Christie Already Has the Power to Change State Aid

Since Chris Christie came out with audaciously unfair "Fair Aid" proposal on June 21st, many commentators have condemned the proposal for being brutal to poor districts throughout New Jersey, whose tax bases are woefully inadequate to sustain decently staffed school systems without above-average state help. One commentator, Julia Sass Rubin of Rutgers University and SOS-NJ, has pointed out that Christie's proposal goes beyond moral wrongness to mathematical and budgetary wrongness too, since real K-12 state aid is $8 billion, not $9.1 billion, and to redistribute $9.1 billion in state aid would require eliminating Extraordinary Aid, debt service aid, Pre-K, and much more, among which is private school pass through dollars.

Christie's proposal to give equal state aid to economically unequal districts is so self-evidently bad that I don't feel a need to write a post condemning it, but what shocks me is that Christie already has the power to eliminate the worst excesses that he condemned in his speech. In fact, Christie started to eliminate those excesses in 2012-13 before he changed his mind the next year.

Most of New Jersey's highest aided districts are indeed Abbotts and Asbury Park is an outlier in getting about $24,000 per student in state opex aid, but most of these ultra-high aid districts don't get so much because of the Supreme Court or because of the core formulas of SFRA per se. They usually get so much because of ADJUSTMENT AID.






Were Adjustment Aid to be eliminated, which is what Steve Sweeney wants to do, Asbury Park would only get about $13,500 per student. That's a lot more than the $6,599 per student Christie says he wants Asbury Park to get, but eliminating Asbury Park's Adjustment Aid would still save the state almost $25 million per year.

Unfortunately Christie never even mentioned Adjustment Aid in his speech. Although he condemned Asbury Park and Trenton's aid repeatedly (they aren't representative Abbotts or even similar to each other), he ignored other examples of overaided districts, such as Hoboken, Jersey City, Keansburg, and Pemberton. Ignoring Hoboken and Jersey City surprised me, since conservatives who condemn Abbott usually use Hoboken and Jersey City as examples of Abbott's unfairness.  (Example 1, Example 2, Example 3)

And yet Christie knows what Adjustment Aid is and even cut it in 2012-13 during Chris Cerf's commissionership.

Although Adjustment Aid is, part of a SFRA, any budget the legislature approves is automatically legal, even if it contradicts SFRA. Although the legislature has the power to reject a budget or write its own, in practice, the legislature is usually a rubber stamp. The legislature has approved Additional Adjustment Aid, even though it's not in SFRA, it has approved "Professional Community Aid" even though it's not in SFRA, it has approved "PARCC Readiness Aid" even though it's not in SFRA, it has approved "Student Growth Aid" even though it's not in SFRA either.  In 2013 Christie unilaterally capped Interdistrict Choice and again, the legislature accepted it.

The governor and legislature can also make SFRA cuts to districts that contradict SFRA. In 2010 the legislature accepted Christie's across-the-board cuts even though this contradicted SFRA.

Two years later, Education Funding Report, then-Commissioner of Education Chris Cerf was very critical of Adjustment Aid:

Adjustment Aid was a political add-on .... It served no purpose other than to hold all districts harmless in the transition from the old funding formula to the SFRA...

Today, the result is that a number of districts already funded at their Adequacy Budgets – the level, according to the PJPs, at which a district has sufficient funds to provide its students with a “thorough and efficient” education – receive huge windfalls from the State in the form of Adjustment Aid.  

Cerf, (cautiously) proposed cutting Adjustment Aid for districts that were above Adequacy:

Instead, for all districts at or above their Adequacy Budgets, the Department recommends reducing Adjustment Aid by 50% of the amount the district is over adequacy, and to phase in that reduction, like all funding formula changes recommended in this Report, over five years. So, by FY17, after giving districts five years to adjust to this new reality, the State will have taken a strong step in correcting a gross inequality and undoing a political giveaway of the past. Districts that were used to receiving these add-on dollars will no doubt cry foul, but even with the reduction in Adjustment Aid, they will still have more money to educate their students than called for by their respective Adequacy Budgets, i.e., be over-funded from the perspective of the PJPs.

And Cerf and Christie actually followed through on this for one year and cut over $40 million from districts which was then redistributed.

Since Christie's Adjustment Aid cuts are now so obscure, let me demonstrate:

• Asbury Park lost about $3 million.

• Pemberton lost about $3 million too.

• Jersey City lost about $1 million.

• Keansburg lost about $1.4 million.

Hoboken would have had a net loss of aid too, but it gained more money through Interdistrict Choice than it lost.

In all, $40 million was redistributed that year.  Unfortunately, 2013 was an election year, Christie changed his mind, and since then there has been no redistribution.

Christie's "Fair Funding" proposal of 2016 is motivated by a desire to lower taxes in middle class and affluent towns.  Were Christie to follow through on reducing Adjustment Aid, he could use the savings to lower suburban taxes.  The increased state aid for middle-class districts wouldn't be as large as what he would get under his "Fair Funding" proposal, but it's politically realizable and the amount wouldn't be trivial either.

To increase the amount of money that could be freed up for middle class (and even affluent towns), Christie also has the power to amend the Abbott list.

I've met people who say that only the Supreme Court can amend the Abbott list, but this is untrue.

In the Abbott II decision, Chief Justice Robert Wilentz created the guidelines for Abbott inclusion (DFG A or B status combined with being an "urban aid municipality") but he gave the elected branches some leeway on the final list.

