Governor Christie signed A2911 this afternoon. Changes to the law require the transfer of excess library funds to the municipality. Please see attached "Proposed Transfer" form, and the FAQ following (and attached).

Victoria Rosch Associate State Librarian New Jersey State Library vrosch@PROTECTED
609.278.2640 ext.157

FAQ N.J.S.A. 40:54-15 Transfer of Excess Library Funds to the Municipality

What items are included in the mandatory annual report to the municipality? The board of trustees shall make an annual report to the chief financial officer and municipal governing body of the municipality which shall include: \x95 a statement setting forth in detail all public revenues received by the library, \x95 all State aid received by the library, \x95 all expenditures made by the library and the balance of funds available \x95 an analysis of the state and condition of the library \x95 the annual report shall identify excess funds that the board must, pending State Librarian approval, transfer to the municipality as miscellaneous revenue.

NOTE: The annual NJ Public Library Survey suffices as the library\x92s report to the State Librarian. Please see the full text of NJSA 40:54-15 in the \x93Pertinent Statutes\x94 section following.

Is it mandatory to say in the annual report that money will be transferred? If the trustees have excess funds, they must be reported and returned.

Are there any requirements that necessitate long-term planning? Yes. Funds may not be returned until an approved strategic plan is in place, and as a \x93best practice\x94 all libraries should have a plan and keep it current. A strategic plan of 3, 4 or 5-year duration as well as a 3-year technology plan is required. The State Library will provide links to sample strategic plans and more details upon request.

What does \x93excess funds\x94 mean? \x93Excess funds\x94 (not synonymous with a surplus account in the budget) means funds on hand not intended for use or emergency use in the operating budget. The trustees must allocate at least 120% of the \x93audited operating expenditures of the library for the most recent available year\x94 in the operating budget of the year in which the money is to be returned. Surplus, included as part of the operating budget, may be no more than 20% of the last audited budget. Anything above 20% must be returned to the municipality. Capital accounts and grant accounts are the only accounts specifically excluded from the calculations.

How do I calculate the amount to be returned to the municipality? If you have more than 20% in a surplus account, you will want to obtain the \x93Proposed Transfer Form\x94 (see contact information below). This form contains formulas that you will need to make the calculations. Don\x92t forget that if you do not have an acceptable strategic plan, you will need to produce one to return funds.

What steps must the trustees take to return funding to the taxpayers? Contact the Library Development Bureau of the New Jersey State Library (NJSL) for guidelines, forms and steps necessary to apply to the State Librarian for the approval to transfer funding to the municipality. See below for contact information.

How long does it take NJSL to complete the review? NJSL staff members make every effort to complete the process within 45 calendar days. To date, turnaround time has been under 3 weeks for those who submitted complete packets that met all minimum requirements.

Does the library have to maintain a surplus equal to 20% of the last audited budget? The library is not required to maintain any minimum amount of funding as surplus (although it is recommended that a prudent amount be retained as surplus in an emergency fund). However, if it is required to return funding to the municipality, 20% (but no more) of the last audited budget must be maintained in surplus.

How are fines, copy fees and non-resident fees handled? Fines, copy fees and non-resident fees (if available to the trustees), are counted as part of surplus unless expended in the operating budget.

How are gifts handled? Whether or not gifts and bequests (NJSA 40:54-19.5 to 22) might qualify as surplus is not addressed in NJSA 40:54-15. Small gifts might be anticipated and spent as part of the operating budget. Large gifts or endowments often are given with restrictions. Gifts for the library given to separate groups such as the Friends or a Foundation are not under the control of the trustees and would not be considered library surplus.

If the library returns funding to the municipality, are there any restrictions on what the municipality must do with the money? Yes. The money must be used \x93solely and exclusively to reduce the amount required to be raised by the local property tax levy\x94 (see NJSA 40A:4-25.1, Use of library monies transferred to municipality).

How does the municipality budget the returned funds? NJSA 40A:4-25.1 states that it \x93may be anticipated by the municipality as miscellaneous revenue.\x94

If the municipality receives the return of funds after the Division of Local Government Services (DLGS) has already approved the budget for the year, how is the money handled? The municipality may accept the funds after the budget have been approved by DLGS, but the funds would remain in the budget as miscellaneous revenue. The funds would be used in the following budget year to reduce taxes. DLGS would review and approve the transfer of funding in that year.

Instead of the trustees returning funding to the municipality, may the municipality reduce the annual contribution? No. It is a transfer from the trustees to the municipality (see NJSA 40A:4-25.1, Use of library monies transferred to municipality).

