NJ Legislators: Support State School Aid in Governor Murphy’s Proposed Budget but Know that work remains
June 12, 2025
As New Jersey “budget season” moves into the critical phase where Legislators and Governor Phil Murphy negotiate a final state budget for FY26, it is important to note which of the Governor’s state school aid proposals the Legislature must support and where there is more to do.
The coming school year will be challenging for public schools given the extreme volatility and uncertainty they face. This will be the first year in which neither the state nor individual school districts can rely on funding from federal Covid relief funds. Districts are also facing the Trump administration’s threats to significantly reduce federal education funding and other supports as part of its effort to dismantle the U.S. Department of Education. At the same time, school districts are facing fiscal challenges from pandemic learning delays, increased student mental health demands, and rising costs in special education, transportation, and employee health benefits.
As Education Law Center testified in recent budget hearings in the Senate and Assembly, several of the school funding proposals in Governor Murphy’s budget are responsive to the concerns that advocates have been raising for years, providing more stability and responding to some of the most pressing issues facing school districts.
Overall, the FY26 proposed budget increases K-12 state aid by a net $387 million (3.3%). The budget increases state aid to 392 districts by $454 million, though increases are capped at 6% of the prior year’s state aid. A handful of districts are flat-funded, and 177 have their state aid reduced by a total of $67 million, but those reductions are capped at 3%. The Governor is proposing over $1.2 billion for existing preschool programs, a $42 million increase, while also adding $10 million for preschool expansion in new districts.
The FY26 Educational Adequacy Report
The School Funding Reform Act (SFRA), the formula that determines both state and local aid for the state’s public schools, requires the Governor to issue recommendations to the Legislature that update the formula every three years through the Educational Adequacy Report (EAR). In addition to updating costs using the most recently available salary, benefit, and expenditure data, as the Murphy administration has faithfully done throughout its tenure, the FY26 EAR also provides significant new resources that address district needs:
- Adds the costs of one district-level social worker and one district-level school psychologist to the base cost calculation;
- Adds an additional $550 per pupil to the base cost for mental health resources;
- Adds the cost of one security guard at the elementary level to the categorical security grant.
These changes result in a 7.4% increase in the base cost from $13,946 to $14,972 per pupil, well above the inflation rate of 3.57%.
No changes were made to the SFRA weights for at-risk or multilingual students, and grade level weights remain unchanged except for a small decline for vocational students. The EAR updates special education expenditures, resulting in a 6% increase in the excess per-pupil cost from $21,868 to $23,172. Preschool costs were adjusted for inflation.
Unless the Legislature objects to these changes, they will remain in effect for the next three fiscal years.
Budget Language Changes
In addition to caps on state aid changes from FY25, the Governor is proposing several other significant changes to how state aid is allocated through budget language. These include:
- Changing the calculation of special education aid to use a district’s audited classification rate instead of the statewide average;
- Using a three-year average for property values and income, instead of a single year, in the Local Fair Share calculation;
- Providing some districts with the opportunity to increase their taxes beyond the 2% property tax cap in order to reach their local fair share;
- Reducing preschool education aid by an amount equal to 25% of any preschool carryover funds maintained by the school district.
These changes address many of the concerns about volatility, predictability, and equitable funding for special education that advocates have long been pursuing. However, accomplishing these changes through budget language means they are temporary, applying only to the 2025-26 school year.
Unfinished Business
The changes proposed in Governor Murphy’s FY26 State Budget, if accepted by the Legislature, do not negate the need for continued advocacy to amend the SFRA or otherwise improve school funding. ELC’s recommendations include:
- Additional funding in the FY26 budget to support a study of Local Fair Share, including an analysis of how the SFRA interacts with property tax caps, whether the formula should consider municipal overburden, and how the formula could be changed to improve equity, stability and predictability;
- Additional funding in the FY26 budget to support a study of how special education is funded through the SFRA, including a consideration of returning to tiered funding levels based on the costs of required services;
- Increases in the allocation for Extraordinary Special Education Aid, districts are currently reimbursed for a fraction of their eligible expenses for high-cost special education placements, and no new funding was proposed for FY26;
- Additional funding to support new capital construction funds to meet the outstanding constitutional obligation to improve school facilities in the SDA districts;
- Immediate planning to support an in-depth, expert-driven analysis of the SFRA’s base costs and weights and how they relate to the state’s current learning standards.
“Governor Murphy’s budget shows a welcome acknowledgment of many of the concerns that advocates and school districts have been warning about for years,” said Danielle Farrie, ELC Research Director. “These improvements will prevent some, though not all, of the annual turmoil that many school districts have come to expect. The Legislature needs to continue to make adequate and equitable school funding a priority in the coming months to both codify and expand necessary reforms of the SFRA.”
Related Stories:
New ELC Report: Fix the Contradiction in the Local Share to Improve School Funding in NJ
ELC to the State of NJ: This is the How and Why of Reviewing the Current School Funding Formula
Press Contact:
Sharon Krengel
Director of Policy, Strategic Partnerships and Communications
skrengel@edlawcenter.org
973-624-1815, x240