Navigating NJ School Budgets

The thirteenth article in an ongoing series intended to help NJ residents, especially students, understand their local and state government

Ever watch a Board of Education budget presentation and said, “I still don’t understand what I’m looking at”?  

Join 90% of the state.

New Jersey school budgets represent the biggest chunk of local property taxes in most NJ towns and they’re also some of the hardest public documents for residents to understand, and this is often because Districts don’t present them in ways that answer the questions people are actually asking.

Why is the school tax going up?
What changed this year?
What’s mandated, what’s contractual and what’s just a choice?

This article hopes to give folks just enough clarity so they can ask questions that lead to actual answers.

If you want a primer on why budgets, audits and financial reports don’t match and how comparing the wrong documents creates fake “gotcha” moments, start here first:
https://nj21st.com/2025/12/19/budgets-audits-and-financial-reports/

If you want the bigger picture on how BOE’s work, how school funding flows through the state system and why districts don’t control every part of the financial picture, this article is a good pairing to the one you’re reading now:
https://nj21st.com/2025/10/26/understanding-your-nj-government-boards-of-education-and-school-funding/

And if you want to see what real district cost categories look like when pulled from actual financial reporting, the 7-District ACFR dashboard series is is a good place to start (we still have a few more articles to add):
https://nj21st.com/2025/12/12/what-the-7-district-acfr-dashboard-shows-about-school-costs-part-1/
https://nj21st.com/2025/12/17/what-the-7-district-acfr-dashboard-shows-about-school-costs-part-2/
https://nj21st.com/2026/01/11/what-the-7-district-acfr-dashboard-shows-about-school-spending-part-3-the-ghost-in-the-machine/

Now let’s get into the school budget itself.

Schools are the main character in the NJ tax story  

As weve’ covered our property tax bill is a bundle of governments with the town being one part, the county another and the school district the biggest. Residents can watch a municipal council keep spending tight while still seeing total taxes rise.

In many towns the school portion is the whole story.

So if you want to understand local tax pressure in New Jersey then you have to understand school budgeting. There’s no way around it.

A school budget isn’t a household budget  

A lot of school budget arguments start with a bad mental model.

It’s natural to think about it the same as our household budgets…

Income doesn’t rise so spending shouldn’t rise.
Things are tight, so we should cut back.

….but school budgets don’t work that way because the biggest cost categories aren’t flexible in the short term and districts operate inside a state universe with a different set of rules.

A district’s budget is shaped by costs that move even when nothing “new” is being added:

-Salary obligations
-Benefits costs
-Special education (placements/services)
-Market-driven Transportation costs
-Debt payments
-Changes in State Aid

So while, “Nothing changed” in the classroom, the system around the classroom became more expensive to run.

Staff are the main characters in the school budget story

We often think of visible stuff we can touch when it comes to spending. Tech, athletics, clubs, classroom materials, buildings.

While they matter they aren’t the star of the show.

If you want to understand the  district budget then the first question should be less about programs and more about staffing, benefits and why they may have changed.

Most district budgets are dominated by staffing….

-Teachers
-Support staff
-Paraprofessionals
-Counselors and nurses
-Administrators
– Custodians and clerical staff
-Contracted staff filling gaps

Staffing costs can rise even when new programming isn’t added because salaries rise, headcounts change, coverage needs shift and staffing mixes change.

This is why you can see a budget go up in the same year where everything looks exactly the same.

Checking in with the Ghost

Benefits are one of the most important factors in school budgets and usually the hardest for families to track because they grow quietly and it feels like we are paying more with nothing to show for it.

That’s why we put a lens to them in our third ACFR article – The “Ghost in the Machine”. The title isn’t a metaphor, it’s a real cost that keeps rising in the background, and it’s easy for districts to treat it like weather.
https://nj21st.com/2026/01/11/what-the-7-district-acfr-dashboard-shows-about-school-spending-part-3-the-ghost-in-the-machine/

Benefits can rise because…

-Health insurance premium go up along with prescription and claims trends
-Plan Changes
-Changes in dependent coverage participation
-Pension contribution obligations

A district can add nothing new, make cuts and still face pressure because benefits ticked up.

