Saturday, October 15, 2016

The Long Wait for Full Funding under Capped Aid

When SFRA was passed in January 2008 the designers of the law realized that they were essentially Abbottizing all poor and working class districts in New Jersey, and thus setting extremely ambitious targets for school funding that the State of New Jersey would not be able to reach in a single year.  

Thus, the framers of SFRA created "state aid growth limits," or "caps," for how much new aid a district could gain in a year.  The caps allowed the State to gradually ramp up aid for districts that were hitherto fiscally neglected.  The caps meant that SFRA could be sold to the public as something that could be paid for with new revenue and would not require a tax increase.

The legislative text describing the State Aid Growth Limits is below:

For the 2009-2010 school year and thereafter, total stabilized aid shall include Equalization aid, Special Education categorical aid, Security Aid, and Transportation aid.
d. For the purposes of this section, “State aid growth limit” means 10% in the case of a district spending above adequacy and 20% in the case of a district spending below adequacy.

SFRA also contains a section here ordering the Commissioner to "adjust" (ie, cut) a district's aid if it somehow exceeded the State Aid Growth Limit.

a. Notwithstanding any provision of this Act to the contrary, the total stabilized aid for each district shall not be increased by more than the district’s State aid growth limit. In the event that total stabilized aid exceeds the prebudget year total by a rate greater than the State aid growth limit, the commissioner shall adjust the components of total stabilized aid so that they total exactly the prebudget year total increased by the State aid growth limit.

The problem with the State Aid Growth Limits is twofold:

1.  The caps are set in terms of percentages, not dollars per student.

2.   Getting a 10% aid increase of a 20% aid increase is dependent on a district being above or below Adequacy, when spending relative to Adequacy is determined in part by local tax effort, not just state aid.

1.  The Percentage Problem

Since the caps are defined in terms of percentages and not dollars per student, a low-aid, severely underaided district would get less new aid than a high-aid, moderately underaided district.  In other words, if districts are getting 10% increases, a deeply underaided district already getting $1,000 per student would only gain is $100; whereas a slightly underaided district already getting $5,000 per student would gain $500 per student.

For instance, if SFRA were funded at its statutory level and the aid caps are followed, Newark's aid would jump by $116 million ($2,300 per student), to $858 million. By contrast Atlantic City, would only gain $2.5 million, or $370 per student.

Newark would get much more than Atlantic City because Newark already gets a lot of aid and Atlantic City gets very little ($19 million in regular aid).

That's not fair but that's SFRA.

2.  The Adequacy Budget Problem

This is SFRA's definition of Adequacy.

(1) For purposes of determining if a school district or county vocational school district is spending above or below adequacy and its applicable State aid growth limit, the district’s spending shall equal the sum for the prebudget year of its equalization aid calculated pursuant to section 11 of this act, special education categorical aid calculated pursuant to section 13 of this act, security categorical aid calculated pursuant to section 14 of this act, and general fund local levy.   [my emphasis]

Since the "general fund local levy" is included in the Adequacy Budget, a district that overtaxes itself and is thus above Adequacy is therefore penalized.

SFRA's caps were a problem in the first place, but since Christie cut aid in 2010 and has flat-funded districts since 2013, SFRA's aid caps even more unfair than they were back in 2007-2008 when they were devised, since districts are even deeper below their uncapped aid levels now than they were.

Let's look at two large, badly underaided, but above Adequacy suburbs, Cherry Hill and West Orange.

For 2016-17 Cherry Hill will get $13,110,005 in state aid, but its uncapped aid is $39,946,051.

Necessitated by underaiding, Cherry Hill's Local Tax Levy exceeds its Local Fair Share by $34 million ($159 million versus $125 million.)

It's unclear to me what Cherry Hill's Capped Aid is. Data I got last February directly from the DOE gave it at $14.2 million, but newer data on the DOE's website in "Additional School Funding Scenarios" gives Cherry Hill's capped aid at $16.5 million, a figure that I believe is based on Cherry Hill's 2008-09 aid.

Let's use the higher $16.5 million amount.  

Again, Cherry Hill's taxes are so high that it actually is above Adequacy, so its increases would be only 10% per year.

10% of $16.5 million is $1.65 million.  That's not even 1% of Cherry Hill's $191 million Total Operating Budget.  Cherry Hill already increases its taxes by $4-$5 million per year, so increases in the $1.65 million ballpark are nice, but only small offsets of Cherry Hill's steadily increasing tax burden.

But what's significant is that assuming Cherry Hill raises its taxes enough to stay above Adequacy, it would take Cherry Hill 11 years to get to what its 2016-17 full funding should have been.

And since inflation will erode the value of money and Cherry Hill's Uncapped Aid target will rise, the wait for true, full funding will be even longer, perhaps 20 years.

But Cherry Hill does much better than West Orange, another overtaxed, yet badly underaided district who is nevertheless above Adequacy.  West Orange would have a 14 year wait to full funding (again neglecting inflation).

For a district that is below Adequacy the annual boosts would be 20%, but for some severely underaided districts such as Bayonne, Red Bank, and Clifton, the wait to full funding is still 6-7 years.

By contrast, a high-aid district that gets more than 80% of its uncapped aid, like Newark, would reach full funding in a single year since Newark would qualify for a 20% increase and 20% would be more than enough to bring Newark up to its full, uncapped aid.  At that point, Newark would be fully funded and theoretically flat-funded for several years.

According to the DOE's "Additional School Funding Scenarios," other already high-aid, but modestly underaided districts, would have the biggest gains. Paterson's aid would jump by $57 million ($2,050 per student), to $458 million in a single year. Trenton's aid would increase by $33 million in a single year ($2,350 per student).

As I mentioned before, even a district as underaided as Atlantic City would gain little under capped. Atlantic City would only gain $2.5 million, or $371 per student. Red Bank Boro would gain $538,000 or $380 per student.

Bound Brook, NJ's most underaided district in terms of its dollars per student deficit, would only gain $1.54 million for 1,744 students, or $883 per student.

Freehold Boro would gain $1.8 million, or $1,100 per student. Bayonne would also gain $1,100 per student. Manchester Regional would only get $1,300 per student.

Bayonne, Bound Brook, Atlantic City would get gradually larger boosts as 10% or 20% is calculated based on larger previous-year aid totals, but if New Jersey cannot escape its chronic fiscal problems, the larger aid boosts are doubtful.


Given New Jersey's chronic budgetary crisis, some aid growth caps are necessary, but it would make
Steve Sweeney Understands
The Problem Here
more sense if the caps were a flat amount in dollars per student and not based on what the previous year's aid was.

If there has to be some prioritization and some districts are given bigger increases than others, let the prioritization be based on the severity of underaiding, not being above or below Adequacy, since spending relative to Adequacy depends on local tax effort, not just state aid.

As depressing as the state's dire fiscal situation is and the aid caps are, Steve Sweeney's state aid reform commission bill always included a clause on evaluating the fairness of the state aid growth caps.  As long as there is one powerful legislator who understands the unfairness of the growth caps there is some hope, but those of us who care about aid fairness have to speak up and support.


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