|February 12, 2008
CY 2008 Municipal and County Budget Guidance
The Division of Local Government Services (DLGS) has released two new Local Finance Notices - 2008-3 and 2008-4. 2008-3 provides CY 2008 budget cycle guidance to municipalities and counties. Levy cap procedures are covered in a separate document that is posted on the Division web site. In addition, municipalities considering applying for Extraordinary Aid must review Local Finance Notice 2008-4, which will soon be available on the DLGS website.
To assist local officials, the League has scheduled seminars with DLGS to review the process and answer questions. The seminars are scheduled for February 14 and 22. Copies of this Notice should be shared with other appropriate local officials.
The Notice includes the following elements.
Budget Dates: Local Finance Notice 2008-2 extended the budget calendar to reflect the presentation of Governor Corzine’s FY 2009 budget at the end of February, with State Aid Certifications following. Notwithstanding that extension, the budget may be introduced prior to the deadlines using last year’s formula aid. Once State Aid is certified, budgets can be amended to reflect any changes.
Health Benefits Cap Adjustment: Both the appropriation and levy caps provides a cap exclusion for increases in health care costs that are in excess of four percent but do not exceed the average increase in State Health Benefit Program costs. Because a new State Health Benefits contract is currently being reviewed, the final rate has not yet been established.
The Division of Pensions and Benefits, however, has advised the Division that the average SHB increase for CY 2008 and FY 2009 budgets will be less than four percent. Local units are therefore directed to prepare their budgets without using the health benefits exclusion. To facilitate this, the Health Benefit data elements and worksheet in the Levy Cap Calculation worksheet have been disabled.
Budget cap referendums: Budget referendum dates have been modified by the Local Finance Board to reflect the extension of the budget calendar. For CY 2008, the referendum schedule is as follows:
- Appropriation Cap and Levy Cap Referendum: March 26
- Second Levy Cap Referendum: May 6
Municipalities planning to conduct a referendum should consult Local Finance Notice 2008-2 for additional details.
- Appropriation Cap: CY 2008 is the final year of the phase in for PFRS and the appropriation continues to be budgeted outside the cap. In CY 2009, the 2008 paid or charged plus reserved amount and the appropriation will be budgeted inside cap. PERS will be at 80 percent for 2008.
- Levy Cap: the exclusion for PFRS expires in CY 2009.
Recycling Tax Appropriations: The implementation of the new recycling tax approved in P.L. 2007, c. 311 (N.J.S.A. 13:1E-96.5) will be delayed until April 1 under a bill currently under consideration by the State Legislature. This new $3.00/ton tax will be charged by operators of landfills and transfer stations for all solid waste deposited at each facility. Guidance on this tax will be forthcoming from the Department of Environmental Protection. A separate budget line item appropriation for the tax is required. The CY 2008 budget should include an appropriation for the tax starting April 1, 2008.
The original law provides an exception to the appropriation cap law, but did not address the levy cap. At this writing, it is expected that legislative action will be taken to make the tax an exclusion to the levy cap. In anticipation of approval of the exclusion, the Levy Cap Calculation Workbook includes a line to identify this amount. If the proposal is signed into law, the appropriation for the tax can be taken as an exclusion. In future years, only increases in this line item will be allowed as cap exclusions.
Capital Lease Obligations: Budget document Sheet 27 has been amended to reflect the Capital Lease Obligations approved by the Local Finance Board both before July 1, 2007 and after this date. The Annual Financial Statement Sheet 34a has also been revised to reflect this change.
Notice of Budget Findings: Beginning with CY 2008, when the Registered Municipal Accountant prepares the Annual Financial Statement and budget, Division budget examiners will issue their findings not only to the RMA but also to the Chief Financial Officer.
Budget Waiver Considerations: When a local unit is considering applying to the Local Finance Board for a waiver or to the Division for Extraordinary Aid, the following considerations must be taken into account:
- A waiver application may be filed anytime after introduction, but it must be consistent with the budget. This means the waiver application must be included with an introduced budget or accompanied by a budget amendment.
- If a waiver and Extraordinary Aid application are both considered, the budget and EA application must meet the EA application date deadline. The needed waiver line items and amount must be included in the introduced budget, but submission of the waiver application can only be made upon the award of EA and filing of the appropriate budget amendment.
- Municipalities that are applying for EA in CY 2008 and received EA in CY 2007 cannot file a cap waiver application until EA is awarded and a budget amendment is filed accordingly. The Levy Cap Calculation for EA applicants is described in Local Finance Notice 2008-4.
- An EA application eliminates the ability of the applicant to take advantage of the second budget referendum.
- Waiver requests are not permitted with a budget that includes a levy cap referendum.
Questions on any of these issues can be directed to Division budget examiners or by e-mail to firstname.lastname@example.org.
Very truly yours,
William G. Dressel, Jr.