The original text by Judge Robert Wilentz in the Abbott II decision shows this:

We leave it to the Legislature, the Board, and the Commissioner to determine which districts are “poorer urban districts.” It appears to us that twenty-eight of the twenty-nine school districts designated by the Commissioner as “urban districts” located in DFGs A and B should qualify. (We omit Atlantic City since its tax base for 1989-90 is far in excess of the statutory guaranteed tax base.) Perhaps more should qualify, perhaps fewer. The assured funding per pupil should be substantially equivalent to that spent in those districts providing the kind of education these students need, funding that approximates the average net current expense budget of school districts in DFGs I and J. In addition, provision will be made, presumably similar to categorical aid, for the special educational needs of these districts in order to redress their disadvantages. Such provision will necessarily depend upon the legislative judgment, informed by the Board and Commissioner

Later, in the Abbott VII decision, the Supreme Court made explicit what Wilentz had hinted at:

Whether the Legislature can remove a school district from its designation as an Abbott district has not before been specifically considered by the Court. The addition of districts, e.g., Neptune and Plainfield, that meet the criteria for Abbott classification certainly suggests that in the happy circumstance in which a district no longer can claim it is typical of poorer urban districts, Abbott II, supra, 119 N.J. at 346 n.21, it could be removed by the Legislature from the Abbott classification. We affirm that principle. When a district no longer possesses the requisite characteristics for Abbott district status, id. at 338-45, the Legislature, the State Board and the Commissioner may take appropriate action in respect of that district.  [my emphasis]

Commissioner of Education William C. Librera also said in 2005 that the Abbott list could be changed, although he believed that academic performance should have something to do with it.


B. Two-Part Test for Designation and Declassification

In order to be considered for Abbott designation or Abbott declassification, a school district must be characterized by both low student achievement and concentrated poverty for designation or the absence of both for declassification. Both Abbott II (page 385) and Abbott VII, as well as legislation (N.J.S.A.18A:7G-4), give the Commissioner the responsibility to determine those districts to include or, as will be discussed, to remove from Abbott status. . ...  [my emphasis] 

The decennial census may validate that some Abbott Districts no longer satisfy Abbott’s economic requirements. After each census, the Commissioner shall document those Abbott Districts, if any, that no longer satisfy the criteria for concentrated poverty. Should these districts also demonstrate satisfactory student achievement, an exit plan will be devised for each no longer qualifying district to permit an orderly financial and educational transition. Funding, for example, might be phased out over four years. These districts will continue to receive 100 percent facilities funding for all projects in the design or construction phase. Districts will be able to make application for adjustment based on hardship.

So a governor, with the consent of the legislature, can deAbbottize a district.

Since no district has ever been taken off the Abbott list there's no telling what this would mean, but it could mean:

1. that the state does not have to pay 100% of construction costs
2.  the state would not have to prioritize the district's aid if there is a new version of Abbott XXI, where the NJ Supreme Court orders full funding for the Abbotts and no other district.
3. the state could stop paying for Pre-K or implement means-testing.

Hoboken is the obvious candidate for deAbbottization.  Since Hoboken has an extremely low tax rate and a tremendous $174 million in Local Fair Share (about four times is Adequacy Budget), the state could probably completely drop its Pre-K commitment there and save $11 million per year on top of savings on not having to pay for Hoboken's capital costs and Adjustment Aid.

Jersey City, Phillipsburg, Pemberton, Long Branch, Neptune, Harrison also should not be Abbotts.  Pemberton and Neptune are in DFG CD.   Other Abbotts might be reclassified in higher DFGs if the DFGs were ever updated.  Long Branch, Harrison, and Jersey City were still in DFG B in 2000, but they have nearly average tax bases and do not have the "municipal overburden" that was part of the justification of the Abbott list.  Phillipsburg has a very low tax base, but its FRL-eligibility is 53%, which is only about the 85th highest in NJ.

I can't say what would happen if a district were deAbbottized.  Technically under SFRA every district where more than 40% of the kids are FRL-eligible should get state-funded Pre-K and all of the less-poor Abbotts exceed 40% in FRL-eligibility, but Christie could plausibly fight for means-testing of Pre-K and save tens of millions of dollars.

Unfortunately, Christie doesn't seem to want to do any of this.  He hasn't even tried to deAbbottize Hoboken.

Christie's reasons for not supporting incremental reform are political.  He's spent the last three years preparing to run for president and wanted to avoid controversy.  He wanted to win an overwhelming victory in 2013 and knew that the aid-losing districts would be angrier about losing aid than the aid-gaining districts would be about gaining it.  Thus, he abandoned the endeavour.

Christie has been asked about what he thinks of Steve Sweeney's proposal and this is his answer:

I don’t think it’s bad, but it’s too small. To say you will have a commission to move $800 million around (in certain aid) in a $9.1 billion aid package, it is not going to solve the property tax problem … We’re talking about a monumental change that needs to be made from a property-tax perspective and an educational perspective.

I think Christie's "Fair Aid Formula" is neither fair nor a formula, but I do agree that taxes in middle-class communities are too high and and even worse in working class and poor communities.    

Since the governor's only real motivation is to lower taxes, he should not make the perfect the enemy of the good and should embrace the politically viable reform of eliminating Adjustment Aid and shrinking the Abbott list.  

(If I were governor I'd go farther and eliminate all aid from ultra-high tax base districts too, but I know that Christie would not want this.)

Christie already missed his chance to make sweeping changes when the Democrats retained the legislature in 2013.  At this point compromise is the only pathway forward for him.

Dana Goldstein Misunderstands Abbott, SFRA

Dana Goldstein is a good education writer, but like most other journalists, she uncritically accepts certain myths about Abbott that circulate among the NJ edusphere without anyone bothering to look up if they're true or not.

Goldstein's essay in Slate is right about the foolishness of Chris Christie's proposal to give every district equal state aid per student, but this section on Abbott history is incorrect:

The vast majority of public education funding comes from state and local sources, most notably from property taxes. In 1990, in Abbott v. Burke, New Jersey’s Supreme Court ruled that the state’s school funding formula betrayed the state constitution’s promise of providing a “thorough and efficient education” for all by sending more money to affluent suburban schools in towns with high property values. To remedy that, the court required supplemental funding for the state’s 31 poorest districts, including Newark, Trenton, Camden, Union City, Jersey City, and Hoboken. Today, thanks to a revised funding formula crafted by both Democrats and Republicans, the state sends extra per-pupil dollars not only to those 31 “Abbott districts” but to students in any district who are poor, learning to speak English, or disabled. Cities and towns with large groups of those kids receive additional money to compensate for the challenges that come with concentrated poverty, such as the need to hire social workers or bilingual teachers.

