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.
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.
Bringing All Districts to Adequacy, Not Necessarily 100% Funding
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;
(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.
(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.