New Jersey Section 2C:30-4 – Disbursing Moneys, Incurring Obligations In Excess Of Appropriations

New Jersey has a law, Section 2C:30-4, that prohibits government officials from spending public money or incurring obligations beyond what has been appropriated by the legislature. This law is intended to maintain fiscal responsibility and prevent misuse of taxpayer funds. However, it can also create challenges for local governments that need flexibility in their budgets. Let’s take a closer look at what the law says, how it impacts municipalities, and some potential pros and cons.

What Does The Law State?

Section 2C:30-4 of the New Jersey Code of Criminal Justice contains two key provisions:

• It is illegal for a public official to disburse money or incur obligations that exceed the appropriation or spending limit set by law for that department or agency.
• This applies to any “officer, department, division, board, commission or other body” at the state, county or municipal level.

Violating this law is a crime of the third degree in New Jersey. Essentially, the law prohibits deficit spending beyond what has been allocated by the annual budgetary process. It aims to prevent overspending of taxpayer dollars.

How Does This Impact Municipalities?

For local governments like cities, towns and counties, Section 2C:30-4 means all spending must stay within the amounts appropriated for each department or function. The annual municipal budget sets limits on expenditures for the police department, road repairs, recreation programs, etc. Officials cannot simply spend more than what was approved, even if unforeseen needs arise.

This creates some inflexibility. For example, if a water main breaks and requires emergency repairs exceeding the appropriation for public works, the municipality cannot just pay the added costs. They must either transfer funds from another account or pass an emergency appropriation ordinance.

Section 2C:30-4 also bars local governments from entering into contracts or agreements that obligate funds beyond the current budget year. So multi-year contracts often require special arrangements to avoid violating the law.

Potential Pros of the Law

While restrictive, Section 2C:30-4 offers some benefits:

• It promotes fiscal restraint and responsible spending of tax dollars. Officials cannot simply spend at will.
• It reinforces the budget process. Expenditures must align with voter-approved appropriations.
• It requires discipline to operate within financial limits and encourages long-term planning.
• It prevents deficit spending and accumulation of debt without express approval.

By limiting expenditures, the law aims to ensure stability, predictability, and financial accountability for local governments. Citizens want assurance their taxes are being used judiciously.

Potential Cons of the Law

However, the inflexibility of Section 2C:30-4 poses some downsides as well:

• It reduces responsiveness to unforeseen events and emergency needs. Repairing storm damage or paying police overtime may be complicated.
• It can inhibit long-term investments that span budget cycles, like infrastructure projects and technology upgrades.
• It limits risk-taking and innovation since experimenting with new programs requires budgetary commitment.
• It may encourage rushed year-end spending as departments try to “use or lose” appropriated funds before they expire.
• It could tempt officials to move money between accounts in ways that violate best practices for appropriations.

Critics argue the law reduces agility and makes it harder for local governments to operate strategically. Finding workarounds can also become an administrative burden.

Strategies and Defenses

When faced with the restrictions of Section 2C:30-4, New Jersey municipalities can employ various strategies and defenses to avoid violations:

• Seek guidance from the Division of Local Government Services on how to structure contracts or financial arrangements. The DLGS can offer opinions on compliance.
• Explore exceptions that may allow long-term agreements, such as the “escape clause” or contracts contingent on appropriations.
• Use temporary or emergency appropriations to address unanticipated needs.
• Create contingency or reserve accounts with funds that can cover unexpected costs.
• Be transparent and engage the public when changes are needed in spending plans.
• Make a good faith effort to comply with appropriations and demonstrate fiscal prudence overall.
• Cite case law allowing flexibility for emergency actions like the blizzard example above.
• Note that criminal sanctions are rare and violations typically lead to administrative actions or local political fallout.
• Emphasize that appropriations were not exceeded in total, only reallocated between accounts when necessary.
• Develop multi-year plans and budgets that appropriate funds in stages with voter approval.

When faced with dire needs, local officials can often craft solutions to avoid the harshest consequences under Section 2C:30-4. But they must be careful not to cross the line into misconduct.