Let me unpack the wrongness of this paragraph alone:

First, the NJ Supreme Court accepted the constitutionality of the school funding formula for most poor districts, but only said it was unconstitutional for "poor urban districts," ie, the then-28 Abbott districts.

Second, this is totally untrue:
"[NJ was] sending more money to affluent suburban schools in towns with high property values." 

NJ had progressive state aid even in 1990, but it was a flatter distribution than what we have now.  In 1990, for instance, Newark already got $263,782,806.  Paterson got $94,935,249.  Millburn got $1,729,178, or 0.6% as much as Newark.  I don't have early 1990s student enrollment figures, but Newark was getting much more per student.  

Even if you look at less extreme comparisons, you see that NJ was not sending more money to "affluent suburban schools."  Bloomfield was getting $5,228,575, again, which is much more than Millburn was getting per student but less than Newark.  Bound Brook, a very small district, was getting $2,139,354 in 1990, which was more than Millburn, more than Bloomfield, but less than Newark.

In fact, six of the future Abbotts were already spending above the state average in 1990.

Third, this is also partly untrue:

"To remedy that, the court required supplemental funding for the state’s 31 poorest districts, including Newark, Trenton, Camden, Union City, Jersey City, and Hoboken.:

The 31 Abbotts (originally 28) were never NJ's 31 poorest districts. Over 30 districts in DFG A were excluded from the Abbott list because they weren't defined as "urban." Very poor DFG A districts that didn't become Abbotts included Buena Regional, Pinelands Regional, Bass River Township, East Newark, Paulsboro, and National Park Boro.  (See the 1980s DFG classification used by the Supreme Court to create the Abbott list.)

Hoboken, Pemberton, Long Branch, Burlington City, and Neptune, who were Abbottized, were not plausibly among the poorest in NJ even in 1990 either.  

Fourth, this section is totally untrue because it  characterizes SFRA as an operating law not utopian fantasy:

Today, thanks to a revised funding formula crafted by both Democrats and Republicans, the state sends extra per-pupil dollars not only to those 31 “Abbott districts” but to students in any district who are poor, learning to speak English, or disabled. Cities and towns with large groups of those kids receive additional money to compensate for the challenges that come with concentrated poverty, such as the need to hire social workers or bilingual teachers.

Yes, NJ theoretically has a law to send more money to poor non-Abbotts, but SFRA IS NOT AN OPERATING LAW!!!  The state "does not send extra per pupil dollars to students in any district who are poor."  SFRA is a joke.  Poor non-Abbotts are lucky if they even get half as much of what their Abbott peers get.  SFRA has never been fully funded and cannot be as long as NJ is in a fiscal crisis.  Having a fair school funding law is one thing, but funding it is quite another.  

Here's more error from other sections of Goldstein's essay:

But Christie has always opposed [Abbott]. When he came into office in 2010, he proposed more than $1 billion in education budget cuts, a move the state Supreme Court declared unconstitutional.

This is wrong in context and factuality.  In 2010 Christie cut $1 billion in response to the budget crisis and the depletion of federal stimulus money, not because he didn't like Abbott.  The $1 billion in cuts was across the board, with every district losing aid equivalent to 4.9% of its budget.  Many affluent districts, including Christie's hometown of Mendham, had their state aid drop to $0.  The aid cuts affected the Abbotts, but the Abbotts weren't specifically targeted.

In the Abbott XXI decision, the NJ Supreme Court only declared unconstitutional cuts to the Abbotts.  Cuts to poor non-Abbotts, like Freehold Boro, Dover, Fairvew were considered constitutional.  The NJ Supreme Court ordered $500 million restored to the Abbotts, of which a quarter was Adjustment Aid, not the full $1 billion.

This is also mostly untrue:

It is true that New Jersey school districts like Newark and Camden continue to struggle. What Christie didn’t mention is that those districts are in state receivership, which means that the person ultimately accountable for their low performance is ... Chris Christie. It isn’t reasonable to expect that Newark, a city where 81 percent of students live in poverty, would have the same graduation rate as Hillsborough, where only 5 percent of students are poor. Even so, high-school graduation rates in Newark are up. And overall, poor children of color across New Jersey have experienced big academic gains since Abbott—gains that Christie is loath to acknowledge and that would be rolled back if his new funding plan becomes a reality.

Umm, four of the Abbotts were or recently were under state control (Newark, Camden, Paterson, and Jersey City).  The others are autonomous, although there's been some special monitoring of Asbury Park.

What Goldstein doesn't admit about academic gains is that they have occurred in poor non-Abbotts too, not just Abbotts.  Chris Cerf demonstrated this in 2012 in his Education Funding Report and other researchers have found the same gains in non-Abbotts.  

Dana Goldstein means well, but she is spreading myths here.  Maybe it would help journalists if they talked to people other than David Sciarra?

Sweeney, Prieto Condemn Christie Proposal; Murphy, Fulop Silent

Update: This post was accurate when written.  Phil Murphy has now tweeted criticisms of Christie's unfair aid plan.


Senate President Steve Sweeney and Assembly Speaker Vincent Prieto both immediately criticized Chris Christie's proposal to redistribute state aid so that every district receives an equal $6500 per student.

Here's Steve Sweeney, speaking with fellow state aid reformer Teresa Ruiz:

“The governor’s proposal is a direct attack on the core principles of equality for all of New Jersey’s communities, denying too many schoolchildren the opportunity for an equal education. “This plan is unfair, it is unjust and it is blatantly unconstitutional. “It is a maneuver that discriminates against the most vulnerable students and would systematically deny children an equal opportunity to achieve the American Dream.

