The Division of Local Government Services (DLGS) has issued guidance on the Notice of Intent to Apply for Transitional Aid for CY2026/SFY2027 

Full Text: 

On February 7, the Division of Local Government Services (DLGS) provided guidance on the Notice of Intent to apply for the Transitional Aid to Localities program in Local Finance Notice 2026-03. Municipalities that intend to apply for CY 2026/SFY2027 Transitional Aid must notify the Department of Local Government Services no later than Friday, February 13, for CY2026 applicants and September 25 for SFY2027 applicants. The Notice of Intent to Apply must be sent to DLGS via email to dlgs@dca.nj.gov. 

Transitional Aid to Localities is discretionary aid available for municipalities that have severe structural difficulties and anticipate difficulties making payments toward critical obligations, including, but not limited to, debt service, contractual obligations, and payroll. 

The Mayor and Chief Administrative Officer of each municipality not currently receiving Transitional Aid and applying for CY2026/FY2027 aid will be required to attend a mandatory orientation meeting on a date and time as agreed by the applicant and the Division Director to discuss the application process and conditions of the award.  

A Transitional Aid award is conditioned on the municipality meeting the following requirements:  

• Submitting to broad State oversight of hiring, procurement, and other matters.
• Performing reasonable revaluations or reassessments of property as required by law.
• Submitting such additional fiscal control measures as may be directed by the DLGS.

Applicants who are awarded aid will be required to sign a Memorandum of Understanding (MOU) with the DLGS acknowledging State oversight and committing to compliance therewith.  

The DLGS will consider reducing oversight provisions in the MOU for those municipalities requesting an amount of Transitional Aid for CY2026/FY2027 that reflects a reduction of at least 15% of aid provided in CY2025/FY2026 or otherwise demonstrating sustainable structural improvements in their fiscal management practices.  

Municipalities that received Transitional Aid in CY2025/FY2026 and are operating under an MOU through the end of 2026 will be eligible for early termination of the terms of the MOU if they sign an agreement not to apply for additional aid for CY2026/FY2027 and for the next two budget years. These municipalities are encouraged to contact the Division Director to make an application for early termination. 

To be eligible to apply, applicants must meet the minimum criteria listed below to be considered for the award of funds under the Transitional Aid program.:  

• All financial documents shall be received by the DLGS on or beforeFriday, February 27,2026for calendar year municipalities and on or before September 25, 2026, forState fiscal year municipalities.
• The introduced budget should include Transitional Aid at 15% less than the prior year’s allotment, but not more than the amount received in the previous year. This level of funding is not guaranteed and is only permitted for the limited purposes of advancing a budget for introduction. 
• The budget shall be subject to DLGS review (no local examination). Municipalities that have adopted their budgets are not eligible for aid. 
• The municipality must demonstrate reductions or limited increases in Salary and Wage (S&W) costs. The DLGS expects that the municipality will have engaged with its unions and non-union employees to effectuate savings through reduced salary costs, reduced staffing levels, modified work rules, modified controllable benefits costs, or other efforts to mitigate S&W costs. 
• The introduced budget must contain a 2% increase over the prior year’s tax levy if it doesn’t exceed the tax levy cap workbook maximum allowed by the Local Budget Law(N.J.S.A. 40A:4-1 et seq). 
• The municipality must demonstrate severe fiscal distress that will result in a constrained ability to raise sufficient revenues to meet budgetary requirements. 
• The budget must show spending restraint from CY2025/FY2026. This must include documented efforts to share municipal services, including public safety dispatch, code enforcement, public health services, and other services offered by neighboring municipalities, area boards of education, local authorities, or the county, if those costs are less than the current full cost of providing equivalent service.
• The municipality must provide an assessment of existing local revenues, including whether rates or collections can be increased, and a plan to implement potential changes. Please note that the municipality must demonstrate that user fees have been established where reasonable and practicable for discretionary services to avoid taxpayer subsidy of nonessential programs. 
• For applicants not currently receiving Transitional Aid, the municipal governing body must adopt a resolution authorizing the application to the DLGS and acknowledge that upon submission of the application.
• Applicants not currently receiving Transitional Aid may apply if they meet the criteria above, and must have suffered an extraordinary revenue loss or extraordinary appropriation increase (other than appropriation increases common to other municipalities). 

The Division cautions against any applicant assuming the receipt of any aid. Municipalities applying for aid should plan accordingly, including advancing a levy referendum, if appropriate, to prepare for the possibility of not receiving aid.  

Please email any questions to dlgs-ta@dca.nj.gov with the subject heading “Transitional Aid Question.”  

Contact: Erin Knoedler, Legislative Analyst, eknoedler@njlm.org, 609-695-3481, x116.