DLGS Releases LFN 2023-04 Regarding Appropriation Cap Relief and Opioid Settlement Guidance
The Division of Local Government Services issued Local Finance Notice 2023-04 announcing the appropriation increases in excess of 3.5% for the Calendar Year 2023/State Fiscal Year 2024 budget appropriations for certain items and guidance on usage and reporting Opioid Settlement Funds.
Appropriations Cap Relief
As we previously reported, the Local Finance Board at their February 8 meeting approved one time additional exceptions to the appropriation cap for increases above 3.5% from the previous year for garbage collection and disposal, recycling costs, pension contributions, gasoline and diesel fuel, workers compensation insurance, and health insurance.
The Division has updated the Municipal Budget Template and levy cap workbook to reflect the Local Finance Board action.
The appropriation cap exception will be calculated using the amount of the increase over the prior year appropriation that exceeds 3.5%, which is the COLA rate. The Division has prepared an addendum to the levy cap workbook to calculate the allowable appropriation cap exception – which goes on sheet 20 of the budget. The appropriation cap exception can be used up to the amount calculated in the workbook. Please note that the use of the appropriations cap exceptions are permissive.
The Municipal Budget Template now includes the selection of the following FCOA codes on Sheet 20:
- Garbage and Trash Removal and Disposal (Code 305)
- Recycling (Code 305)
- PERS employer contribution (Code 471)
- PFRS employer contributions (Code 475)
- Gasoline and Diesel Fuel (Code 460)
- Worker’s Compensation Insurance (Code 215)
The above updated FCOA codes are not on earlier versions of the Municipal Budget template of 2023.0 or earlier of the Municipal Budget Template. Municipalities that have not completed a substantial amount of data entry for their budgets should use the 2023.1 version. Those municipalities that have completed a substantial amount of data entry for their budgets should email the template to Matthew.Gallello@dca.nj.gov, who will revise Sheet 20 to permit selection of the additional FCOA codes. The Division cautions municipalities not to attempt to input the new appropriations cap exceptions on versions 2023.0 or earlier of the template, as it will result in data collection errors.
As DLGS Director Jacquelyn Suarez noted at the Local Finance Board these exceptions were not granted lightly and expressed reluctancy to extend them beyond the CY2023 and SFY2024 budget years. Municipalities are strongly encouraged to explore all avenues of cost savings, including investigating shared services, and closely analyzing labor agreements and discretionary spending, to ensure a sustainable budget in future years.
National Opioid Settlement Proceeds - Guidance on Budgeting & Reporting
The proceeds of the nationwide opioid settlements are in various stages of distribution to many New Jersey counties and municipalities.
The State has not imposed restrictions on the types of eligible programs beyond the limits imposed at the national level. However, the agreement between the State, counties, and municipalities does include other requirements beyond those imposed in the nationwide agreement, including but not limited to:
- a requirement that settlement funds be used to supplement, not supplant, funds that otherwise would have been used for approved purposes;
- establishment of County Advisory Councils to provide expert input, advice, and recommendations on the disbursement of settlement funds;
- limits on administrative expenses; and
- reporting requirements.
Under N.J.S.A. 40A:4-87, municipalities and counties may seek approval from the DLGS for the insertion of revenue from the National Opioid Resolutions into the budget of the municipality or county. There is no statutory or regulatory authority for a municipality or county to independently establish a trust fund for the settlement proceeds.
Further, Governor Murphy signed Executive Order 305 designating the Department of Human Services (DHS) as the lead State agency overseeing the disbursement and reporting of the settlement monies over the next 18 years. DHS will develop and announce an annual reporting process for participating county and local subdivisions. On an annual basis, counties will be required to provide information about how the settlement funds were allocated over the prior year by the county and the participating municipalities within the county. DHS will review those reports and publicly post them online. Counties and participating municipalities are responsible for collaborating to ensure all reporting requirements are met and that all required information is shared with DHS on a timely basis. The first annual reports are due to DHS no later than September 1, 2023, and those reports will cover the current State Fiscal Year. Please note that DLGS’ approval to insert the opioid settlement into a municipal or county budget does not negate the DHS reporting requirements.
For municipalities receiving settlement proceeds from the National Opioid Resolutions with Johnson & Johnson, Mallinckrodt Pharmaceuticals, McKesson Corporation, Cardinal Health, Inc, and AmerisourceBergen Corporation please review Exhibit A of the agreement, starting on page 35, for a list of programs that the funds may be used.
The Division is recommending that you consult with your municipal or county counsel for additional guidance on issues such as the amount that can be spent on administrative expenses, program eligibility, and expenditure reporting. For instructions on how to receive the distributors' first settlement payment tranche, please consult the New Jersey Office of the Attorney General's guidance on this topic. Please email any questions to DMHAS@dhs.nj.gov.
Contact: Paul Penna, Senior Legislative Analyst, ppenna@njlm.org, 609-695-3481, x110.