Children do not choose their zip codes, and this proposal decimates educational opportunity, resulting in more poverty and increased income inequality. It is a divisive plan that’s not fit for New Jersey. “Which is why the school funding proposal we sponsored recognizes the values of this state, the values the people of New Jersey committed to in the 1947 Constitution.

We believe in those values and we know the people of New Jersey do as well. We want to pursue excellence in education, not limit it to those who already possess the advantages. We don’t want to give up on the families throughout the state who look to educational opportunity as the equalizer that can help their children succeed in the rapidly-evolving economy.”
Ok, good.

Vincent Prieto also condemned Christie's proposal, although he came out with a call to fully fund SFRA that I see as hopelessly unrealistic:

“Gov. Christie’s idea is unconstitutional and harmful to our most vulnerable children. Gov. Christie has been in office for more than six years and not once has he fully funded the school funding formula that would provide increased aid and property tax relief to school districts throughout New Jersey. In fact, he even vetoed a Democratic initiative (A4203 in 2011) to accomplish that goal. If Gov. Christie truly wants to undo the damage caused by his policies, he must acknowledge his responsibility by working with legislators to finally fully fund the existing – and constitutional - school funding formula.”

I'm not going to get into why NJ can't fully fund SFRA, but at least Prieto is right that Christie's proposal is "harmful to our most vulnerable children."

What's disappointing is that it's now over 48 hours after Christie made his state aid proposal and Steve Fulop and Phil Murphy have been totally silent.

Steve Fulop's not shy about criticizing Christie, but he initially refused to comment until he sees the official proposal.  Doesn't he know enough about state aid to know that equal funding per student is nonsense?  Doesn't he know enough about Jersey City to know that it receives substantially more than $6500 per student and would be a massive aid loser?   

Apparently Fulop knows enough about state aid to forward a reporter a condemnation the Education Law Center wrote, but he doesn't care enough to write something himself.  

Phil Murphy is showing the same silence, even though Murphy is usually more aggressive in attacking Christie than Fulop is.  

I appreciate Phil Murphy's stances on gun control, but being governor involves more than just signing gun control legislation.  

Fulop and Murphy's Facebook pages are equally silent.  

Are Murphy and Fulop ceding state aid as a political issue to Sweeney?  

It's not like a Tweet takes long to compose.  It's literally the least they could do.   

UPDATE: 

Phil Murphy Tweets three days later about Christie's proposal in response to a press release from Ras Baraka.

https://twitter.com/PhilMurphyNJ/status/746427805915807744

Chris Christie's Total Incoherence on School Aid

When Chris Christie ran for governor state aid was on his agenda. Christie's agenda then was that the Abbotts received too much aid and that more money should go to middle class districts. Christie rightfully denounced the excesses of Asbury Park's state aid, but also criticized Newark's less excessive package.

When Christie became governor in January 2010 the state was in budgetary freefall and federal stimulus money was exhausted. Like many other governors, Christie slashed school aid, cutting over $1 billion.

Although the cuts themselves may have been necessary, Christie made the cuts in an extremely unfair way, cutting the equivalent of 4.9% of every district's budget, if it was underaided or overaided, under Adequacy or above Adequacy, poor or middle class. The only exceptions were over 50 affluent districts for whom state aid was already less than 4.9% of the budget. These districts lost less than 4.9% of their budgets, but their state aid went to $0.

In 2011 Christie reluctantly accepted the New Jersey Supreme Court's decision to reinstate $500 million to the Abbotts. When the legislature tacked on a few hundred million more for non-Abbotts he accepted it.

When Christie rebuilt state aid after the bottom of the recession he followed some progressive principles and gave more money to the districts that were the most underaided and most under Adequacy.

And the governor who had come in criticizing Abbott went around to Abbott

Christie Celebrates Abbott Bucks for Long Branch.

districts to celebrate their 100% state-funded school construction. For instance, Christie celebrated Long Branch getting $27.5 million for another elementary school after the state had already spent $189 million to build four other new schools since 2002.

In 2012 Christie's Commissioner of Education, Chris Cerf, proposed cutting Adjustment Aid for districts that were above Adequacy. In 2012-13 Christie actually followed through with this and cut sometimes hundreds of thousands of dollars from Adjustment Aid districts, but just for one year. Thereafter Christie even created "Additional Adjustment Aid" which disallowed any cuts. The biggest beneficiaries of "Additional Adjustment Aid" are Interdistrict Choice students that have lost Choice students. Additional Adjustment Aid is money for non-existent students.

Since 2013-14 state aid has been flat. In 2013-14 every non-Choice district gained $20 per student. In 2015-16 the aid change was $0 for non-Choice districts. For 2016-17 the increase will be $10 per student, although there is a small $36 million increase in Equalization Aid plus some extra money for Newark and Atlantic City.

Unlike the Education Law Center, I accept that SFRA cannot be fully funded, but the unfairness of the funding I cannot accept, where 200 districts are overaided while everyone else is underaided and the most underaided districts have deficits greater than $9,000 per student.

Aside from criticizing Abbott and the NJ Supreme Court, Christie has been incoherent on state aid. He's made sensible criticisms of Abbott, but he has never discussed how the real victims of Abbott are poor and working class non-Abbotts. Through his Commissioner of Education, he has the power to recommend changes to the Abbott list, but he has never done so.

Christie says "A funding formula that puts a higher value on one child over another is morally wrong and it has been economically destructive. We cannot let it continue," but if you don't put a higher "value" on children in poor towns, their schools will have inadequate resources since their towns' tax bases are inferior.  Bridgeton, Camden City, and Woodlynne have less than $2,000 in Local Fair Share per student, how can they offer decently staffed and equipped schools without superior state aid?

