Thursday, January 14, 2016

Debt and the Inevitability of State Aid Cuts for NJ

Recently I found an important state report on New Jersey's debt.

The report is sobering for everyone and should be a wakeup call to anyone who believes that New Jersey's current level of K-12 aid is sustainable.

First, this is a graph, produced in the report itself, on debt service costs for school construction bonds, of which over 70% has gone to the Abbotts.

As you can see, school construction debt service costs are expected to rise significantly over the next few years.  Given our stagnant revenue and the intense pressure to put more money into pensions, the increased bond servicing costs from (mostly Abbott) school construction will cut into Pre-K money and K-12 operating aid.

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The bigger pressure on K-12 aid will come from the need to put more money into the pension system.

Source, NJSpotlight,

More significantly, New Jersey is already one of the US's most indebted states by multiple measures of indebtedness.

The state Treasury Department took figures from Moody's and demonstrated that New Jersey is one of America's most indebted states.

It's shocking that New Jersey has more tax-supported debt than much larger states like Pennsylvania, Virginia, Florida, Georgia, and Texas but that is the reality.

Anyway, anyone who thinks NJ is ever going to fully fund SFRA is woefully ignorant of New Jersey's economic climate, other pressing needs, and deep debt.

SFRA is never going to be fully funded and the only hope badly underaided and underfunded districts have is more money through redistribution.

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