Library Finance and State Aid Presented by Victoria Rosch, Deputy Director, Library Development Bureau, New Jersey State Library Presented May 9, 2009

The Board’s Financial Responsibilities NJ library law gives boards of trustees responsibility for the use of funds available for library purposes (Municipal: N.J.S.A. 40:54-12; County: N.J.S.A.40:33-8 Trustees are accountable for the use of funds Trustees must comply with applicable laws and as much as reasonable, with local customs

The Board’s Financial Responsibilities Set Financial Policies Develop, approve, monitor, and evaluate the budget against performance Oversee management of investments Assure adequate funds for the provision of library services; build good relationships with elected officials and community; assure money spent wisely; develop strategic plan for service with staff and community input

Basic sources of library funds… Local taxes and appropriations State Aid Fines, fees, gifts, bequests and fundraising activities Grants Federal funds, such as the e-rate Capital Funds

Local Financial Effort for Municipal Libraries Municipal/county expenditure generally comprises the largest percent of income for the library N.J.S.A. 40:54-8- the governing body shall annually appropriate and raise by taxation a sum equal to one-third of a mill on every dollar of assessable property within such municipality based on the prior year’s equalized valuation of such property Increase to the library may be limited to 15% of the previous year’s municipal expenditure to the library

One-third Mill Definitions Equalized valuation is the true value of real property within a local taxing district, computed from the aggregate assessed valuation and actual sales of property, and used to distribute equitably State school and library aid, apportion county taxes, and measure municipal debt limits One-third mill is the equalized valuation times

Sample Minimum Funding Calculation For A New Jersey Municipal Public Library Prior year Equalized Valuation: $921,534,000 Multiplied by (1/3 mill) $307,178 is the minimum level of support Most municipal libraries are above 1/3 of a mill

More Samples of 1/3 Mill Calculation BUDGET EQ VAL1/3 MILL YEAR PRIOR YR 2002$534,653,525$178, $586,700,890 $195, $684,943,295$228,314* * 16.74% increase in Eq Val so municipal expenditure to library may be limited to 15% of prior year = $224,902 (195, %)

Sample- Mini Budget for NJ Public Library Amount of local support given = $500,000 Personnel costs - $325,000 (65%) Materials (books, AV) 100,000 (20%) Other expenditures (building, supplies, continuing education, etc.) $75,000 (15%)

Budget Checklist for Board and Director Review prior year’s budget Develop next year’s program and services Anticipate revenues/ expenditures Review draft budget Revise as necessary Board approves budget

Budget Checklist- Continued Present to local officials Director and board member/s attend budget hearing to explain the budget and advocate for the library. The municipality/county sets the appropriation. Thank local officials The library board adopts the budget The library director implements the budget

Municipal/County Capital Budget Appropriations in the municipality’s capital budget are for items which have a five year life under the Local Bond Law Capital Improvements are financed by the issuance of notes or bonds by the municipality under the Bond Law Capital improvements are not subject to the municipality’s statutory spending limitation, but a waiver is required for the tax levy cap Municipal capital improvement expenditures are in addition to the library’s statutory minimum

Expenditures May be for any purpose related to providing library services (see NJAC 15: (c) for details) Follow appropriate laws and procedures Resolutions are required for all expenditures including funds held by municipality Keep reserve fund at appropriate level Spend your operating budget, or have a written plan detailing future use of funds. Advise municipality of plan Capital expense paid for by the library board of trustees with funds from the annual mandatory library appropriation may be considered an eligible cost under certain conditions (see NJAC 15: (c) for details)

Municipal and Library Budget Notes Best practice: One line in the municipal/county budget gives the trustees greater flexibility in use and transfer of funds In those municipalities/counties where the annual library appropriation is retained in the custody of the municipal/county treasurer and disbursed by her/him after approval of the board/commission by resolution, any prior year unexpended funds remaining from the mandatory library appropriation shall be retained in the library-controlled account dedicated for eligible purposes (important to review N.J.A.C. 15: ) If funded above 1/3 of a mill, be certain to receive your full appropriation by November 1

Investments Public funds must be deposited in banks or trusts in New Jersey organized under state laws, or with cash management funds May use N.J.S.A. 40A:5-15.1, Securities which may be purchased by local units, (provides a list of securities which may be purchased by library boards) and/or 40: , Investment of funds; regulation of bonds or securities Municipal libraries as a government agency, may not use a mutual fund or anything that has stocks or bonds where the principal is at risk. Funds should be deposited every 48 hours (N.J.S.A. 40A:5-15)

Fundraising Boards undertake the education of elected officials to assure that the library has the funding needed to provide excellent library service A foundation is often formed to undertake fundraising in the form of a capital campaign Friends of Libraries groups raise funds for expenses outside of the library’s operating budget Both the board and director attend programs on fundraising and investigate opportunities

Annual Audit The library should have an annual audit that shall include verification of all cash and bank balances. (N.J.S.A. 40A:5-4) If the audit is done by municipal auditors, make sure you get copies. If any recommendations are made, correct them promptly. Director needs to follow up on recommendations.

File Annual Reports Board shall make an annual report to the chief financial officer of the municipality which shall include a statement setting forth all revenues received,expenditures made and balance of funds available. The annual report shall also include an analysis of the state and condition of the library and shall be sent to the municipal governing body and to the State Library (N.J.S.A.40:54-15)

File Annual Reports NJSA 40:54-15 was revised in August 2008 New language: The annual report submitted by the library board of trustees to the municipality pursuant to N.J.S.A. 40:54-15 MAY identify excess funds that the board intends to approve for transfer to the municipality as miscellaneous revenue pending approval by the State Librarian. FAQ on this subject and steps required are available from NJSL

What is State Aid for public libraries? Since the 1960s, the NJ Legislature has appropriated funds to support a Per Capita Library Aid program Administered by NJ State Library Municipalities and counties annually submit an application Libraries annually submit a report in the form of an online survey, a Certification and other supporting documentation as needed

Eligibility for State Aid Minimum requirements based on decennial Census population served must be met for numbers of professional and other staff, operating hours, collections, and various public service areas (N.J.A.C. 15:21-2.3) If not met, State Aid is reduced. Exceptions may be made through petition to the State Librarian.

Calculation of State Aid The amount of tax support in relation to the prior year’s equalized valuation establishes the aid category; the greater the funding relative to prior year’s equalized valuation, the greater the aid category 5 aid categories – from $.50 to $1.50 per capita The Decennial Census is used in the formula to calculate payments

Summary: Know your role in promoting the library’s financial health Spend time developing, implementing, and evaluating plans and the budget to make them work Advocate for your budget – work with local officials and the community Seek new sources of revenue Keep abreast of laws and local traditions

Follow-up Resources NJ Statutes and Regulations pertaining to libraries at NJ State Library consultants NJ Library Association webpage Pat Tumulty: Victoria Rosch: