Can a New Jersey county pay for a court-ordered jail improvement using a 'special emergency appropriation' (and three-year notes) instead of putting the cost in its annual budget?
Plain-English summary
In January 1990, Essex County signed a consent order requiring it to make capital improvements to county jails and to pay ongoing operating costs for inmate counseling and other services. When the County submitted its final 1990 budget months later, it left those costs out. The County's plan was to fund the court-ordered work through a "special emergency appropriation" under N.J.S.A. 40A:4-55.13, financed by three-year borrowing notes, instead of including the expense in the regular annual budget.
Barry Skokowski, the Director of Local Government Services, asked the Attorney General whether he could approve such a budget. Attorney General Robert J. Del Tufo said no. Special emergency appropriations under N.J.S.A. 40A:4-55.13 are limited to costs that arise from a "public exigency caused by civil disturbances" and that occur after the budget is adopted. The Local Budget Law's whole purpose is to make local governments include foreseeable obligations in the annual budget on a cash, pay-as-you-go basis. A county cannot deliberately leave out a known liability and treat it as a post-adoption emergency.
The Director's duty under N.J.S.A. 40A:4-78 is to refuse approval of a budget that fails to meet the requirements of law. Approving Essex County's proposed budget would have endorsed using emergency-appropriation borrowing as a workaround for ordinary budget responsibilities. The Director was therefore obligated to disapprove it.
What this means for you
If you are a New Jersey county administrator or chief financial officer
A "special emergency appropriation" is not a flexible off-budget line. The two statutory paths are narrow: N.J.S.A. 40A:4-46 permits emergency appropriations after the budget is adopted for purposes that were not foreseen at the time of adoption; N.J.S.A. 40A:4-55.13 permits special emergency appropriations after adoption for costs arising from a public exigency caused by civil disturbances. If you know about an obligation when the budget is being prepared, even one imposed by a court order, you must include it in the final budget. Trying to defer it to a post-adoption emergency mechanism so you can finance it with three-year notes is exactly what this opinion forbids.
A few statutes do allow special emergency appropriations for foreseeable items (tax maps under N.J.S.A. 40A:4-53; county college aid anticipation under N.J.S.A. 40A:4-55.8). Read each carefully. They are limited exceptions, not a general permission.
If you are a Division of Local Government Services reviewer
Your review under N.J.S.A. 40A:4-76 and -77 is not just a technical compliance check. Where the local unit has structured its final budget around an emergency-appropriation workaround for known liabilities, this opinion gives you both the authority and the obligation under N.J.S.A. 40A:4-78 to refuse approval. The benchmark from Passaic v. Local Finance Bd. is whether the local unit made a "bona fide effort to include whatever items should reasonably have been inserted in the budget in reasonable amounts." A budget that omits a known, signed consent-order obligation does not meet that standard.
If you are a county freeholder or council member
Court-ordered remedial obligations (jail conditions cases, special education compliance, environmental cleanup) are substantial, often unwelcome, and have real political costs because they eat into the rest of the budget. The temptation to push them off-budget is real, but doing so violates the Local Budget Law's pay-as-you-go principle and risks Director disapproval. The opinion notes that capital portions of a court order may sometimes be financeable through the Local Bond Law (N.J.S.A. 40A:2-1 et seq.) for items with at least a five-year period of usefulness, but operating costs (counseling, services) almost always must be funded through the annual budget.
If you are bond counsel or finance counsel for a New Jersey local unit
Three-year-note financing under N.J.S.A. 40A:4-55.16 is keyed to a valid special emergency appropriation. If the underlying appropriation is invalid because the costs were foreseeable at budget-adoption time, the financing structure is also defective. Counsel reviewing such notes for a county facing a court-ordered obligation should verify the predicate facts: was there really a post-adoption civil disturbance, and were the costs really unforeseen?
If you are an attorney handling a consent decree against a county
Be aware that the county cannot necessarily push the cost of compliance into a future fiscal year through emergency-appropriation financing. The cost has to compete for space in the annual budget. That gives plaintiffs' counsel some use to insist on funding mechanisms that work within the Local Budget Law, rather than relying on the county's promise to "find the money" later.
Common questions
Q: Why does it matter whether costs are paid through the budget versus a special emergency appropriation?
A: Items in the annual budget come out of the current year's revenue (taxes, fees, state aid). A special emergency appropriation can be financed by borrowing through three-year notes (N.J.S.A. 40A:4-55.16). Pushing foreseeable costs into emergency appropriations effectively converts current expenses into deficit-financed debt, which the Supreme Court warned in Passaic "subverts the pay-as-you-go principle and could effectively constitute deficit financing."
