Understanding the 2026 Budget Cap Update for New Jersey Municipalities & Counties 2025-14
Local Finance Notice 2025-14 What this Note Covers
The notice addresses budgeting for calendar year 2026 under the long-standing ‘1977 cap law’ and the ‘2010 levy cap law’. It provides updated parameters for both municipal and county budgets in New Jersey, including the annual Cost-of-Living Adjustment (COLA) for the appropriation cap, rules for exceeding the base cap via ordinance or resolution (up to 3.5%), and special exclusions such as group health insurance increases and ‘cap banking’ for unused prior year capacity.
Key Figures & Rules for CY 2026
– The automatic COLA under the 1977 cap law is 2%.
– Municipalities can increase up to 3.5% via ordinance and may bank the difference from prior years if properly authorized.
– The group health insurance exclusion under the 1977 cap law is 32.2%, while under the 2010 levy cap it is 34.2%.
– One-year appropriation cap exclusions (garbage/trash removal, liability insurance, workers’ compensation) approved by the Local Finance Board in 2025 may be added to the 2026 cap base.
What Municipal & County CFOs Should Do
• Check your prior years’ cap-banking status – Unused cap from 2024 and 2025 may be available if authorized.
• If increasing appropriations above 2% (up to 3.5%), adopt an ordinance (or county resolution) after January 1 but before budget introduction.
• File certified copies of both introduced and adopted ordinances/resolutions with the DLGS Director within 5 days of each stage.
• Accurately apply health insurance exclusions in your budget workbook for proper cap calculation.
• Include approved one-year exclusions in your 2026 cap base.
Why This Matters
• The base COLA is 2%, but municipalities can budget up to 3.5% with the correct ordinance or resolution.
• Adopt your ordinance before budget introduction.
• Health insurance growth is excluded from the cap and must be calculated correctly.
• Review one-year exceptions and include them in your cap base.
• Submit filings to DLGS on time to preserve your cap flexibility.
Local Finance Notice 2025-14
Please follow the link below to read more about these items and guidance on how your local unit can implement them: https://www.nj.gov/dca/dlgs/lfns/2025/2025-14.pdf
Contact Wielkotz & Company, LLC Today
For further information on Local Finance Notice 2025-14 and its implementation feel free to reach out to Steven Wielkotz at (973)-835-7900 ext. 201 or sdw@w-cpa.com.
