In overtaxed New Jersey, towns should be able to cut their school taxes when they have that rare chance.

Officials in Pemberton Borough, Burlington County, found themselves in an unusual situation this spring. Their school district, which sends most of its students to the neighboring Pemberton Township schools, had more money than it needed.

So officials decided to cut property taxes in the borough (population 1,210) by nearly $300 for the average homeowner. It was a welcome move given the recession, especially in a state with the highest property taxes in the nation.

But a tax cut is such a foreign concept in Trenton that the body politic rejected it.

Gov. Corzine's administration said the tax cut was illegal because it lowered the borough's overall school levy below the minimum $1,003,940 required by the state's education-funding law. That formula, based in part on property values and residents' income, seeks to ensure that each district pays its fair share.

A similar situation occurred this spring in the Lake Como school district in Monmouth County. Officials there eventually knuckled under to the state's insistence of a higher tax levy.

By one estimate, about 50 school districts around the state would have lower property-tax rates if the state allowed them.

In Pemberton's case, the state told the borough school district to raise its school-tax levy by at least $93,744. The average homeowner would still receive a tax cut, but it would be about $123, not $300.

Pemberton officials refused. They voted to put their outlaw tax levy on the April 21 ballot. The state education department went to court and forced the school district to put the higher tax measure on the ballot instead.

So voters rejected it. The borough council then voted unanimously last month to approve the lower tax rate, which puts the issue back in the state's hands.

The state's Department of Education has the authority simply to impose the higher tax rate, and Education Commissioner Lucille Davy has threatened to do just that. The state should back off.

In the past, Trenton has allowed districts to collect less than the required amount in school taxes. The law should allow the state to make exceptions to the minimum requirement where reasonable.

Corzine has been preaching school consolidation as a way to hold the line on taxes, and Pemberton has taken steps to keep costs down. The borough closed one school in 2007, and didn't replace its superintendent, who retired last June.

Three Republican legislators from Burlington County have responded to the state's action by introducing bills that would allow districts to reduce their school levies below the minimum amount. Districts would need to prove that the state is providing no more than 65 percent of operating expenses.

While that measure could lead to a watering down of the new formula, there ought to be some flexibility in the school-funding law.

Pemberton shouldn't be punished for good fiscal management. Its modest tax cut isn't going to throw the formula out of whack in another part of the state, or deprive the borough's students of a quality education.