schools Development Authority.
N.J. Department of Treasury spokesman William Quinn said that since 2011, districts have been assessed 15 percent of the debt repayment cost on grants they received. Payments from 2011 until last year were lower because of debt refinancing that generated savings. He said there was no refinancing this year and the payment for next year is closer to the actual cost.
Statewide, the total cost to districts for debt service payments will increase 62 percent, from $21 million this year to $34 million next year.
In some cases, the additional assessment will wipe out any state aid increase and lead to budget cuts.
Egg Harbor Township was slated to get an additional $70,558 in state aid but is now losing almost $194,000. Business Administrator Katerina Bechtel said the increase is having an effect on the budget and, combined with the 2 percent state-mandated cap on the property tax levy, will result in cuts to staff, textbooks and supplies, among other items, for next year.
A group of parents, faculty and staff from Egg Harbor Township plans to lobby state legislators to adjust the payments in the proposed budget. Parent Amber Umphlett said they will visit the office of state Sen. Jim Whelan, D-Atlantic, today to raise awareness of the proposed cuts.
“We just want people to understand what is happening,” Umphlett said. “We still are not getting all the state aid we should get in Egg Harbor Township, and then we have to make the extra debt payment as well.”
Whelan said he has spoken with EHT school officials and is looking into the issue, but he wants to get a better idea of the statewide impact before suggesting solutions. He said one option might be a cap on the amount the payment can increase each year.
The assessment will eat up about half of the state aid increase in the Greater Egg Harbor Regional and Buena Regional districts.
Greater Egg Business Administrator Charles Muller said the money is allocated from the general fund and not from the debt service account, so it does affect the budget for next year. He said the district is not looking at major cuts, but there likely will be a property-tax increase.
“It hurts,” Muller said of having to pay the extra $215,398 to the state. He said he is trying to find out just how the allocations were determined.
For districts getting no state aid increase, the increased assessment is, in effect, a state aid cut. Among them are Cumberland Regional, which must pay an extra $121,841 to the state; Dennis Township, which must pay an extra $27,069; and Ventnor, which must make a $26,082 additional payment.
In Somers Point, the extra $23,317 in debt service payments will wipe out the increased state aid of $22,986. In Wildwood Crest, the extra $6,500 in debt payments is more than the extra $6,217 the district will get in formula aid. In Egg Harbor City, the extra $69,020 in debt payment eats up almost two-thirds of most of the state aid increase of $111,680.
School business administrators have lobbied their state association about the assessments, saying the grants they received through the Schools Development Authority have turned out to really be partially loans. John Donahue, president of the New Jersey Association of School Business Officials, wrote a memo reminding members that one state law can trump another, and the state budget law would overrule other laws already in place. But he also said he, too, was puzzled about how the budget could modify the terms of previously approved contracts with the authority.
He said the Legislature could still modify the 15 percent provision before a final budget is approved in June. But he added that legislators have rarely made changes to the state education budget.
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