This is where residents can demand clarity- if benefits are going up then the district should be explaining the assumptions being used and steps they are going to take in managing the pressure.

Special education costs are real, unpredictable and sometimes explosive  

Special education is one of the most important services districts provide, and one of the biggest sources of budget volatility. Districts are legally obligated to meet student needs and the costs connected to this obligation can change fast from one year to the next.

Out-of-district placements, tuition-based programs, one-to-one aides, contracted services, specialized transportation …. all of these can cause big cost swings.

This is why residents sometimes see a budget jump with vague explanations. Sometimes the district is reacting to real student needs. Sometimes it’s reacting late to needs they should’ve planned for sooner. Sometimes both are true.

The accountability question isn’t “why do we spend on special education.” but “are we planning for these costs, are we building internal capacity and are we spending effectively.”  As we covered last year, more spending on special needs doesn’t always translate to better outcomes.

Enrollment matters, but it doesn’t always scale  

Enrollment is the first number everyone asks about and it’s still important. But it’s not a simple “more kids equals more money” equation.

Districts don’t scale down smoothly.

You can’t cut half a teacher, run half a building or keep a high school schedule in tact if you run staff like a dial that can be turned down to hit a precise proportion.

Then consider student needs can rise even when enrollment falls.

Enrollment matters don’t get me wrong – in my own District there are some significant questions that need to be answered given the whole budget picture, staffing models and student needs also factor in.

The 2% tax levy cap also matters but it’s not the whole story

NJ’s 2% tax levy cap is often treated like a full explanation by itself -we hear “2% cap” and think it means districts can’t raise taxes beyond that.

In real life, the cap has exceptions that can change outcomes and it doesn’t answer the bigger question anyway – is the budget reasonable?

A district can stay within cap and still have a budget that should be challenged OR it can be dealing with costs that make 2% seem disconnected from reality, especially when benefits, special education, debt and state aid are all pushing in bad directions at the same time.

State aid shifts can paint a very different picture one year to the next  

School budgeting is local but the state has a significant hand in how it’s shaped – the last few years have taught us that lesson.

State aid affects how much funding districts need to raise locally. If aid rises then tax pressure drops. If it’s flat local taxpayers pick up the inflation hit. If it drops then the levy can feel a push.

This is one of the reasons it can feel like budgeting is rigged – the tax burden can change without any obvious change in what the District adds.

That doesn’t mean districts are off the hook only that we need to track state aid alongside local spending to figure out what’s actually happening.

Debt, capital projects and long-term budget rigidity  

While operating budgets get the most attention debt can turn budget aches into a long term chronic pain scenario.

Once a district commits to capital projects, debt service becomes a recurring budget cost that doesn’t care what happens later.

It doesn’t care if enrollment goes down.
It doesn’t care if state aid goes down.
It doesn’t care if residents are on their last dime.

It gives 0 fucks and the payments still show up.

That’s why referendum decisions echo for YEARS. They’re not one-time events but long-term commitments that take a bite out of future budgets the minute they’re passed.

What we can ask…

What’s driving the increase this year, in plain English?
How much of the increase is staffing, how much is benefits, how much is special education, how much is debt?
What parts of the budget is contract driven, what part is mandated, what part is discretionary?
How did staffing change compared to enrollment trends, and why?
What’s going on with benefits costs and what’s the plan for controlling that pressure?
How much is debt service this year and what does it look like over the next five to ten?
What happens if state aid stays flat or goes down next year?
How does this budget connect to academic outcomes and how will success be measured?

If a district can’t answer these questions clearly then they are either hiding something or don’t really know the details of the budget they are asking you to buy into.

[Explore the Entire ‘Understanding Your NJ Government’ Series->]