UPDATE: 6:03 p.m. The School District of the Chathams will lose $2.58 million in state aid next year and will be forced to cobble together a budget with 86.3 percent less state aid than it had last year.

As a result, the district may have trouble hiring the additional teachers it had planned to take on next year, according to Superintendent Jim O'Neill.

O'Neill said today that when district officials had begun to craft a budget in the previous few weeks and months, they had projected it would lose $450,000 based on prior statements made by state Department of Education officials.

"That's how dramatic the swing is," he said.

In those statements, DOE officials had said school districts could expect to see state aid reductions of 15 percent next year. But Christie's budget speech Tuesday went even further than that. It indicated that districts would see cuts that could be equal to five percent of the total Board of Education budget. Chatham's state aid was cut by 4.99 percent of its total budget. The district can consider itself lucky, however—59 school districts across the state, such as the Madison School District, lost all of their state aid.

As of now, property taxes make up 94 percent of the school district's budget, but that number will be increased to nearly 99 percent under the governor's proposal.

The school district is technically only allowed to increase local property taxes by 4 percent, but has some flexibility to increase them by even more if it chooses to do so. It is basically allowed to increase property taxes by more than that 4 percent if there is an increase in enrollment (which there will be), and is also allowed some more room to increase taxes if there are drastic state aid cuts (which there are).

O'Neill said the budget crunch, coupled with the district's desire to not increase property taxes by a heavy margin, will mean he and Business Adminstrator Ralph Goodwin will engage in a "balancing act" to determine which parts of the district's program must be saved and which can be cut. A preliminary version of the district's 2010-11 budget will be presented to the Board of Education at its next meeting March 22.

"I haven't talked to a superintendent yet who hasn't talked about having to cut staff," O'Neill said.

The district had hoped to add 10 teachers next school year. Four would be in the high school, four would be in the middle school and two would be in the elementary schools. It would cost the district about $600,000.

"Now it becomes much more difficult for us to do that," O'Neill said.

State Education Commissioner Bret Schundler defended the increased cuts in a conference call with reporters Wednesday afternoon. He avoided discussing individual districts and the cuts, stressing the overall aid figure.

"Districts had the understanding that it would be 15 percent, and it is a number that is less than that," he said.

Schundler placed the blame at the state aid reductions for school districts at the feet of previous Democratic administrations, and defended the cuts by saying that the state legislature can avert layoffs at the school district level by implementing Christie's package of public employee reforms in a quick time frame. The package includes changing the pension and health benefits packages for teachers, including requiring co-pays and larger payments for pensions. The co-pays will apply to school personnel who retire after the changes are made, but not to those who leave their jobs before the proposals are enacted.

He said this will allow for more quick retirements from teachers who do not want to pay part of their health insurance in retirement. Quick enactment, he said, which is not considered likely, will help stem the expected layoffs in school districts statewide.

"That will dramactically reduce the number of personnel reductions that would be achieved through a layoff," he said. "These reforms will reduce costs to the districts and create a need for early retirements."

Even though the district may be allowed to increase property taxes by more than four percent next year, another proposal by Christie may prohibit districts across the state from doing so in the future.

The governor is asking the state legislature to approve an amendment to the state constitution calling for a cap of 2.5 percent in annual property tax increases. In addition, he is calling for a constitutional amendment that would cap state budget increases at 2.5 percent.

"If the state had a constitutional requirement to be under 2.5 percent, I think that would shortly drive schools and municipalities to be under 2.5 percent," O'Neill said.

Westfield Patch Editor John Celock contributed reporting.