Gov. Murphy signs law increasing school district fiscal limits during COVID-19 pandemic

Talk about robbing Peter to pay Paul. Gov. Phil Murphy on Monday signed legislation allowing New Jersey’s 500-plus school districts to maintain surplus at 4 percent for the current and 2021-22 school years, while also permitting districts to use or transfer these funds between line items and program categories without state oversight.

The new law gives school districts greater flexibility in funding certain programs during the COVID-19 pandemic. That’s because districts were previously subjected to more rigorous rules limiting their surplus or annual undesignated general fund balance to 2 percent.

Districts that exceeded the 2 percent fund balance threshold in the past could have been penalized with a sizable reduction of state aid. Districts historically needed to obtain approval from the state commissioner of education before transferring surplus funds between line items and program categories, but those rules no longer apply for the 2020-21 and 2021-22 school years.

Previously known as Senate Bill No. 2691 and Assembly Bill No. 4310, this new state law signed by Murphy was prime-sponsored by several lawmakers representing Mercer County, including Democratic State Sen. Linda Greenstein, Democratic State Sen. Shirley Turner and Democratic Assemblyman Dan Benson.

Benson previously championed the bill last summer, saying, “By providing this financial tool to districts, one of many needed, we give them flexibility to better equip themselves for the unexpected.”