Contact: Michele Stricker at mstricker@PROTECTED or 609.278.2640 ext. 164 \x93Proposed Transfer Form\x94 is available at (webpage currently under construction)

Pertinent Statutes

NJSA 40:54-15 Annual report, identification of excess funds to municipality, transfer procedure. a. The board of trustees shall make an annual report to the chief financial officer of the municipality which shall include a statement setting forth in detail all public revenues received by the library, all State aid received by the library, all expenditures made by the library and the balance of funds available. Notwithstanding the requirements of R.S.40:54-8 pertaining to the amount required to be raised and appropriated for library purposes, the annual report shall identify excess funds that the board is required to approve and transfer to the municipality as miscellaneous revenue. The excess funds transferred shall be any amount that exceeds the sum of the amount of the audited operating expenditures of the library for the most recent available year, plus an additional 20% of those operating expenditures, excluding funds restricted for capital projects and grants, to be maintained as surplus. The annual report shall also include an analysis of the state and conditio

n of the library and shall be sent to the municipal governing body and to the State Library. The State Librarian shall prescribe by regulation the form of all such reports.

b. (1) Except as limited in paragraph (2) of this subsection, the board of trustees of a municipal free library shall adopt a resolution of its intent to transfer excess funds to the municipality, as identified in its annual report pursuant to subsection a. of this section. (2) The board of trustees of a municipal free library established after the effective date of P.L.2008, c.8 shall not adopt a resolution of intent pursuant to this subsection before the eighth budget year following its establishment.

c. Once the board of trustees has adopted a resolution of intent pursuant to subsection b. of this section, it shall forward the resolution to the State Librarian for approval, along with any other information required by the State Librarian and in accordance with procedures and forms promulgated by the State Librarian in consultation with the Director of the Division of Local Government Services in the Department of Community Affairs. The State Librarian shall approve any resolution upon a determination that all of the following provisions are met: (1) the municipal free library will still retain a sum equal to the amount of the audited operating expenditures of the library for the most recent available year plus an additional 20% of that amount, excluding funds restricted for capital projects and grants, to be maintained as surplus; (2) the municipality and the municipal free library are in compliance with all conditions imposed by rule or regulation promulgated by the State Librarian for per capita library aid to public libraries according to the "state library aid law," N.J.S.18A:74-1 et seq., and pertaining to appropriations for the maintenance of a municipal free library according to R.S.40:54-8 or section 2 of P.L.1959, c.155 (C.40:54-29.4) in the case of a joint free public library; (3) there are sufficient funds remaining in the municipal free library's operating budget for the maintenance of the library for the balance of the fiscal year in which the transfer of funds to the municipality occurs; and (4) the library board of trustees has a written plan of at least three years that reflects that the long-term funding needs of the library will be met, and that any capital expense will contribute to the provision of efficient and effective library services, and that the written plan has been approved by the State Librarian.

d. Upon approval of its resolution of intent by the State Librarian pursuant to subsection c. of this section, the board of trustees shall cause the amount of the excess funds identified in its resolution to be transferred to the municipality. Amended 1985, c.541, s.2; 2001, c.137, s.55; 2008, c.8, s.1.

NJSA 40A:4-25, Miscellaneous revenues. "Miscellaneous revenues" shall include such amounts as may reasonably be expected to be realized in cash during the fiscal year from known and regular sources, or from sources reasonably capable of anticipation, and lawfully applicable to the appropriations made in the budget, other than dedicated revenues, revenues from taxes to be levied to support the budget, receipts from delinquent taxes, and surplus. Miscellaneous revenues stated in the budget shall be classified according to their respective sources. L.1960, c. 169, s. 1, eff. Jan. 1, 1962.

40A:4-25.1, Use of library monies transferred to municipality. \x85 2. Monies approved by the State Librarian for transfer to a municipality by the board of trustees of its municipal free library, pursuant to subsection c. of R.S.40:54-15, may be anticipated by the municipality as a miscellaneous revenue; provided, however, that the monies shall be used solely and exclusively by the municipality for the purposes of reducing the amount the municipality is required to raise by local property tax levy for municipal purposes. The director shall certify that each municipality has complied with this section. If the director finds that monies transferred to a municipality by its municipal free library pursuant to subsection d. of R.S.40:54-15 are not used by that municipality solely and exclusively to reduce the amount required to be raised by the local property tax levy, then the director shall correct the municipal budget, pursuant to N.J.S.40A:4-86, to ensure that the transferred funds are used for that purpose only. L.2008, c.8, s.2.

NOTE: \x93Director\x94 above means the director of the Division of Local Government Services in the Department of Community Affairs.

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