Thursday, June 30, 2016

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:
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.

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