Q: What counts as "unforeseen" under N.J.S.A. 40A:4-46?
A: The Passaic test: the need was either genuinely unforeseen, or there was a "bona fide effort" to provide for it in the budget but it could not be fully covered. A signed consent order entered before final budget adoption almost never qualifies as unforeseen.
Q: Does N.J.S.A. 40A:4-55.13 require both a civil disturbance and post-adoption timing?
A: The opinion holds yes, the post-adoption timing is required. The opinion does not need to reach the question whether court-ordered jail improvements are themselves caused by a "civil disturbance" because the timing problem alone disqualifies the appropriation here.
Q: What if a true civil disturbance happens after the budget is adopted, like a riot at a county facility?
A: Then N.J.S.A. 40A:4-55.13 is potentially available. The cost was unforeseeable at budget adoption time and arose from a public exigency caused by a civil disturbance. The county can adopt a resolution, make the special emergency appropriation, and finance it through three-year notes per N.J.S.A. 40A:4-55.16.
Q: Can a county finance court-ordered jail capital improvements through a bond ordinance instead?
A: For capital items with at least a five-year period of usefulness, yes. The Local Bond Law (N.J.S.A. 40A:2-1 et seq.) and the Local Lands and Buildings Law (N.J.S.A. 40A:12-1 et seq.) allow long-term debt financing for capital improvements. The opinion notes this option but flags two practical limits: most consent-order costs are operating expenses (not bondable), and capital improvements that have already been completed and paid for cannot retroactively be financed by bonds.
Q: Could using emergency appropriations be a Cap Law violation?
A: The opinion says it could be "in certain circumstances" but explicitly does not decide that question. The Local Government Cap Law (N.J.S.A. 40A:4-45.1 et seq.) limits how much the budget may be increased annually; off-budget emergency appropriations could be used to evade that cap, but Director disapproval under N.J.S.A. 40A:4-78 already addresses the immediate problem.
Q: What happens if the Director refuses to approve a county budget?
A: Under N.J.S.A. 40A:4-10, no budget may be adopted unless the Director has certified prior approval. The county must revise the budget to comply with the law and resubmit it. Under N.J.S.A. 40A:4-57, the county also cannot expend money or incur liability without an appropriation, so the practical pressure on the county to come back with a compliant budget is significant.
Background and statutory framework
New Jersey's Local Budget Law (N.J.S.A. 40A:4-1 et seq.) is one of the most prescriptive in the country. Counties and municipalities must prepare budgets on a cash basis (40A:4-3), include all foreseeable expenses, balance anticipated revenues against expenditures, and submit the budget to the Division of Local Government Services for Director approval before adoption. The Director's review is substantive: under N.J.S.A. 40A:4-78, if the budget does not meet legal requirements, the Director "shall refuse to approve it."
The statute carves out two categories of emergency appropriations made after the budget is adopted:
-
N.J.S.A. 40A:4-46 allows ordinary emergency appropriations "for a purpose which is not foreseen at the time of the adoption" of the budget. This is the broader provision but requires unforeseeability.
-
N.J.S.A. 40A:4-55.13 allows "special emergency appropriations" for "costs arising from a public exigency caused by civil disturbances." Special emergency appropriations are powerful because they can be financed through three-year notes under N.J.S.A. 40A:4-55.14 and -55.16, effectively allowing the cost to be spread over time rather than absorbed in a single fiscal year.
A small handful of other special emergency provisions (N.J.S.A. 40A:4-53 for tax map preparation; N.J.S.A. 40A:4-55.8 for county college aid anticipation) allow emergency appropriations for foreseeable costs. These are limited legislative exceptions to the general rule that budgets must capture all known expenses.
The 1990 dispute centered on Essex County's attempt to use the civil-disturbance provision (N.J.S.A. 40A:4-55.13) for a court-ordered jail-conditions consent decree. The County signed the consent order on January 2, 1990, and the court entered it on January 5, 1990, while the County was still operating under a temporary budget. The final budget was being prepared at the same time. The County argued that because N.J.S.A. 40A:4-55.13 does not contain the word "unforeseen" the way N.J.S.A. 40A:4-46 does, it could be used at any time during the fiscal year. The Attorney General rejected that textual argument, holding that the requirement that the appropriation be made "after the adoption of the budget" carries an implicit unforeseeability requirement, consistent with the Supreme Court's reasoning in Passaic.
