N.J. Stat. § 18A:18A-40.3
With respect to any contract entered into by a board of education pursuant to section 1 of P.L. 1987, c.343 (C.18A:18A-40.1) for which the contractor shall agree to the withholding of payments pursuant to section 2 of P.L. 1987, c.343 (C.18A:18A-40.2), 5% of the amount due on each partial payment shall be withheld by the board of education pending completion of the contract if the contractor does not have a performance bond. If the contractor does have a performance bond, 2% of the amount due on each partial payment shall be withheld by the board of education when the outstanding balance of the contract exceeds $500,000, and 5% of the amount due on each partial payment shall be withheld by the board of education when the outstanding balance of the contract is $500,000 or less.
N.J.S. § 18A:18A-40.3