What is Banked Cap?

In 2010, the statutory tax levy cap (N.J.S.A. 18A:7F-38) was established to implement a 2% increase over the prior year general fund levy in order to restrict the increase in local property taxes. There are three different ways in which a district can “bank” their capacity to levy taxes above the 2% cap. This mechanism is known as “banked cap”.

First, when a school district does not utilize its full allowable tax levy increase in a given year, the unused portion is “banked” (i.e., if a district only raises taxes by 1%, then the amount equated to the remaining 1% is “banked”). This unused allowable remainder (or “banked cap”) can be carried over and used to increase a future year’s tax levy by that specific amount and percentage, above the 2% statutory tax levy cap. In essence, “banked cap” allows districts to accumulate unused tax levying capacity over time.

Second, there are fixed costs that the New Jersey Department of Education recognizes are difficult to control. These fixed costs include enrollment increases, health care cost increases, or deferred pension cost increases. The New Jersey Department of Education allows for districts, depending on the circumstances, to obtain an adjustment to the statutory tax levy cap. These adjustments are sometimes known as waivers.

Finally, there is a calculation that is done in the budget software by the State of New Jersey that reflects what is known as the SDA district’s local fair share. This calculation shows the difference between the amount that a city or municipality has the capacity to pay in school taxes and what it is actually paying. The delta is then reported to the district and the New Jersey Department of Education, and is added to the “banked cap” total.

The Hoboken School District’s “banked cap” total for the 2024-2025 school year is $170,302,535. This does not mean that the district has this money in hand to use. This simply means that the district’s allowable taxing authority above the 2% statutory tax levy is $170,302,535. For the Hoboken School District, a 1% tax levy equates to $587,163.11. 

On April 30, 2024, the Board of Education held a budget public hearing and presented a fiscal plan with a local tax levy of $67,517,886 to support the general fund budget for the 2024-2025 school year of $83,269,737. The approved budget supports enrollment growth, salary and benefits, special education, student achievement, professional development, maintenance of school facilities and related insurances, co- and extra curricular activities, and general administration and operations.