On certification to the Division of Local Government Services.
For affirmance -- Chief Justice Wilentz and Justices Sullivan, Pashman, Clifford, Schreiber, Handler and Pollock. For reversal -- None. The opinion of the Court was delivered by Sullivan, J.
This is an appeal, on direct certification granted, from the decision of the State's Director of the Division of Local Government Services (Director) refusing to approve the proposed 1981 budget of Morris County. Under the Local Budget Law, N.J.S.A. 40A:4-1 et seq., which is applicable to all counties and municipalities of the State, no budget may be adopted by a local governing body unless the Director shall have previously certified his approval thereof. N.J.S.A. 40A:4-10.
On January 14, 1981, the Board of Chosen Freeholders of Morris County introduced its 1981 budget and transmitted copies of it to the Director as required by N.J.S.A. 40A:4-5. Pursuant to his responsibilities to review proposed budgets, N.J.S.A. 40A:4-76 to 81, the Director examined the Morris County budget and determined that certain amounts included under "Miscellaneous Revenues" could not reasonably be expected to be realized and should not be anticipated as revenues. These amounts consisted of tax revenues to be collected by the State under the Financial Business Tax Law, N.J.S.A. 54:10B-1 et seq., and the Corporation Business Tax Law (Banking corporations),
N.J.S.A. 54:10A-33 et seq., which revenues Morris County had expected would be apportioned among the State and the several counties in accordance with statutory provisions for distribution. N.J.S.A. 54:10B-24 and N.J.S.A. 54:10A-33.*fn1 Based on his determination that the amounts could not reasonably be expected to be realized, the Director refused to approve the proposed Morris County budget.*fn2
The County appealed to the Local Finance Board of the Division of Local Government, N.J.S.A. 52:27BB-10(4), which conducted a hearing, taking testimony regarding the propriety of including these anticipated revenues in the budget and considering the basis for the Director's determination. Following the hearing on February 24, 1981, the decision of the Director was affirmed.
The basic issue involves the construction of the Local Budget Law insofar as it allows a governing body to include in its budget "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." N.J.S.A. 40A:4-25. Also involved is the scope of the Director's review under N.J.S.A. 40A:4-77 which requires that he determine "upon the basis of information and data available whether: a. all estimates of revenue are reasonable, accurate and correctly stated."
The Local Budget Law regulates the budget-making process for all counties and municipalities in the State. It establishes the procedure to be followed in adopting local budgets, N.J.S.A. 40A:4-4 to 10, as well as the form and content thereof, N.J. S.A. 40A:4-21 to 45. All budgets must be prepared on a cash basis
unless otherwise permitted by law. N.J.S.A. 40A:4-3. This insures that local governments will pay for the expenses they incur with cash actually collected or received during the fiscal year. The purpose of the Law is to require local governments to follow sound business principles in their budgetary practices. Its aim is to insure that anticipated revenues equal expenditures, State v. Boncelet, 107 N.J. Super. 444, 450-451 (App.Div.1969), and to prohibit deficit financing. Mount Laurel Township v. Local Finance Board, 166 N.J. Super. 254, 257 (App.Div.1978), aff'd, 79 N.J. 397 (1979).
The real dispute is over the evaluation of certain undisputed facts. While the Financial Business Tax Law and the Corporation Business Tax Law contain provisions for the distribution among the counties of part of the taxes collected by the State under these laws, the provisions are not self-executing and do not constitute legislative appropriations in and of themselves. Unless the Legislature each year includes in its general appropriation law a provision for such distribution, the full amount of taxes collected remains with the State to be used for general state purposes. See City of Camden v. Byrne, 82 N.J. 133, 145-146 (1980).
The record shows that in 1980 the Legislature included in its general appropriation law a provision for the allocation to the counties of a portion of such taxes in accordance with the statutory provisions for distribution, and that the several counties received the amounts allocated to them. It is also undisputed that in preparing its 1981 budget Morris County, in ...