Facing what it calls an impossible budget shortfall, the Toms River Regional School District — the largest in Ocean County — is preparing to file for federal bankruptcy protection, setting up a clash with the Murphy administration over the future of student services.
The school board on Monday refused to approve a budget for the next fiscal year. Officials say closing a $22.3 million gap would require a nearly 13% property tax increase, on top of a 9.3% hike the year before and the sale of $20 million in district assets.
Instead of approving the steep tax increase, board members authorized district officials to begin working with bankruptcy attorneys to file for Chapter 9 protection. Bankruptcy would allow the district to continue operating while freezing payments to creditors and negotiating a plan to restructure its debts.
The district, which enrolls about 14,600 students, has seen state aid slashed by $175 million in recent years under a revised school funding formula.
The standoff escalated Monday when the New Jersey Department of Education warned the district to immediately stop spending if it could not approve a budget.
In a letter to the board, David Corso, assistant commissioner of the Division of Financial Services, ordered the district to halt all spending, including on summer educational programs, and to “initiate closure procedures” to ensure no funds were used without a budget.
Defying the directive, the board voted to keep educational services running without interruption while it moves toward bankruptcy proceedings.
Local lawmakers weighed in, blaming what they called a politically motivated and flawed state funding formula.
“This is a revenue problem, created entirely by a deeply flawed and politically driven funding formula, implemented with zero transparency and even less accountability,” said a joint statement from Republican state Sens. James Holzapfel and Paul Amato, Jr., and Assemblymen Gregory McGuckin, Paul Kanitra, Brian Rumpf, and Greg Mhyre.
No timeline has been set for formally filing a bankruptcy petition, but board members said preparations would begin immediately.