The result is that court-ordered remedial obligations known at budget time must be funded through the regular budget (with cuts elsewhere if necessary), through a properly issued bond ordinance for qualifying capital portions, or through some other lawful mechanism. They cannot be papered over as a "special emergency appropriation" simply to defer the cost or to escape the cap on annual budget increases.
Citations and references
Statutes:
- N.J.S.A. 40A:4-1 et seq. (Local Budget Law)
- N.J.S.A. 40A:4-3 (cash basis budgets)
- N.J.S.A. 40A:4-10 (Director's prior approval required)
- N.J.S.A. 40A:4-46 (post-budget emergency appropriations for unforeseen needs)
- N.J.S.A. 40A:4-53 (special emergency appropriations: tax maps and similar)
- N.J.S.A. 40A:4-55.8 (county college aid anticipation)
- N.J.S.A. 40A:4-55.13 (special emergency appropriations: civil disturbances)
- N.J.S.A. 40A:4-55.14, 40A:4-55.16 (three-year-note financing)
- N.J.S.A. 40A:4-57 (no expenditure without appropriation)
- N.J.S.A. 40A:4-76 to -78 (Director's review and refusal)
- N.J.S.A. 40A:4-45.1 et seq. (Local Government Cap Law)
- N.J.S.A. 40A:2-1 et seq. (Local Bond Law)
- N.J.S.A. 40A:12-1 et seq. (Local Lands and Buildings Law)
Cases:
- Passaic v. Local Finance Bd., Commun. Aff., Etc., 88 N.J. 293 (1982), foundational authority on bona fide effort and pay-as-you-go principle
- Morris Cty. v. Skokowski, 86 N.J. 419 (1981), paramount purpose of Local Budget Law
- Trainor v. Burlington Cty. Freeholder Bd., 200 N.J. Super. 288 (Law Div. 1984), bar on expenditure without appropriation
- Alexander v. NJ Power & Light Co., 21 N.J. 373 (1956), statutory construction
- Albert F. Ruehl Co. v. Bd. of Trustees of Schools for Indus. Ed., 85 N.J. Super. 4 (Law Div. 1964), words presumed to have purpose
- Wollen v. Fort Lee, 27 N.J. 408 (1958), words read in context of whole statute
Source
- Original PDF: https://www.nj.gov/oag/oag/ag%20opinion%201990-1.pdf
Original opinion text
Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.
STATE OF NEW JERSEY
DEPARTMENT OF LAW AND PUBLIC SAFETY
ROBERT J. DEL TUFO
ATTORNEY GENERAL
August 28, 1990
Barry Skokowski, Sr.
Deputy Commissioner and Director
Division of Local Government Services
Department of Community Affairs
101 South Broad Street - CN 800
Trenton, New Jersey 08625
Re: FORMAL OPINION NO. 1 (1990): Authority of Director of Local Government Services to Disapprove a County Budget That Does Not Provide for an Appropriation to Meet Foreseen Obligations.
Dear Mr. Skokowski:
You have asked if the Director of Local Government Services may approve a county budget where the county proposes funding certain court-ordered county jail improvements outside of the budget process through a "special emergency appropriation" pursuant to N.J.S.A. 40A:4-55.13. For the reasons that follow, you are advised that the Director may not approve a county budget under that provision where he determines that the budget does not provide for an appropriation to meet obligations known or foreseen at the time the budget was prepared.
Your inquiry arises out of the following circumstances: Essex County has been operating, we are informed, under a temporary budget approved in January 1990. The final budget submitted for the Director's approval does not provide for any appropriation to meet current fiscal year anticipated costs of certain court-ordered jail improvements. The court order, which was signed by the parties, including the County on January 2, 1990, and by the court on January 5, 1990, requires the County to make certain capital improvements to county jails and to provide for certain operating costs for counseling and other inmate services at those jails. Instead of including these costs in the proposed final budget, the County proposes to pay for them with a special emergency appropriation under N.J.S.A. 40A:4-55.13 to be financed by borrowing money through the issuance of three-year notes as provided for in N.J.S.A. 40A:4-55.16.
