& Fiscal Guidance
January 11, 2001
||Chief School Administrators
School Business Administrators
||Tom McMahon, Assistant Commissioner
||2001-02 Budget Impacts of the Facilities Law
The following summary is intended to provide guidance
in the development of your 2001-02 budgets with respect to the impact
on district budgets of the Educational Facilities Construction and Financing
Act (EFCFA) enacted in July 2000.
The department has included the applicable information
in the 2001-02 Budget Guidelines and in the programming of the 2001-02
Funding under EFCFA
Projects eligible for funding under EFCFA include:
new construction and additions to accommodate unhoused students; rehabilitation
to keep the building functional for its original purpose or new purposes
without increasing the square footage of the original building; and
acquisition of land or existing buildings to accommodate unhoused
Districts have the option of receiving a grant from
the Economic Development Authority (EDA) for the state support, instead
of debt service aid, of the final eligible costs of an eligible project.
EDA will provide the grant and disbursement of the funds through an
agreement between the district and EDA.
Districts that have submitted applications for retroactive
funding for which debt has been issued, and have received approval
of the retroactive funding, will have their 2001-02 debt service aid
calculated based on EFCFA formulas.
Budgeting for Local Support of a Project Eligible for EFCFA Funding
(1) The local share to be paid to EDA for an EDA
(2) The local share of a non-EDA constructed project
for which the district chooses to receive a state grant for the State
(3) The local portion of debt service payments for
a non-EDA constructed project for which the district chooses to receive
state debt service aid for the State support.
All districts are required to secure the required
local support of an eligible project prior to initiation of construction.
Districts that fund the entire local support through
a means other than school bonds must secure this funding through:
(1) Approval of the necessary line items at the annual
(2) Approval of expenditures of local funds at a
Special Election; or
(3) Withdrawals from capital reserve in accordance
with the procedures described below.
(1) The amount required to be raised by bonds;
(2) The final eligible costs of the project as approved
by the Commissioner;
(3) The amount of the costs of the project which
are in addition to the final eligible costs (if applicable);
(4) The portion of local support to be raised through
other funding sources (e.g. capital reserve, surplus), listing these
sources and amounts separately; and
(5) An explanatory statement of the costs in addition
to the final eligible costs.
For authority constructed projects or districts electing
to receive a grant from EDA for the state share, the referendum question
or board resolution should request approval of the local share.
For non-authority constructed projects for which
a district chooses not to receive an EDA grant for the state share,
the referendum question or board resolution must include the total
costs of the project and disclose the state debt service aid percentage.
In addition, a district should include in the board resolution or
question an explanatory statement of the costs in addition to the
final eligible costs.
Districts must provide the approved local share to
the authority for authority constructed projects in accordance with
the rules of the authority to be developed.
Budgeting For Projects to Receive EDA Grants for State Share
Districts electing to receive an EDA grant for its
state share should account for these funds along with its corresponding
local share in its capital projects fund.
Districts that choose to raise the local share portion
in their 2001-02 capital outlay budget should budget only the
estimated local share of the school facilities projects they anticipate
to receive DOE approval and to be completed in 2001-02.
Districts should transfer the local share budgeted
in capital outlay to the capital projects fund upon execution of the
EDA grant agreement.
EFCFA allowed districts that did not have a capital
reserve account to establish such account by board resolution no later
than October 15, 2000.
Funds in the capital reserve account may be used
only to implement projects in a districts approved LRFP.
Funds in the account in any budget year may not exceed
the amount of local support required to fund the projects in the approved
LRFP. This amount will be adjusted annually in a districts QAAR.
Upon submission of a districts LRFP to the
department, a district may make deposits into capital reserve to meet
the local needs of its LRFP at any time by board resolution as follows:
(1) Transfer of undesignated, unreserved general
fund balance; or
(2) Transfer of excess, undesignated, unreserved
general fund balance that is anticipated to be deposited during the
current year (2000-01) in the advertised recapitulation of balances
of the subsequent years budget (2001-02) that is certified for
taxes. No transfer can be made if a district applies for a Commissioner
SGLA in the subsequent years budget (N.J.A.C. 6:19-2.5(b)).
A district may appropriate funds in its 2001-02 budget
to supplement the capital reserve account to meet the local needs
of its LRFP submitted to the department. A line has been added to
the net budget cap worksheet to exclude the capital reserve appropriation
Upon approval of a districts LRFP, if the amount
in the capital reserve exceeds the amount of local support required
to implement the projects in the approved LRFP, the district must
withdraw the excess and reserve and designate it in the subsequent
Audited excess undesignated, unreserved general fund
balance may not be deposited into a capital reserve account and must
be reserved and designated in the subsequent years budget (N.J.A.C.
Upon approval of a districts LRFP, a district
may withdraw funds from capital reserve at any time by board resolution
for the following purposes:
(1) To capital outlay to fund the local support of
final eligible costs of an approved school facilities project;
(2) After receiving voter or board of school estimate
approval, to capital outlay to fund the excess costs of school facilities
projects and other projects not eligible for EFCFA funding:
(a) Voter approval may be obtained through the
original budget certified for taxes, which must include a separate
statement of purpose. A new revenue line has been added for withdrawals
from capital reserve for ineligible costs.
(b) Voter approval may also be obtained through
a special appropriation process (e.g. special election for a Type
(c) The separate statement of purpose in the annual
budget or special election question must include the projects
total cost, final eligible costs, and amount requested for withdrawal
for excess costs and delineate what the excess costs will fund.
(3) To the debt service fund to offset principal
and interest payments for bonded projects that are included in the
districts approved LRFP.
A district may apply to the Commissioner for approval
to withdraw funds from its capital reserve account prior to approval
of its LRFP for emergency purposes.
Funds in capital reserve accounts in existence prior
to July 18, 2000 are subject to EFCFA and Commissioner regulations,
but must be utilized for the original purpose deposited and accounted
for separately. Appropriation of these funds must be made in the annual
Maintenance of School Facilities
For projects that receive funding under EFCFA, districts
must demonstrate, starting in the third year following completion
of the project, an annual maintenance investment in the school facility
of two-tenths of 1% of its replacement cost.
For all existing facilities, districts seeking EFCFA
funding 10 years from the enactment of EFCFA (July, 2010) must demonstrate
over the prior ten years a maintenance investment in such facility
for which the district is seeking funding of at least 2 % of its replacement
Upon completion of a school facilities project constructed
by the district, the district must submit a maintenance plan which
includes its plan to achieve the above; the maintenance plan must
also include a provision for a maintenance reserve fund.
A new column has been added in the Recapitulation
of Balances in the 2001-02 budget for the new maintenance reserve
County School Business Administrators