Christie never mentioned the most unfair things about Abbott either, such as the fact that the Abbotts get 90% of Pre-K money or that the state pays for 100% of their construction.

Anyway, Christie's state aid proposal is a joke. It's dead on arrival. Sweeney had a condemnation out in less than an hour. Prieto condemned it too, but added a hopeless call to fully fund SFRA.

I don't need to explain in detail why giving Millburn and Newark, Bridgeton and Haddonfield, Hoboken and Fairview the same $6,599 per student is wrong, but if you're curious, here's Bruce Baker of School Finance 101 doing the work I don't feel like doing.

Christie's proposal will go nowhere in the legislature, but the Framers of the NJ Constitution, in their infinite wisdom, copied the US Constitution and gave a governor the ability to thwart the will of two-thirds of a legislature.  So anything the legislature doesn't pass overwhelmingly will be dead on arrival as soon as it reaches Christie's desk.  There will thus be stalemate until NJ's new governor takes power in January 2018.

If Christie digs his heels in and vetoes the Sweeney state aid reform bill there is no hope for reform until January 2018 and at that point in the budget cycle it might be too late for the new governor to set up a fairer aid distribution for 2018-19.  If Christie blocks aid reform than the soonest we might get relief is 2019-20.

What if Christie Had Never Become Governor?

Imagine someone invented a Trans-Dimensional Hyperdrive that allowed one to travel to a parallel dimension that was our same Planet Earth and same moment in time as we are, but where some event in our history had never happened.

You don't need Sci-Fi technology to see NJ
without Christie,
All You Need is to Drive to Connecticut

A lot of novelists and television shows like to imagine an alternate reality where Germany had won WWII, but I'll look at something more prosaic:

What if Jon Corzine had been reelected in 2009? or a Democrat, maybe Barbara Buono, had defeated Chris Christie in 2013?

Well, I can't invent a Dimensional Travel Machine, but I don't need to because the equivalent already exists.

The car.  

To experience a New Jersey where Chris Christie had never become governor just drive up I-95 north to the Nutmeg State, Connecticut, our peer in stagnant growth, massive indebtedness, decaying central cities, and an increasingly unappealing suburban landscape.

Gov. Dannel Malloy did everything in Connecticut that Democrats wanted Chris Christie to do in New Jersey.  He was a "dream progressive governor" who challenged other Democrats to "grow a pair," and passed two rounds of billion dollar tax increases; in 2011 increasing taxes by $2 billion and in 2015 increasing taxes by another $1.1 billion.  He imposed Combined Reporting, which the New Jersey Policy Perspective has been calling for in New Jersey, but instead of turning a multi-billion dollar deficit into a surplus, he just turned a multi-billion dollar deficit into another multi-billion deficit. After losing GE to Massachusetts, Connecticut is now handing out tax subsidies left and right, even $52 million to Bridgewater Associates, the world's richest hedge fund whose owner, Ray Dalio, has a net worth of $15.3 billion.

Hey, Where's Connecticut?

Connecticut's economy is in worse shape than New Jersey's.  While New Jersey has recovered 93% of jobs lost in the recession, Connecticut has only recovered 80% and has a 5.7% unemployment rate.

Connecticut's credit rating is falling.  In May 2016 it received a rare double downgrade from S&P and Fitch:

"Substantial revenue shortfalls over the past year have left Connecticut with what we believe are low reserves and an increasing share of the budget devoted to fixed costs....it remains unclear whether the state has succeeded in fully aligning its budget to potential future economic and revenue performance."

It made headlines in NJ when Mercatus recently ranked us the country's third worst indebted state, but who was #1?

Connecticut.  

Oh, I'm not saying that Connecticut's economic malaise and hopeles

s indebtedness are Dannel Malloy's fault per se, only that his pursuit of policies which are the opposite of what Christie has done hasn't turned the Connecticut economy around or put the budget on a sustainable position.  Absent serious pension reform, Connecticut may be in worse shape than New Jersey in a few years.

I'm also not saying that Malloy and Christie are morally equivalent either. Malloy has a lot more integrity than Christie has. He hasn't been involved in any scandals, abandoned his state to run for president, endorsed Donald Trump, or created a traffic nightmare as political retribution.  And yet despite avoiding Christie's unforced errors, Dannel Malloy's approval rating is only 29%.

Faced with the reality that sometimes businesses do relocate (partly) for tax reasons, Dannel Malloy is now making the cuts that he avoided for several years. His latest budget eliminates 2500 state jobs, reduces spending by 4.4%, and eliminates school aid to wealthy districts. He is not raising taxes again. Malloy now talks about budgeting the same way a Republican would, saying government needs to "live within its means."

Malloy justifies his budget cuts and lack of tax increases thusly to a skeptical Democratic base:

“What’s changed is that the money’s not coming in the door...We live in a new dynamic in the United States where most states’ revenue is not growing at a rate to which we became accustomed.”

Malloy defends his previous rounds of tax increases, but says, “At some point, you simply can’t raise taxes to an extent that you price yourself out of the market.”

Anyway, the notion pushed by groups and individuals like the NJ Policy Perspective, the Education Law Center, and Phil Murphy that all Chris Christie has to do is govern like a Democrat and New Jersey will be a-okay doesn't seem plausible to me.  

Like Connecticut, New Jersey has structural economic and budgetary problems and the getting a Democratic governor won't change that.  Any revenue increase from tax increases will be eroded away by structural growth of the state budget, as Connecticut's two rounds of tax increases have been eroded.   Any gubernatorial candidate who promises to pay for new programs or fund the pensions through "economic growth" is bullshitting you.

Steve Fulop and Steve Sweeney also talk about the magic of increased revenue, but Phil Murphy's claims are the most optimistic and far-fetched:

Aron: Do you believe in keeping taxes down if possible?

