N.J. Stat. § 4:19-4
The sums of money collected from the tax imposed by virtue of this article shall be appropriated in the annual budget and the taxing ordinance of the taxing district to make good any loss which may be sustained by any person by the destruction or wounding of his sheep, lambs, domestic animals or poultry, except dogs and cats, within the taxing district where the tax is collected and shall be kept as a separate fund for that purpose by the officer having charge of the general funds of the taxing district. The appropriation shall be made by adding to the budget substantially the following words: "Anticipated revenue from tax on dogs, $, to be used for payment of claims for damages by dogs to sheep, lambs, domestic animals or poultry."
Claims for damages shall be presented to the governing body as provided in section 4:19-5 of this title, and shall be paid in the order in which they are presented and approved if there is sufficient money in the fund for that purpose.
If there is not sufficient money on hand in the fund, the claims, as and when approved, shall be held and paid as soon as the collections from the tax will permit. If the collections from the tax in any year are not sufficient to pay all the claims presented and approved, there shall be assessed and collected in the following year a tax in addition to the annual tax provided in this article, which shall be sufficient to pay such claims.
Any balance in the fund after all claims for the year which have been presented and approved have been paid, shall be transferred to a special account to be kept separate and apart from any of the other accounts of the municipality. Whenever the fund at the close of any fiscal year of the municipality shall equal the amount received by it from such dog tax for the then next preceding three years, then the surplus over and above such amount shall be paid over by the officer having charge of the general funds of the taxing district to the surplus revenue account of the municipality at the close of the year in which the surplus arises, and the tax provided for in this article need not be assessed for the ensuing fiscal year, or thereafter until the net amount of the special fund has been reduced from such stated amount by the payment of claims presented and approved.
The use of general funds of the municipality to pay claims for damages, or the use of the moneys collected from such dog tax in any other manner than as provided in this article, shall be a misdemeanor.
N.J.S. § 4:19-4