correct size blogThe Division of Local Government Services has issued Local Finance Notice 2018-27 regarding the CY 2019 Municipal and County Budget and Cap Information.

The 1977 budget cap law (which caps APPROPRIATIONS increases) requires the Director of Division of Local Government Services to promulgate the Cost of Living Adjustment (COLA). The COLA for CY 2019 budgets is calculated at 2.5%. The governing body may pass a COLA ordinance, increasing the appropriation cap base to 3.5%. Cap bank balances from 2017 and 2018 are available for use in 2019.

As you know, this is just one of the two caps that limit local budgets. This cap was designed to limit local SPENDING flexibility. It should not be confused with the 2 percent cap on the local LEVY, which limits local revenue raising authority.

If a governing body wants to increase its allowable appropriations percentage in its budget to 3.5%, the following steps must be taken:

1. After January 1st, and prior to introduction and approval of the budget, an ordinance must be introduced that details the following:

a. The new rate (increased percentage) to be adopted; and,
b. The additional amount of appropriations to be added by the increase.

2. The ordinance must be approved by a majority of the full membership of the governing body, published, and a public hearing held at least 10 days after the publication date. A certified copy of the introduced action must be filed with the Director of the Division of Local Government Services within 5 days of its introduction.

3. The governing body may take a final vote on the action any time after the public hearing and prior to adoption of the budget. Depending on the form of government, the chief executive may veto the action in accordance with local procedures.

4. The ordinance takes effect immediately upon passage, and a certified copy of the adopted action must be filed with the Director within 5 days.

5. Cap increase referendums are not permitted if this option is chosen.

In addition, the 1977 cap law includes a cap exception for Group Health Insurance. This exemption is limited to the amount appropriated that is over 4% of the previous expenditures but not exceeding the State Health Benefits percentage increase. Since the State Health Benefits increase for CY 2019 is 0%, there will be no 1977 cap or 2010 levy cap exception for Group Health Insurance for CY 2019.

The Division will issue the Levy Cap Workbook at a later date.

Contact: Lori Buckelew, Senior Legislative Analyst, lbuckelew@njslom.org, 609-695-3481 x112.

 

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