Murphy: If possible, but I think it’s going to be hard. I think it would be false to stand up and say, “I’m running because I believe we can cut taxes by X or Y percent.” This state, thanks to the current administration, we’re in a crisis and we’re going to have to lock arms and get out of that, but I’m a huge optimist about New Jersey. I’m encouraged because it’s been done elsewhere. Jerry Brown led California, another liberal Democrat, from a $25 billion deficit to an $8 billion surplus in five years. That’s the sort of change I hope we can see sooner, frankly. That’s the sort of change in our economy and our state I think that’s available to us and we can get out with the right kind of leadership.

Murphy says that New Jersey is in crisis "thanks to the current administration," but Connecticut's administration has done what Phil Murphy advises for New Jersey and it's in crisis too.

Phil Murphy can talk about California all he wants, even though I see no comparison between a state that has half of the West Coast, has multiple megacities, and is 163,000 square miles and New Jersey, which has no major cities, which is 8700 square miles.  California has economic moats around moats and New Jersey just has highways to the rest of the country.  California has Hollywood and Silicon Valley, neither of which can likely be recreated in New Jersey.  

Connecticut, which also lacks a major city and is only 5500 square miles, seems the more relevant comparison to me.

Let the Garden State beware!

http://www.city-journal.org/html/malloy-middle-14578.html

http://njeducationaid.blogspot.com/2016/01/ge-leaves-connecticut-and-what-it-might.html

Sweeney State Aid Bill: A Preliminary Analysis

I've now gotten to see a copy of Steve Sweeney's state aid reform bill and can present a preliminary analysis of it.  

The text of the bill appears to differ in some key respects from what has been reported and what its own authors have said in public.  There are also provisions in the bill affecting the tax cap and PILOTing which are important and yet I hadn't seen discussed yet.

http://assets.njspotlight.com/assets/16/0609/2307

9/15/2016 Update:  This post was accurate when it was written.  The final text of the Sweeney -Ruiz bill is much improved from the original.  This post is mostly not accurate anymore.  

http://www.njleg.state.nj.us/2016/Bills/SCR/119_I1.PDF

Bringing All Districts to Adequacy, Not Necessarily 100% Funding

First, this bill is not a bill to bring every district up to 100% funding.  Using ballpark figures, 100% funding for every district would cost $2 billion without redistribution and with redistribution would cost $1.5 billion.  

What the Sweeney bill appears to be is redistribution plus new spending in order to bring every under Adequacy district up to 100% of Adequacy.    This differs from how Sweeney has described the bill in public and I'm confused as to what the actual intent is.  

This is the relevant statutory text: 

2. a. It shall be the duty of the commission to study: (1) the adjustment aid and State aid growth limit provisions of the “School Funding Reform Act of 2008” (SFRA), P.L.2007, c.260 (C.18A:7F-43 et al.), to determine recommendations for revising those provisions in order to bring all school districts to their adequacy budgets as calculated pursuant to section 9 of that act over a period of five school years;  

So affluent underaided districts who tax themselves above their Local Fair Shares and therefore spend Above Adequacy, would apparently not benefit from this bill.  Very wealthy districts like Princeton and Millburn wouldn't gain, which is ok, but neither would diverse districts like West Orange, Teaneck, Wayne, East Brunswick, Fair Lawn, South Orange-Maplewood, Mount Olive, and Cherry Hill. (source for Adequacy Figures, the Fair Funding Database)

However, NJ's most severely underaided districts (who are all below Adequacy) would gain and there are hundreds of districts in this category.  

However, there is no risk to underaided/above Adequacy districts in this bill since the commission is charged with looking at Adjustment Aid and, by definition, these districts receive no Adjustment Aid.  So, this is a redistribution conditioned on state aid relative to uncapped aid, not residential wealth, which I believe is how redistribution should be handled.   

Since the text of the bill differs from how its authors have described it, there could be a pure mistake here. SFRA spells out Adequacy Budget in Section 9, Local Fair Share in Section 10, and the calculation of Equalization Aid in Section 11. If the bill read "calculated persuant to Sections 9-11 of that act" it would square much better with how Steve Sweeney has presented it in public.

Correcting this possible mistake or changing what is a bad idea is needed is for the commission to be able to differentiate between districts that are above or below Adequacy because of their own tax effort, not just state aid.

For instance many underaided districts are also below their Local Fair Share, so if they were to be brought up to Adequacy without a requirement that they tax at their LFS, they would become overaided. 

A few of the Abbotts are prominent districts in this category, like Trenton, Newark, and Paterson. Paterson is underaided by $36 million for 2016-17, but under its Local Fair Share by $46 million.  If Paterson were to be brought up to Adequacy it would get about $82 million.  (these are ballpark figures, the DOE has been confusing this year as to what exact Adequacy budgets are)

Conversely, there are underaided districts who are below Adequacy and tax massively above their LFS. Manchester Regional's taxes are more than twice what they should be.  

So, if a district is $10 million below Adequacy, but taxes $4 million above Local Fair Share, would it only get $6 million?  If so, the district is still underaided and the taxpayers overburdened.  

To avoid perverse tax incentives, the goal of the law should be to bring districts up to 100% of SFRA aid, not 100% of Adequacy.  This would also free up some more state money that could go to overAdequacy/overtaxed districts.

I accept that districts like Paterson, Newark, and Trenton cannot pay their full 100% Local Fair Shares because their residents are poor and their municipal taxes are very high, but the solution should be to change the formula for Local Fair Share should that it is calculated differently for poor districts than for wealthy districts.

Without a systematic change to the LFS formula or the language of the bill, there is a risk that the state will make up the tax deficit and districts will be, in effect, penalized for not paying their full Local Fair Share. So, if one district taxes at 100% of LFS and another district taxes at 50% of LFS, they would both get whatever the state aid needed is to bring them up to Adequacy and the district with taxes at 100% of LFS will be punished for that.  

