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Banked Cap- Budget Discussion

Jennifer Dericks

Sunday, February 2, 2014 • 10:35pm

SPARTA, NJ- Banked Cap is a term often used during school budget discussions this year. This is a relatively new term as the legislation that provides for banked cap has only been in effect since July 2010.

On July 13, 2010 Governor Christie signed S-29 into law.  Primarily, this legislation limits property tax levy increases to only two percent.  This limit, commonly called a cap, applies to local government and school district spending.  The previous limit was four percent under S-1701.

The new legislation allows three waysfor local governments or  school districts to exceed the strict two percent cap; banked cap, second question and a limited number of exemptions.

Cap banking occurs when the school district or local government does not increase the tax levy by the full two percent allowable by law.  The difference between the maximum two percent and the actual levy increase is 'banked',  available for use in future budgets.  The banked cap must be added back into the budget within three years or it expires and is never again available.  When banked cap is added back into the budget it becomes part of the base budget, available every year.

When Sparta voters defeated the school budgets in 2010 and 2011 the township council cut the district's levy increase to approximately one percent, eliminating  over $1 million.  That money is the banked cap. 

Use of banked cap has been discussed as a possible way to allow the Sparta school district to expand the educational program for kindergarteners  from a half day to a full day program.  Currently more than 80 percent of all districts in New Jersey and 75 percent of districts in Sussex county provide full day kindergarten.  If banked cap is not used, Superintendent Dennis Tobin has said staff and programs would have to be cut from the regular budget to allow for the kindergarten program to be expanded to a full day program. 

The budget will continue to be discussed at the Feb and March board meetings.  The final budget hearing is tentatively scheduled for March 31.  

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