A cyberattack that stole $4.8 million in taxpayer money has spurred a New Jersey suburb to issue short-term debt as officials try to recover the funds.
Spotswood, located roughly 40 miles outside New York City, was targeted by hackers last year in a scheme that involved the criminals accessing a school district employee’s email account and spurring the borough to erroneously send local school tax funds to a hacker impersonating the board of education.
“Both the Borough and the Board of Education were spoofed by a third party cyber criminal which resulted in both the Borough and Board of Education believing they were dealing with each other when in fact they were not,” noted a public release on the suburb’s website.
Although $1.7 million has since been recovered, Spotswood’s school district is still owed about $3.2 million in funds from property taxes that it would typically receive from the borough, according to S&P Global Ratings. As a result, the borough is planning to issue short-term notes in May to cover the difference.
There won’t be a tax impact on this year’s budget, but when the note comes due in May 2027, the estimated tax impact will be about $157 per average assessed home for the first year, Mayor Rich O’Brien said in a release after the Spotswood Borough Council approved the refunding ordinance.
Spotswood Board of Education’s outlook was also revised to negative from stable due to a “significant” projected deficit for fiscal 2026, according to a new rating report by S&P. Its available reserves are expected to be “materially lower” for the next two years, the analysts said.
Even before the cyberattack, the school district had faced difficult economic conditions since its primary funding source is property taxes, said Superintendent of Schools Jeffrey Bicsko in a November report.
In New Jersey, schools are generally limited to increasing their local property tax levy by a maximum of 2% every year. Many districts have seen expenses rising by more than that.
For Spotswood in particular, one of the largest growing costs the district has faced is health insurance, which came in $2.5 million higher than budgeted last year, according to S&P. District leaders are looking for “new funding sources,” Bicsko said in the district’s most recent annual report.
If the district does not receive funding from the short-term notes as planned, S&P warned that “our calculation of available reserves could weaken beyond current projections until the funds are received.”
Representatives for the school district did not respond to requests for comment. Borough officials declined to comment.
Financial Headwinds
There have been several high-profile instances of financial trouble at New Jersey school districts in the past year. Last summer, Toms River’s school district threatened to file for bankruptcy due to a reduction in its state aid, before the state stepped in to hike local taxes to make up the shortfall.
In the town of Montclair, the school district discovered a roughly $18 million deficit that has forced it to slash staff and programs, and levy a one-time tax hike in order to close the gap for this year, though challenges persist as expenses are projected to continue to outpacing revenues.
This imbalance between income and expenses in New Jersey school districts echoes the challenges many public schools are facing across the country. New Jersey districts will need to “continue appropriating higher levels of reserves to meet these costs while also investing in their capital assets,” S&P analysts wrote in an October report on the sector.
S&P, which assesses over 280 school districts in New Jersey, said most have had stable credit ratings over the past year, with 11% receiving higher scores and only 2% seeing downgrades, and its analysts expect that trend will continue.
“In our view, these school districts’ credit stability is supported by strong local incomes, comparatively high property values, and overall low debt and liabilities,” wrote Anthony Polanco, an associate director at S&P and the primary contact for the sector report.
© 2026 Bloomberg L.P.
Copyright 2026 Bloomberg.
Topics
Cyber
Fraud
K-12
New Jersey
Interested in Cyber?
Get automatic alerts for this topic.