A sensible change should be to task the commission with reforming the formula for Local Fair Share for poor districts.  If the formula were changed to "Aggregate Income -$10,000 per adult" the drop in a low-income town's Local Fair Share would be significant and Equalization Aid would increase, but the drop in a high-income town's LFS would be small.

Reforming the calculation of LFS may already be allowable under the existing text, but it's ambiguous.

Those of us in the fair aid community will have to constantly point out that a district's tax levy affects is spending relative to Adequacy, not just state aid.  

Reforming the Tax Cap

(2) the tax levy growth limitation as established and calculated pursuant to section 3 of P.L.2007, c.62 (C.18A:7F-38) and its impact on the ability of school districts to adequately fund operating expenses;

Reforming the tax cap is necessary for aid redistribution because even though an overaided district might be below Local Fair Share, it cannot tap its tax base if it is only allowed to increase taxes by 2% a year anyway.  

For Jersey City to increase school taxes by $20 million a year would be economically manageable, but it is illegal since Jersey City's tax levy is only $114 million.

This proposal to reevaluate the tax cap law is also a big deal even absent redistribution since overaided/low tax levy districts are scheduled to be flat-funded forever.  Since these districts have tax levies that are proportionally small in relation to their budgets, a 2% tax levy increase for them would bring in minute increases in the overall budget.  For instance, Jersey City's tax levy is 19% of its budget.  2% of 19% is nothing.

Personally, I believe that property taxes are too high in most towns and that the tax cap gives districts leverage in bargaining with unions.  I hope that the tax cap is only amended for districts whose taxes are below Local Fair Share.  

Reforming PILOTs

(4) the equalized valuation and income measures used to determine a school district’s local share of its adequacy budget as calculated pursuant to section 10 of P.L.2007, c.260 (C.18A:7F-52), and the impact of property tax abatements on that local share

PILOT reform would only have an impact on a few districts that receive Equalization Aid and grant many PILOTs, such as Jersey City and to a lesser extent Asbury Park and Harrison.   However, since Jersey City is the state's second biggest district, anything affecting it has a large impact on school finance and this is a case of a reform that would affect a small number of districts but have a big financial impact.    

Hoboken is another heavy PILOT user, but it does not receive Equalization Aid so PILOTs do not distort Hoboken's Local Fair Share in a relevant way since Hoboken's LFS is quadruple its Adequacy budget anyway.  

However, the list of overaided/heavy PILOT districts could expand in the future, so it's good that the bill addresses PILOTing now.

Overall, I have a lot of respect for Steve Sweeney and think his proposal is a very good one, but I hope that certain changes are made between now and passage or that the appointed commission takes the local tax levy into consideration in making it above or below Adequacy.  

More reporting on Sweeney's aid bill

"The school funding reform act never envisioned that New Jersey's school aid formula would be set in stone. We didn't anticipate that school aid would fail to grow sufficiently to meet future needs. But that's exactly what happened," he said during a Statehouse news conference. "As a result, New Jersey's school aid funding has grown less fair and less adequate year after year."

-Steve Sweeney, quoted in the  Burlington Times.

“This is not an urban-suburban issue. There are disparities all over the state, including within my own legislative district where some school districts are overfunded and some are underfunded.

“State aid was to be distributed fairly and equitably based on a formula that took into account each town’s property tax base, its ability to pay, increases and decreases in enrollment and the special needs of the children.”

-Steve Sweeney, quoted in PolitickerNJ

We have some school districts that are receiving three times the amount of aid than they should be and some towns receiving one-third of the aid that they should be. This means some towns are paying 50 percent more in property taxes than they should be and some are paying 50 percent less,” 

-Steve Sweeney, quoted in NJTV

“It has caused a massive disconnect in how schools are actually functioning and how they’re funded. The state continues to distribute more than half a billion dollars in hold harmless aid more than eight years after the School Reform Act from 2008"

- Assemblywoman Joann Downey, quoted in NJTV

Is the Education Law Center in support of Sweeney's plan or against it?  I can't tell based on the following from the Asbury Park Press:

...the Education Law Center said the state doesn’t need a new commission or another year to begin the process.

“We again call on legislators to start the phase-in to full funding without further delay by providing a significant down-payment towards that goal in the FY17 State Budget,” Law Center executive director David Sciarra said.

Reform superintendent Ken Greene praises the approach:

This is a big issue. We are receiving for next year 56 percent of the state aid that we’re due and yet our local tax effort is 44 percent above the local fair share. So our community has had to compensate where other communities are being overfunded. I think that’s the central issue, 

-Dr. Ken Greene, quoted on NJTV

At least a few Republicans are in support:

“The Legislature should decide rather than the courts. Instead of fully funding a broken formula, we should fix it by making it fair and more equal.”

-Assembly Minority Leader Jon Bramnick

Sweeney has never singled out a district as one that is overaided. The closest he has come is this where he anticipates an argument against redistribution from overaided districts:

“We need to commit roughly $100 million a year over the next five years so what happens is, you’re going to see — it’s like a scale some are going to come down some are going to come up but eventually you come to level. And the goal is to 100 percent funding formula. I don’t think any organization can make an argument that it’s unfair to be at 100 percent” (my emphasis)

Others (like me) aren't so circumspect by singling out aid hoarders:

"Tax dollars from hardworking families in Burlington County are going to subsidize school districts and property taxes of homeowners in Hoboken, Jersey City, Asbury Park and elsewhere, even as our kids sit in classrooms in underfunded schools. This defies logic and must stop."

Burlington County Freeholder Mary Ann O'Brien, quoted in the Burlington County Times

Sweeney Releases State Aid Reform Plan

Added: Now that I've seen the bill, I have an analysis here:



For months, Steve Sweeney has been working with Sen. Jennifer Beck on a state aid reform bill that would, presumably, reduce or eliminate Adjustment Aid and redistribute it to needy districts.

The bill was delayed and delayed and it became apparent that Sweeney and Beck were not on the same page.  Sweeney usually talked about eliminating all Adjustment Aid whereas Beck usually talked about just eliminating Adjustment Aid for districts who were above Adequacy (which would severely reduce the amount of aid that could be redistributed.).  Sweeney evidently wants an increase in aid as well as redistribution and we have no idea how Beck felt about that.

Finally, after months of waiting we have a proposal, but it isn't a bill per se and Sen. Jennifer Beck is absent, although the Democratic Assemblymembers from her district, Joann Downey and Assemblyman Eric Houghtaling, were present and on the record for reform.

Sweeney has proposed a bill to create a commission that would be empowered to write a proposal on state aid that the legislature could then vote up or down, with no possibility of amendment.  (like federal base closings bills).

More commentary below:

SWEENEY, RUIZ, DOWNEY & HOUGHTALING UNVEIL INITIATIVE TO FULLY FUND NJ SCHOOLS

Commission Will Develop Five-Year Reform Plan To Close

Gap That Now Leaves 80 Percent of Districts Underfunded
TRENTON – Citing the state's continued underfunding of 80 percent of New Jersey's school districts, Senate President Steve Sweeney, Assemblywoman Joann Downey and Assemblyman Eric Houghtaling today unveiled legislation to create a special commission to develop a school funding reform plan to bring all districts to full funding within five years. Senator M. Teresa Ruiz, chairwoman of the Senate Education Committee, is a cosponsor of the bill.

"The School Funding Reform Act was a major accomplishment that promised to provide full funding for all schoolchildren by ensuring that money would follow the child," said Senator Sweeney. "State aid was to be distributed fairly and equitably based on a formula that took into account each town's property tax base, its ability to pay, increases and decreases in enrollment and the special needs of the children. The goals and objectives of the formula are on target, but the promise has not been kept."

"The state has failed to fund the formula and keep up with the needs of the school districts," said Senator Sweeney. "As a result, the school funding formula has grown less fair and less adequate, with the fastest-growing districts being shortchanged, compromising the quality of education and putting upward pressure on property taxes. It is time to restore equity to the system and to fully fund our schools."

The commission will put the plan into legislation that will have to be approved or rejected in its existing form with up-or-down votes by the Legislature.

"We will closely examine the proposal to ensure it meets our goals to provide sufficient aid to districts that are underfunded but also to allow others the ability to adjust to the formula funding as it is intended under the law," said Senator Ruiz. "We know the transition must be done in a deliberative manner, but that by fully funding the formula we will ensure that the resources necessary for the education of each student are preserved. We believe this is the first responsible approach to meeting the mission of the school funding formula that aid follows the child, and to bringing districts to full funding in a fair and meaningful way."

Senator Sweeney said he expected the plan to include increased state funding over the five-year timeframe.

Under the proposed legislation, a four-member "State School Funding Fairness Commission" would be established and given one year to develop a plan that would bring every school district in the state to "adequacy funding" within five years. The Governor would appoint two commissioners and the Senate President and Assembly Speaker would choose one each, according to the bill.

Assemblywoman Downey and Assemblyman Houghtaling said the state needs to address the growing disparities in school funding throughout the state.

"Our school funding formula is nowhere near being fully-funded, nor has it been updated to keep up with the day-to-day realities our educators and administrators face," said Assemblywoman Downey. "It has caused a massive disconnect between how schools are functioning and how they are funded. "This is an issue that affects all children, and all taxpayers, throughout our state and something we need to take seriously. We can no longer cherry-pick solutions."

"School districts like Freehold Borough and Red Bank, with rapidly growing school populations, have essentially seen their aid frozen, putting students and taxpayers at a tremendous disadvantage," said Assemblyman Houghtaling. "Many more are being failed by a funding system that overlooks the day-to-day realities of their classrooms. Our communities and schools need to finally have the fairness and certainty that our school funding law promised them."

Senator Sweeney said meetings he and other legislators have had with city and school officials in different communities have underscored the problems with the school funding formula.

"This is not an urban-suburban issue," Senator Sweeney said. "There are disparities all over the state, including within my own legislative district where some school districts are overfunded and some are underfunded. We can no longer allow some districts to be subsidizing others under this formula. We need to be responsible in making the reforms to ensure that no students are negatively impacted. It is a matter of fairness for all students."

----

Usually a commission is a way of killing a reform idea, but if a commission is empowered to send legislation directly to the floor for a vote I think it's a sensible idea. I think what Sweeney is conceding by promoting a commission is that the legislative process would not work for redistributing state aid. 

I don't have any insight into what really happened here, but maybe Sweeney tested other Senators and found out that he didn't have 21 votes for the reform he was originally hoping to pass?

Rather than an attempt to bury reform, I think this is an attempt to get a very serious reform. Since the bill cannot be amended, it makes it slightly easier politically for legislators to vote for it.  Under normal legislative proceedings, legislators will work aggressively to protect their own constituents at the expense of the state as a whole.

This happened in 1990 when the Quality Education Act was pushed through the legislature.  The QEA which would have slashed aid for suburban districts to give more money to poor and middle-income ones, but Sen. Matthew Feldman of Bergen County got special transportation aid for his Bergen County constituents.  Montclair's legislators also pulled in some special privileges.

Unfortunately Sweeney's approach delays reform by at least another year.

It looks like Sen. Jennifer Beck dropped out of state aid reform. My guess is that she didn't want to redistribute as much aid as Sweeney did and she may have opposed increasing school aid by $500 million.

However, getting the commission's ideas into law is Step 2.  Step 1 is getting the bill creating the commission through the legislature.  

I've got to assume that Sweeney is confident about the Senate, but who knows about the Assembly.  Vincent Prieto is conspicuous by his absence and has made almost no comments on state aid in all his years in the Assembly.  

Prieto voted for SFRA back in 2008, but on state aid is an unknown.