Wednesday, July 20, 2016

The Transformation of State Aid Since 1990

This post is about the transformation of the state aid distribution in New Jersey from the 1989-90 school year up to the present and how the Abbott II decision of 1990 has upended the state's relationship with middle-class school districts.

This is a lengthy post, so I will begin with a few bullet points.

  1. Prior to the Abbott II decision, NJ already had a progressive aid distribution where poor districts got more aid.
  2. Among poor districts, NJ already had a bias in favor of poor urban districts (the future Abbotts) over poor rural and poor suburban districts.
  3. NJ's aid increase has doubled the rate of inflation even though student population growth since 1989-90 has only been about one-third.
  4. From 1990 to 2002 NJ's pension contributions fell from $750 million to $0.  During that time state aid increased by $3 billion, from $2.5 billion to $5.5 billion. 
  5. In per student and inflation-adjusted terms, most New Jersey districts get less aid than they did before Abbott. 
  6. The districts who have lost the most state aid per student are not wealthy districts who could easily fund education with local money; the biggest "losers" are districts who have gained the most population.

Chris Christie was wrong to propose that every district get equal state aid per student, but he is 100% correct that the Abbott System is a major cause of New Jersey's property tax crisis.  ("Major" does not mean "sole").

The Education Law Center says that any attempt to link Abbott to New Jersey's property tax crisis is "scapegoating" the Abbotts, but this is just the Education Law Center insulting the intelligence of the state.

The word "scapegoat," as a verb, means to cast blame onto something that is blameless. People may believe that Abbott funding still has educational merit, but to deny that Abbott funding is a major cause of high property taxes is preposterous because the enormous money given to the Abbotts has been diverted from middle-class, working class, and poor non-Abbotts.

The early 1990s state aid data in this post have not been available online previously.  I got the state aid and enrollment data from the Department of Education via an OPRA request.  I've put everything online here.  See the conclusion of this post for more information about the data.

State Aid in 1989-1990

In 1990, when the landmark Abbott II decision came out, New Jersey's K-12 state aid total was $2,536,074,465, divided amongst 1,076,005 students, so $2,356 per student.

This amount would be $4,330 per student adjusted for inflation.

In terms of a per student average, K-12 state aid in 1989-90 was thus significantly less than it is today.  For 2016-17, $8,031,337,334 in K-12 aid is divided amongst 1.3 million K-12 students, or $6,177 per student.
The increase in state aid from 1989-90 to today has vastly exceeded inflation and student population growth.

As you can see, as New Jersey increased state aid in the 1990s we first diminished and then completely eliminated pension contributions.  Thus, in discussing the origins of the Pension Crisis, the surge in state aid must be cited in addition to the sales tax cut of 1992 and Whitman's income tax cut of 1994.

Although the Education Law Center implicitly demands that New Jersey continue the pace state aid increases that occurred in the 1990s and 2000s, the pace of increase was not sustainable.

A Flatter Distribution, but Still Progressive

Aside from being a significantly lower "aid effort," state aid before the Abbott II decision had a flatter distribution than today, meaning poor towns got less and middle-class towns got more.

Yet, contrary to what is sometimes said, the pre-Abbott distribution was clearly progressive and there was already a bias in favor of "urban" districts due to the Kean Administration's attempt to give more aid to districts on the Department of Community Affairs' list of "urban municipalities."

For instance, even before the Abbott II decision came out, Newark got $263.8 million, which was more than all of Bergen County and all of non-Newark Essex combined.  Most future Abbotts got significantly less than Newark did, but they got more money than towns you might call working class and more than non-urban DFG A and B districts.

For example, in 1989-90, Millburn got $476 per student ($875 per student with inflation).  Newark got $5,519 per student ($10,155 per student with inflation), so the ratio of Millburn:Newark state aid was 1:11.  Today Millburn gets $416 per student and Newark gets $14,647, so a ratio of 1:35.

A reasonable person might consider the 1989-90 distribution to be unfair since affluent districts had vastly superior tax bases and could more than compensate for inferior state aid, but the state was still trying to give more to poor districts.

The same pattern exists for Mercer County, where state aid was progressive but flatter than it is now.

What I have never seen discussed before is that there was already a bias in favor of districts the state considered urban.

Amounts are adjusted for inflation.
The Abbotts and Everyone Else

The future Abbott districts got $1,024,840,106 in 1989-90, or 40% of the total.  At the time the Abbotts had about 24% of NJ's students.

In crafting the Abbott decisions, the NJ Supreme Court disregarded analternative aid approach to raise spending in the Abbotts up to a threshold considered "adequate."  Instead, the NJ Supreme Court said that whatever the level of the spending in the DFG I and J districts was, the Abbotts had to be at or above that level.

