Thursday, June 2, 2016

Why the 2010 Aid Cuts were Unavoidable

Economic Stagnation is the
Root Cause of NJ's Fiscal
and State Aid Crises
Phil Murphy is the first of the Democrats officially out of the starting gate for the 2017 gubernatorial campaign.  He's hosting town halls, making appearances at public events, and has an active and open internet campaign.

A few weeks ago Phil Murphy did a Facebook town hall in which he took questions from the public.  The questions were submitted ahead of time and were read (and condensed) by Phil Murphy's campaign manager.

There were a number of questions about state aid and Phil Murphy did try to answer a question about what he wanted to do with K-12 state aid.

See Minute 42:50 of Video

Murphy didn't directly say what he would do about education aid so much as condemn what Chris Christie did do, specifically, "gutting" education aid. While Murphy's statement is technically factual, it is so devoid of context as to be misleading.

Murphy blamed Chris Christie for underfunding the formula by (a cumulative) $7 billion and said Christie had "gutted education."  He did not discuss the unevenness of NJ's aid distribution nor use terms like "SFRA" or "Abbott."

Murphy juxtaposed NJ's cumulative underaiding with the amount of corporate subsidies and incentives given out under Christie.  These tax incentives coincidentally have a cumulative value of about $7 billion and Murphy said said money ought to be used to fully fund education aid.

In case Phil Murphy himself reads this or his campaign does, here's some context on NJ's recent state aid history.

1.  Christie Inherited an Unsustainable School Spending Level That Had Been Paid for with $1 Billion in Federal Money

This is the defense of himself that Chris Christie gave in his confrontation with teacher-blogger Marie Corfield and he's factually right.

This is how the Corzine Administration itself described its plans for ARRA money:

Approximately $1.057 billion will be used to implement the new school funding formula enacted by the School Funding Reform Act of 2008 (SFRA). About $70.8 million is allocated to higher education. These funds will be used to restore cuts for higher education that were included in the proposed budget for FY 2010. These cuts will be restored if certain conditions, including limits on tuition increase, are met. Furthermore, the increase in funding for Tuition Aid Grants (TAG) proposed in the Governor’s FY 2010 budget will be supported with SFSF dollars.

If you look at the pension chart below, Jon Corzine also slashed contributions and part of the "savings" went into education aid.  Corzine had hit $1 billion two years in a row, but in 2009 he let contributions fall precipitously in order to sustain school aid.

I Love The 90s!
It's Easy to Fund Education When You're
Abandoning Pension Payments!

So Chris Christie didn't so much as "gut state aid," he "lost federal aid" and couldn't lower pension contributions below $0.

Christie vetoed a renewal the Corzine-era "millionaire's tax" and that certainly deprived the state of much money, but there were multiple versions of "millionaires' taxes" passed for various purposes (like seniors and tax rebates) and I don't believe anyone can claim that all of that money would have gone to schools.

Moreover, virtually every state cut education spending in 2009-2011 as the economy nosedived.

What is awful about Christie's cuts is that he made the same cut equal to 5% of budget for every district, from the most overaided to the most underaided.  This means that Hoboken was treated the same as Clifton until in gross legal amorality and irresponsibility, Justice Jaynee LaVecchia ordered the state to increase Abbott spending by $500 million which "gave back" $1.7 million to Hoboken.  

2.  New Jersey has been underfunding its aid formula since Forever, not since Chris Christie became governor.  
Ok, not forever, but ever since the Public School Education Act passed in 1975.

As New Jersey School Boards Association spokesman Frank Belluscio said in 1989  "The formula has been fully funded maybe three times since the law was enacted in 1975."

3.  New Jersey is Increasing "Education Spending" but the New Money is Mostly Going to Pensions & Debt

I think this is self-explanatory.

NJ only increased total state spending by $1 billion for FY2017.   $544 million of that went to education-related spending, but of that $544 million, only $94 million (17%) went to K-12 education aid.

To paraphrase James Carville, "It's the Pension Crisis Stupid!"

4.  New Jersey's aid for non-Abbotts has been stagnant since 2002.

The forerunner to SFRA was CEIFA,, the "Comprehensive Education Improvement and Financing Act" of 1996

CEIFA didnt' have a long run either.  Aid increased dramatically in the late 1990s, but because the economy was doing well then and NJ was in the process of zero'ing its pension payments.

Yet, starting in 2002 aid was basically frozen for all non-Abbotts.

The Department of Education admitted this very frankly in 2007 when SFRA was unveiled.

5.  New Jersey's Economy is Stagnant and Thus So Is Our Revenue

NJ's economic growth has lagged the nation's since 1990 and been particularly bad since around 2001.  Since 2004, NJ's average compound growth in GDP has only been 0.4% versus a national average of 1.3%.  NJ has only recovered 90% of the jobs it lost during the Great Recession, again, lagging the nation.

So the people who say that Christie gutted education aid are factually right, but not contextually, since any governor would have had to do the same thing.  Maybe if Jon Corzine had won reelection the cuts wouldn't have been as deep, maybe they would have been made more fairly and spared underaided districts, but Christie, along with Democratic counterparts in many other states, had to cut education funding.

By condemning Chris Christie for what he had to do back in 2010, Phil Murphy tells us nothing about what he would do.

See Also: 

The Phantom Budgetary Salvation: Cutting Tax Incentives
Dear Phil Murphy, Massachusetts Doesn't Have High Taxes

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