New Jersey’s Education Commissioner acknowledged during a legislative budget hearing that the state shares some responsibility for the ongoing fiscal crisis in the Lakewood Public School District, citing the role of state-appointed monitors who oversee local financial decisions.

Testifying before the Assembly Budget Committee, Education Commissioner Lily Laux was pressed by Assemblyman Avi Schnall on the extent of the state’s accountability for the district’s persistent deficit, which has now prompted an attempted takeover by the state Education Department.

During the exchange, Laux acknowledged that while local officials manage the district, the state’s oversight structure plays a significant role in approving key financial actions.

“If there is a district that has been found to be fiscally mismanaged, and that district [had a fiscal monitor installed by the state] who would hold the responsibility of the fiscal mismanagement? Would it be the the BA (business administrator), would it be the board (of education)? would it be the superintendent? Remember, not a nickel can be spent without the approval of the state monitor. Everything had to be approved by the state monitor,” Schnall noted, adding that Lakewood has had 11 state-appointed monitors over the last 12 years, with four currently stationed in the district.

Those monitors “have not made much of a difference,” he said. “If anything the fiscal deficit has grown by a lot.”

“I would … certainly say all of the above in terms of responsibility,” Laux answered, pointing to the involvement of fiscal monitors who review and authorize spending decisions made by the school board.

The comments come as Lakewood remains at the center of a high-stakes legal and political battle over a proposed state takeover of the district.

In January, the New Jersey Department of Education initiated formal steps toward full state intervention, arguing that years of financial instability and governance issues have deprived students of a constitutionally required education. The move would install a state-appointed superintendent with sweeping authority over district operations, effectively reducing the locally elected school board to an advisory role.

Local officials, however, have strongly contested the takeover. In a detailed response filed in March, the Lakewood Board of Education argued that the state has overstated academic deficiencies and failed to account for the district’s unique circumstances, including what it says are improving performance metrics that fall above thresholds required for state intervention.

The district has also emphasized that its financial challenges stem largely from structural factors — including state-mandated costs for transportation and special education, as well as a large nonpublic school population — rather than mismanagement by local officials.

Those same structural issues were echoed during the budget hearing, where Schnall argued that the state cannot both exert significant financial control through appointed monitors and simultaneously disclaim responsibility for the district’s deficits.

Lakewood’s public school system has faced years of budget shortfalls, driven in part by rising costs tied to legally required services for both public and nonpublic school students. The district’s unique demographics — with far more students attending private schools than public ones — have long complicated funding formulas and drawn scrutiny from state officials and lawmakers alike.

The dispute over control is now moving through an administrative and legal process that could ultimately determine whether the state assumes full authority over the district. Any final decision is expected to involve recommendations from the Department of Education and could face further legal challenges.

Lawmakers on the committee continued to examine the issue as part of broader deliberations over the state’s education budget, with Lakewood’s situation frequently cited as one of the most complex and consequential school funding challenges in New Jersey.

Watch the full exchange below: