Tuesday, August 4, 2015

"Why NJ's School Funding Reform Act of 2008 failed and where we go from here"

Newsworks ran my op-ed on the unfundability of SFRA.

The op-ed says what everyone who follows NJ's budget should know but doesn't seem to realize.
... SFRA was a method of distributing new aid and not a redistribution of the existing aid stream. In order to prevent any redistribution of aid -- especially from Abbott districts -- SFRA contained a provision for something titled "Adjustment Aid." Adjustment Aid guarantees that any district for whom the new SFRA aid calculations give less aid than it got under the previous funding law that it would be "held harmless" and could keep their old aid and even receive aid growth at 2 percent that first year.
If New Jersey had experienced economic and revenue growth after 2008 and the state could pour an additional $2 billion a year into SFRA, New Jersey's school districts might finally have fairness based on needs and resources, but the reality is that SFRA was signed at New Jersey's peak employment. The recession hit the next year and Jon Corzine himself and later Chris Christie slashed over $1 billion in funding from New Jersey's public schools.
And now even though the recession has been over for over five years, New Jersey has no chance of fully funding SFRA now and the ideology of the next governor is irrelevant.
The reason for this is plain: the Pension Crisis. New Jersey's unfunded pension liabilities verge on being unpayable - $82.7 billion as of mid-2014. For FY 2013, New Jersey's pension funds paid out $9.1 billion in pension benefits but only received $4.6 billion in contributions from the state, localities, and active employees. The $4.5 billion gap means that the pension funds are rapidly depleting and will start to "zero-out" within a decade. According to Moody's, even if the pension funds hit their 7.9 percent investment goal (which they didn't in 2014), the Judicial Retirement System will go broke in 2021, then the Police and Firemen's Retirement System and the state portion of PERS in 2024, and then the biggest fund, the Teachers' Pension and Annuity Fund (TPAF) will go broke in 2027.

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