The Local Budget Law, N.J.S.A. 40A:4-1 et seq., regulates the budget-making process for all counties and municipalities in this State. It contains several provisions by which a county can provide for meeting emergency government needs. Fundamentally, N.J.S.A. 40A:4-46 provides in pertinent part that a county "may make emergency appropriations, after the adoption of a budget, for a purpose which is not foreseen at the time of the adoption thereof." Thus, under its express terms, an emergency must be unforeseen and it must occur after adoption of the final budget. Essex County has not sought to utilize this statutory provision as justification to fund its court-ordered obligations at issue here. Rather, the County argues that its obligations under the court order may be financed through a special emergency appropriation authorized pursuant to N.J.S.A. 40A:4-55.13. That statutory provision states in its entirety that:
A local unit may by resolution make special emergency appropriations after the adoption of the budget, for costs arising from a public exigency caused by civil disturbances.
If this provision is applicable, the County would be able to borrow money to pay for its court-imposed obligations in the form of three-year notes. N.J.S.A. 40A:4-55.14 and 55.16. Hence, the issues presented in this case are whether the events which led to the obligations to be funded by a special emergency appropriation must occur after final budget approval or whether a special emergency appropriation can be used at any time during the fiscal year so long as it is used to fund the costs caused by a civil disturbance.
It is well-established that the primary goal of all statutory construction is to give effect to the legislative intention. Alexander v. NJ Power & Light Co., 21 N.J. 373 (1956). Accordingly, each word of a statute is presumed to have been placed there by the Legislature for a reason. Albert F. Ruehl Co. v. Board of Trustees of Schools for Indus. Ed., 85 N.J. Super. 4, 13 (Law Div. 1964). Further, the particular words of a statute must be made responsive to the internal sense of the legislation as a whole. Wollen v. Fort Lee, 27 N.J. 408, 418 (1958).
[Footnote: As noted, the second requirement of the statute is that the special emergency appropriation must be in response to "civil disturbances." It is unnecessary for us to resolve whether the costs of funding the court-ordered remedial correctional measures here were caused by a civil disturbance within the meaning of the statute if it is determined that the civil disturbance must occur after the budget is adopted in order to invoke the statutory provision.]
The paramount purpose of the Local Budget Law is to require local governments to follow sound business principles in their budgetary practices, and its aim is to insure that anticipated revenues equal expenditures. Morris Cty. v. Skokowski, 86 N.J. 419, 423 (1981). In construing the provisions of N.J.S.A. 40A:4-46, the New Jersey Supreme Court has noted that the propriety of a post-budget emergency appropriation would depend upon whether there had been a failure to make adequate provision in the budget for the costs at issue, and whether the failure occurred "despite a bona fide effort to include whatever items should reasonably have been inserted in the budget in reasonable amounts." Passaic v. Local Finance Bd., Commun. Aff., Etc., 88 N.J. 293, 300 (1982). In considering what would constitute a bona fide effort, the Court cited the requirement that budgets be prepared on a "cash basis", N.J.S.A. 40A:4-3, and noted that "[m]unicipal financing is formulated on a pay-as-you-go principle. To permit the unbridled use of supplemental emergency funding subverts that tenet and could effectively constitute deficit financing." Passaic, 88 N.J. at 300-01.
The emergency appropriation which may be made pursuant to N.J.S.A. 40A:4-55.13 can only be made "after the budget is adopted." Clearly, this means that the costs which may be funded by an emergency appropriation could not have been foreseen or could not have been provided for in full despite a bona fide effort to do so at the time the budget was adopted. Had the Legislature intended a different result, there would have been no reason to require that the special emergency appropriation be made "after the budget is adopted."
This view is consistent with the Supreme Court's approach in Passaic, supra. There the Court concluded that an emergency appropriation is only available to a local governing body where the need is unforeseen at budget-making time or where the failure to provide in full for an anticipated need occurred despite a bona fide effort to structure a reasonable budget. Id., 88 N.J. at 302-03. Planning for an emergency appropriation during the budget process, as is being done in this case, is inconsistent with making a bona fide effort to structure a reasonable budget. Clearly then, it must be concluded that costs which are known at the time of budget preparation should be included during that process. In this case, the County signed a consent order in January 1990 and thus knew it was obligated to incur the expenses involved here at a time when it was operating under a temporary budget and in the midst of planning for its final budget. It would be unreasonable to conclude under these circumstances that these expenses were unforeseen.
[Footnote: Such a funding mechanism could, in certain circumstances, be seen as an evasion of the Local Government Cap Law, N.J.S.A. 40A:4-45.1 et seq., which limits the amount by which the budget may be increased annually. We are not suggesting, however, that the restrictions of the Cap Law are an issue in this matter.]