Since Abbott aid was tied to spending in the DFG I and J districts, the state tried to restrain spending in DFGs I and J.  Jim Florio's original Quality Education Aid of 1990 "shot the suburbs in the kneecaps" by making them pay for pensions, post-retirement health care, and deeply slashed their aid, but suburban pension assumption was reversed and the aid cuts did not (initially) go as deep as what Florio had planned.

Although DFG I and J districts gained virtually no aid, since they were not restrained from spending their own tax dollars, they were still able to increase their budgets and Abbott aid increased more than Jim Florio had wanted.

Thus, Abbott spending more than quadrupled.

First Abbott Aid doubled from $1,024,840,106 in 1989-90 to $2,291,696,951 in 1997-1998, when the Abbotts reached parity with DFG I and J districts.  During those eight years, inflation had only been 29%.

Over the next two decades to 2016-17, Abbott funding would again more than double again, to $5.1 billion (counting Pre-K).  Whereas in 1989-90, the Abbotts got 40% of the state aid total, in the 2010s they get 60% of a much larger total.

The Abbotts got the lion's share of the increase, but poor non-Abbotts did reasonably well during the 1990s.  However, after 2001-02, non-Abbott aid began a multiyear stagnation.

Aid by '90 DFG 1989-90 Aid 2016-17 Aid (counts Pre-K) Percentage Increase
Abbott $1,024,840,106 $5,097,138,421 397.36%
DFG A Non-Abbott $33,026,612 $90,616,671 174.37%
DFG B Non-Abbot $193,413,331 $651,367,836 236.78%
DFG CD $206,432,630 $588,105,998 184.89%
DFG DE $305,697,001 $793,285,540 159.50%
DFG FG $220,873,914 $488,171,679 121.02%
DFG GH $232,498,986 $431,780,101 85.71%
DFG I $196,401,926 $273,268,931 39.14%
DFG J $9,054,787 $12,979,326 43.34%

It's critical to remember that these totals conceal great variation.  Even though DFGs A through FG appear to have gained, there are districts who have lost aid in each of those DFGs, even DFGs A and B. Lawrence Township in Cumberland County was DFG A, but it has lost aid in per pupil and inflation adjusted terms.  Lakewood was in DFG B, but it has also lost aid.

In per pupil terms and inflation-adjusted terms, a majority of NJ districts have lost aid.

Of the state's $5.54 billion increase in K-12 opex aid, the Abbotts have gotten over $4 billion, or nearly two-thirds. Counting construction aid and Pre-K aid, the Abbott increase easily exceeds two-thirds.

The Biggest Losers

I hate to use the word "loser" in the context of any district, but I can't think of another antonym for "gainer" that fits.

The biggest losers in aid per student are NOT wealthy districts like Millburn, Princeton, and Mountain Lakes.  The largest losers in state aid are districts for whom aid has been flat or negative and population growth has been dramatic.

Chesterfield is NJ's biggest loser, since its population has quintupled and its aid has actually dropped. In 1989-90, Chesterfield got $523,570 for 228 students.  For 2016-17, Chesterfield will get $419,983 for 801 students.  

 Adjusted for inflation, Chesterfield has lost 87% of its state aid ($4,225 per student in '89-90, $501 per student for '16-'17)

It's possible that Chesterfield was overaided in 1989-90, but a drop of this magnitude is unacceptable unless there has been a tremendous increase in wealth.

There are in fact about 100 districts in New Jersey that have lost aid in nominal terms and these districts are not all wealthy. Cherry Hill, is the state's biggest loser in nominal dollars. It got $18,222,828 in 1989-90. Now it gets $13,110,005.


The trend of state aid increases outpacing inflation was never going to be sustainable and New Jersey has to get used to a "new normal" where state aid increases are modest and often lag inflation and student population growth.

The huge surge for the Abbotts is particularly unsustainable.  Given the ineffectiveness of Abbott spending, Abbott aid should be be redistributed to other needy districts.


Data Note:

The state aid amounts I got from the DOE were in a very easy to use Excel format, but the enrollment data had to be scanned in manually. Since the enrollment data is formatted in a way that is not machine-readable, I have had to hand copy the data myself. Please excuse any data entry errors and try to focus on the big picture.

Also, the state has changed how it calculates enrollment for districts that have sending-receiving relationships with high schools.  The 1989-90 enrollment numbers I got did not include send-receive kids for whom the district pays tuition, although these students counted towards state aid.  The 2016-17 enrollment figures I have do include send-receive kids.  Because the 1989-90 and 2016-17 enrollment figures for send-receive districts are calculated differently I exclude them from 1989-90/2015-16 per pupil comparisons.

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