Monday, July 27, 2015

Adjustment Aid: What it is, who gets it, and who doesn't

Adjustment Aid is a provision in the School Funding Reform Act of 2008 that guarantees that no district can lose state aid even if SFRA’s new aid calculations indicate that that district should now receive less aid than it did before SFRA became law.  Adjustment Aid's supporters would call it a “hold harmless” provision and praise it for ensuring that no district would experience a possibly destabilizing loss of aid. SFRA’s detractors would call it "aid hoarding" and denounce its creation as a political move that harms underaided districts at the expense of overaided ones.

The actual text in SFRA creating Adjustment Aid is the following:

For the 2008-2009 school year, each school district and county vocational school district shall receive Adjustment Aid in such amount as to ensure that the district receives the greater of the amount of State aid calculated for the district pursuant to the provisions of this act or the State aid received by the district for the 2007-2008 school year multiplied by 102%.

(The reference to “102%” requires the state to actually increase the aid of Adjustment Aid districts, although, according to SFRA, they are already overaided.)

Today, 176 districts -- less than a third of New Jersey’s total - get Adjustment Aid.  The total amount is $555 million, the third largest aid stream in NJ’s K-12 education budget.  (The 176 districts getting Adjustment Aid include nine non-operating districts and nine vo-techs.)

In 2012 then-commissioner of Education Chris Cerf characterized Adjustment Aid this way:

Adjustment Aid also crept in [to SFRA], not because there was an educational need for it, but rather to ensure that no district lost State aid in the transition from old funding formula to new. …

Adjustment Aid was a political add-on to the [Professional Judgment Panel] process. It served no purpose other than to hold all districts harmless in the transition from the old funding formula to the SFRA. It is a symbol of the old Trenton; a paean to the longstanding tradition of refusing to make hard choices even when hard choices are in order and failing to make hard choices will cost taxpayers greatly

Cerf proposed to cut Adjustment Aid in half over five years for districts that were above-adequacy. Unfortunately, his proposal was opposed by the Education Law Center and elected officials from areas that had Adjustment Aid districts. Urban Democrats and rural Republicans both opposed it. Sen. Steve Oroho (R-Sussex) denounced the proposed changes: "

This is exactly why we need a new funding formula that is balanced and accountable. Dozens of our local school districts are now among the 185 suburban and rural districts shortchanged from receiving basic aid, leaving them faced with potential increases in already too costly property taxes."

The Education Law Center and Sen. Oroho never agree, but the ELC also opposed cutting Adjustment Aid (assuming there would be no sensitivity to whether or not a district was Above Adequacy) and described Adjustment Aid's creation in a completely different way from how Chris Cerf did.

However, any proposal to cut adjustment aid in transition districts would run afoul of the State funding law -- the School Funding Reform Act of 2008 (SFRA). It would also create a scenario where a select group of districts would be forced to shoulder the burden of arbitrary school aid reductions.
Under the SFRA formula, numerous districts are currently receiving a form of state funding called "adjustment aid." This aid is designed to ease the transition as overall budgets in these districts are brought down to the "adequacy" cost levels established in the formula. "Adequacy" is what the NJ Department of Education has determined to be the level of spending necessary to provide NJ students with a "thorough and efficient" education. 
Adjustment aid is formula-driven. When the SFRA was first proposed, it was dubbed "hold harmless" aid, since it was designed to prevent a "cliff effect," or a sudden and sizable drop in state aid that would trigger significant cuts in educational programs and staff by districts as they transition to adequacy. With adjustment aid, these transition districts will be "flat funded" -- or receive no increase in state aid -- until their overall budget is lowered to the adequacy level. Most importantly, adjustment aid protects these districts from having their total state aid cut below the prior year's level.

Unfortunately Chris Christie lost his will to cut Adjustment Aid or even to run the aid formulas for the School Funding Reform Act after the 2013-14 aid distribution.  For 2014-15 the state gave every non-Interdistrict Choice district another $20 per student, regardless of it being overaided or underaided.  For 2015-16 the state froze every non-Interdistrict Choice district’s aid again, regardless of how severe its underaiding was.

This post will analyze who gets Adjustment Aid and why reducing Adjustment Aid is necessary in a budgetary era when the state cannot fully fund SFRA.  Reducing Adjustment Aid was the Christie Administration’s one progressive move on aid, it should be revived and enthusiastically supported by people who purport to care about equity and justice. In a reactionary defense of the status quo, the Education Law Center betrayed hundreds of underaided, high-need districts in its opposition to reducing Adjustment Aid.

There are several different ways to look at where Adjustment Aid goes. Here are some snapshots to give you an accurate picture of who is getting the money and who isn't getting the money.

Most of the districts getting any Adjustment Aid are, in fact, middle-resource and not poor at all.   

Though most districts getting Adjustment Aid are middle class, most of Adjustment Aid money does indeed go to districts with low-DFG rankings.

HOWEVER, just because a district has a low-DFG ranking doesn't mean it has a low tax base. Many low-DFG districts at the Jersey Shore actually have extremely strong tax bases. Jersey City is in DFG B, but has an average tax base per student.

ALSO, just because most Adjustment Aid goes to poor districts doesn’t mean that most poor districts get Adjustment Aid.  Most districts DFG A and DFG B get nothing in Adjustment Aid and those that do usually get very little.

Let's do a close-up look at DFG A, the poorest of the eight DFGs. As you can see, most DFG A districts get absolutely nothing in Adjustment and and for those that do, it's usually a small percentage of their overall revenue.

Is any aid stream whose distribution looks so random appropriate for the state to use?

According to the chart Asbury Park gets over 30% of its revenue from Adjustment Aid. Since Asbury Park's students are over 90% FRL-eligible, you might think that Adjustment Aid serves from progressive purpose.  

But Asbury Park spends $28,229 a year, of which $23,600 a year comes from state aid. Is it really fair to give Asbury Park so much money when so many other districts are severely underaided? Even if Asbury Park lost half of its $24.4 million Adjustment Aid its state aid alone would still be $18,400 per student and its overall spending about $25,000 a student. Some people say that Asbury Park is overaided because it is an Abbott -- that is not quite accurate -- Asbury Park is overaided because of Adjustment Aid.

Other DFG A districts that get large amounts of Adjustment Aid also spend over $20,000 a pupil, including Atlantic City, Camden City, Keansburg, North Wildwood City, and Wildwood City. These districts can afford to lose aid.

Jersey City is in District Factor Group B, so it doesn't appear in the above chart, but Jersey City is especially relevant in discussions of Adjustment Aid because Jersey City gets $114 million in Adjustment Aid, one-fifth of the total. Because of Adjustment Aid Jersey City has a $109 million tax levy on $18.3 billion in valuation. Jersey City is the highest valuation city in New Jersey, but its local tax levy for schools is less than West Orange's.

$122 million of Adjustment Aid goes to districts that are DFG CD and higher.  This includes some high-wealth districts Princeton, Montclair, Hoboken, West Morris, Clinton, and Marlboro.  When so many districts like Belleville, East Newark, Guttenberg, Fairview, Dover etc are desperately underaided and underfunded, how can we side with the aid hoarders? 

New Jersey is never going to be able to fully fund SFRA, but when 117 districts get less than 50% of their recommended SFRA (uncapped) aid, redistribution is necessary.   Chris Cerf's idea to halve Adjustment Aid for districts above-adequacy was a sound one and should be supported.


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