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December 15, 2011

Re: Division of Local Government Services issues guidance on CY 2012 Budget

Dear Mayor:

This week your Chief Financial Officer has received Local Finance Notice 2011-37 from the Division of Local Government Services regarding significant changes to the budget process for the forthcoming year. Here is the second of two letters you will receive from the League, wherein we have identify these major changes that you should bring to the attention of your fellow elected officials and members of your administrative staff involved in the budget preparation process.

This letter will focus on the more technical issues raised in Local Finance Notice 2011-37.

The Division is requesting that the Local Finance Board approve the following modifications to the statutory deadlines:

The proposed changes (absent referendum dates) are:

Introduction and Adoption of Budget – Non Referendum

Statutory Date

Revised Date*

Mayor/Council Faulkner Act (Executive) budget transmission to governing body



Municipal introduction and approval of budget



Municipal adoption



* Or the next regularly scheduled governing body meeting where formal action may be taken.

Notwithstanding the revised dates, a budget may be adopted anytime within 10 days of receiving the Director’s certification of approval of the budget. 

If you plan to hold a property tax levy cap election, the municipality will need to meet the notice and publication deadlines tied to the April school board election date.  The full calendar for referendums will be released when the Division of Elections sets the timetable. 

Municipalities may increase their temporary budget appropriations to provide for the period between March 20 and the extended adoption date of the 2012 budget.  The governing body must adopt the resolution no later than February 29, 2012.  If additional appropriations are needed prior to the adoption of the budget, the municipality may adopt emergency temporary appropriations in accordance with N.J.S.A. 40A:4-20.

The Governor is expected to propose the State 2013 FY budget on or about February 21, 2012.  At the very least, immediately after the budget is proposed the Division will notify municipalities as to CMPTRA and Energy Tax Receipts funding that can be anticipated in the budget.  The Division will share the information sooner should it become available.

One of the major changes to the budget process this year is the revisions to the Budget Message section of the annual budget to include a “good faith explanation of budget issues related to structural imbalances” in four areas.  For more information on the revisions to the Budget Message please see the other December 15 Dear Mayor Letter.

In regards to the 2% tax levy cap, Local Finance Notice 2011-36 announced that a local unit can exclude from the Levy Cap certain expenses billed to a local unit by a municipality, county or regional authority.  Specifically, any amounts that may be required to be paid by a local unit to an authority, pursuant to an agreement, and which is necessary for the authority to meet its debt services obligations, may be considered the equivalent of debt service under the levy cap debt service exclusion. 

In addition, the 2010 Levy Cap Law permits increases in items that are exclusions to the levy cap, (i.e., pension and health benefits costs) that are billed to shared service recipients, to be taken outside the cap by those recipients.   There is no requirement, however, for providers to bill or charge their recipients for these increases and there is no obligation for recipients to take them as levy cap exclusions.    The law only allows the exception if the local unit desires to use the exception if the increase is specifically billed.

The health insurance levy cap exclusion will be based upon an average State Health Benefits increase of 10.3%.  The levy cap workbook will calculate the exclusion, which will be any increase over 2%, up to the 10.3% maximum. 

For municipalities with a free and joint free public library, recent laws will have an impact on your 2012 budget.  First, P.L. 2011, c. 38 provides a dedicated line item on property tax bill to fund municipal free and joint public libraries.  The law changes the way the minimum library appropriation is displayed on the tax bill but does not result in any increase taxes.  See Local Finance Notice 2011-14 for more information.

Secondly, P.L. 2010, 83 requires the transfer of certain public library fund balance amounts to a municipality.  The transferred funds are to be used exclusively as property tax relief.  The funds transferred must be anticipated revenue without an offsetting appropriation and no levy cap adjustment.  However, the transferred surplus does not have to be anticipated in the budget all in one year.  Please note that the calculation and conditions concerning the transfer of funds is subject to the approval of the State Library.

For municipalities in the Barnegat Bay region, they may participate in an environment improvement loan forgiveness program through the Environmental Infrastructure Trust (EIT) as part of the State’s Barnegat Bay Cleanup Initiative.  Municipalities that apply and receive 100% debt forgiveness EIT loan for these projects do not need to make the 5% down payment on the bond ordinance.  Associated expenses would be treated by the Division as exceptions to down payment requirements pursuant to N.J.S.A. 40A:2-11 (c).

As a reminder, municipalities must post their current year adopted budget and three (3) prior years on their website.  Currently, you should have your 2008, 2009, 2010 and 2011 budget posted.  Once the 2012 budget is adopted it should be posted and 2008 may be dropped.  Municipalities without their own website should contact the Division on the procedure for sending copies of their budgets to Division for the posting.

In addition, municipalities are required to file a copy of new or renewed shared service agreements with the Division.  These agreements should be sent electronically, preferably as Word or PDF, to

Finally, the Division has announced upcoming budget related changes.  As part of the CY 2012 budget adoption cycle the Division will implement the new “User Friendly Budget” summary.  This summary will provide citizens with budget data in a form that they can understand and in a format that is consistent across all municipalities.  This new process must first be adopted by the Local Finance Board.  In addition, the Division is finalizing the Annual Financial Statement sheet, as an Excel worksheet, that will be used to implement the reporting requirements concerning long-term tax exemptions and PILOT agreements that were adopted by the Local Finance Board.

Very truly yours,


William G. Dressel, Jr.
Executive Director






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