The County advances the argument that since N.J.S.A. 40A:4-55.13 does not include the word "unforeseen," when compared with the language of N.J.S.A. 40A:4-46, the Legislature must have intended a county to use a special emergency appropriation to fund the costs of a civil disturbance, regardless of when the disturbance occurred. To the contrary, any reasoned interpretation of the statute must conclude that the Legislature's true design was to address only true emergency situations, i.e. those incapable of being provided for in any reasonable planning process. Therefore, in our view, the County places undue reliance on the absence of one word from the text to the detriment of the fair import of the entire provision.
Having concluded that the County may resort to emergency appropriations only when the costs intended to be funded by such appropriations result from true emergencies occurring after completion of the budget process, it is necessary to turn briefly to the obligations of the Director of the Division of Local Government Services.
[Footnote: There are other provisions in the Local Budget Law which may permit "special emergency appropriations" for costs that could be reasonably foreseen at the time of the adoption of a final budget. See N.J.S.A. 40A:4-53 (preparation of tax maps, etc.); N.J.S.A. 40A:4-55.8 (expenses of county colleges in anticipation of aid). None of the expenses at issue here are sought to be financed under these provisions which, in any event, must be seen as limited legislative modifications to the recognized general rule that a budget encompass all foreseeable expenses at the time of its adoption in order to ensure responsible spending practices by the local government entity. Passaic, supra. Parenthetically, we note that the Supreme Court was comfortable in applying an "unforeseeability" test under N.J.S.A. 40A:4-46, and by extension of reasoning here to N.J.S.A. 40A:4-55.13, while recognizing that unforeseeability is not a predicate to the use of a "special emergency appropriation" to fund significant governmental expenses under N.J.S.A. 40A:4-53. Passaic, 88 N.J. at 298. In short, the Legislature has done no more than exercise its right to establish different alternatives for different circumstances.]
The Local Budget Law requires the Director to examine the annual budgets of all municipalities and counties and to determine, among other things, whether each of those budgets complies with the requirements of law and the regulations of the local government board. N.J.S.A. 40A:4-76 to -77. No budget may be adopted by a local governing body unless the Director has certified his prior approval. N.J.S.A. 40A:4-10. If the Director finds that the budget does not meet all requirements of law and of the regulations of the local government board, he is required to "refuse to approve it." N.J.S.A. 40A:4-78. The Budget Law prohibits any county or municipality from expending any money or incurring any liability in the absence of an appropriation for the particular expenditure or liability. N.J.S.A. 40A:4-57; Trainor v. Burlington Cty. Freeholder Bd., 200 N.J. Super. 288, 301-02 (Law Div. 1984). It also requires that annual budgets be adopted "on a cash basis unless otherwise permitted by law." N.J.S.A. 40A:4-3. Therefore, when a special emergency appropriation under N.J.S.A. 40A:4-55.13 or under N.J.S.A. 40A:4-46 is not available to the County to meet its fiscal needs that are known and can be provided for in the final budget, the Director is not empowered to approve a final budget that relies on such budget approaches.
[Footnote: To the extent the County must satisfy its court-imposed obligation by making capital improvements to county jails, it may be possible for it to proceed in part under the Local Bond Law, N.J.S.A. 40A:2-1 et seq., by adopting a bond ordinance to issue debt for any capital improvement or property which it may lawfully make or acquire, or for any other purpose for which a county is authorized by law to make an appropriation, provided that the purpose does not constitute a current expense and provided further that the purpose has a period of usefulness of not less than five years. N.J.S.A. 40A:2-3; N.J.S.A. 40A:2-21. Although we have not been asked to consider the propriety of this option in the context of your inquiry and we express no opinion in that regard, we note that the Local Lands and Buildings Law, N.J.S.A. 40A:12-1 et seq., provides that a county may construct, repair, alter, enlarge, rebuild, refurnish or rehabilitate any building or other capital improvement for any county public purpose. N.J.S.A. 40A:12-3. This approach, however, may be of little practical utility here since it appears the majority of costs associated with the implementation of the consent order are for operating expenses and not capital improvements, and further, that the capital improvements may have already been made and paid for, thereby casting strong doubt on the use of bonds as a source of financing.]
In sum, you are advised that the Director may not approve the proposed Essex County budget under N.J.S.A. 40A:4-78, in the circumstances of this particular inquiry, on the ground that the budget does not meet all requirements of law where it fails to provide for an appropriation to address known liabilities or expenditures imposed by court order as required by N.J.S.A. 40A:4-55.13.
ROBERT J. DEL TUFO
ATTORNEY GENERAL