Monday, January 30, 2017

PILOTed Chic: Asbury Park's Concealed Wealth

The Monroe Apartments:
Asbury Park PILOTed Chic
Asbury Park is one of the most notorious aid hoarders in New Jersey.  

Asbury Park gets $55.4 million in K-12 aid for only 2300 students, or about $24,000 per student. That $55.4 million K-12 package is $25 million in EXCESS of what SFRA says it needs.  That excess alone works out to $10,900 per student, an amount that is higher than the TOTAL per pupil aid of the poorest non-Abbotts, such as Prospect Park, East Newark, and Woodlynne and virtually all working class districts in NJ.

At a time when nearby Freehold Boro "packs students in on top of one another" and has carved up its library into little classrooms and busses 200 students daily to rented classrooms in other towns, Asbury Park was able in 2014 to reopen a disused elementary school so that every child in the 1.4 square mile town could have a short walk to school.

ASBURY PARK – With two eager elementary children prancing at her side, Erin Hicks walked up to the reopened Barack H. Obama Elementary School with a smile of relief.
For the first time since her now second-grade son started kindergarten, Hicks has an elementary school in her neighborhood. 
"It's easier for me because I live right across the street," said Hicks, who also has a 5-year-old daughter at Barack Obama. "I don't have to deal with the aggravation of school buses." 
Hicks' frustration with kids being bused from the Bangs Avenue neighborhood to schools across town was recognized by the school district, which officially reopened the school on Thursday.

The elementary school reopening took place amidst a continuation of a decades-long decline in student population brought on by family outmigration, Interdistrict Choice outmigration, and charter school outmigration.

As absurd as that $25 million excess is, things will become even more absurd as gentrification hits Asbury Park, increases the tax base (and further decreases the student population.)

Indeed, the Asbury Park Press has a great story up about Asbury Park's real estate boom, "The Changing Face of Asbury Park."

Rents have increased by 17% from 2010 to 2015.  The average price of a home in Asbury Park is now $260,000, which is not that far off from New Jersey's $300,000 average.

Now, instead of deinvestment, Asbury Park is starting to experience gentrification on its East Side:

Since the fits and starts of the beachfront redevelopment began in earnest after 2006, Asbury Park has become two towns. The east side bubbles with upscale housing, restaurants, shops, nightlife, a refurbished boardwalk — even a pinball museum where $10 gets you an hour on any classic machine of your choice. Millionaires buy summer condos that overlook the wide, pristine sands and ocean....
Driving up the prices: wealthy Manhattanites looking to scoop up waterfront condos at places like the Monroe. The 34-unit project along Heck Avenue offers units ranging from $400,000 to $1.2 million. 
Sixty percent of the units have already sold out ahead of the building's opening later this year.
And that gentrification is causing displacement:

"Some longtime residents struggle to keep up with the increased cost of living in their small town.... 
"I lived not more than three blocks away from the beach most of my life," said Jennifer Lewinski. "I can't afford to live there now. I live on the west side. It's just not what I'm used to," she said.

The West Side and the public school students remain poor, but from the perspective of tax base that  
PILOTed Luxury:
The Monroe Apartments, Asbury Park:
Don't you wish your shower
were this nice?
disparity is irrelevant, since when it comes to taxes


So this is all great, right? Doesn't this boom mean NJ can redistribute even more of Asbury Park's school aid (assuming Adjustment Aid is eliminated?)

Reinvestment is a good thing, but it's not that great for school aid redistribution. 

Yes, Asbury Park's existing housing stock is increasing in value and increasing Asbury Park's Equalized Valuation, but the new development is PILOTed and therefore does not count toward Asbury Park's Equalized Valuation.

Since Equalized Valuation is half of the basis of Local Fair Share (along with Aggregate Income), from the perspective of state aid, it's like all of Asbury Park's new luxury condos were still vacant land.  

ASBURY PARK – It sounds like a sweet deal: build upscale, luxury townhomes overlooking the waterfront, sell them for nearly half a million dollars and get off the hook from paying school taxes for 30 years.
That's the agreement master developer iStar Financial inked with the city in 2012, hoping to unlock waterfront development that had been stagnant for several decades. 
Instead of school taxes, the deal calls for waterfront residents to pay a special assessment that funds infrastructure — like sewers, roads and streetlights — for the development of more than 2,000 waterfront residential units over the next decade. ...
 The iStar agreement is one of 15 payment-in-lieu-of-taxes agreements, or PILOTs, in the city that waive school taxes for developments.
PILOTs and tax abatements, which are widely used in municipalities across the country , grant tax exemptions to developers and businesses who contest their property value is too high, or as an incentive for them to build in blighted areas. [ed note. Most NJ towns have 0-3% of property abated and for school districts that do not qualify for Equalization Aid there is no distortion of state aid.]
The difference is that PILOTs require the developer to make a payment in lieu of a property tax, and tax abatements reduce or eliminate a tax. 
Municipalities in New Jersey forgo hundreds of millions of dollars in revenue each year through abatements and tax incentives, according to the Office of State Comptroller, a state investigative arm. 
Other tax incentive agreements in Asbury Park include the Steinbach building, 550 Cookman Avenue and Asbury Towers. Those three buildings combined were exempt from $318,000 in school taxes in 2013 based on their tax assessments and a school tax rate of $1.61 per $100 of assessed value. 
City tax assessor Erick Aguiar said that school tax amount could be significantly higher than what they would actually pay since developers who are tax exempt don't appeal their property assessments. Also, there will be reasessments of properties this year which could mean some property owners will pay higher taxes, others will see a tax cut.

And if Asbury Park's new luxury condos are owned as second homes, then their owners' incomes don't even count towards Aggregate Income.

So, the battle for reform has to focus on Adjustment Aid, but if New Jersey is really going to have equity, we have to reform the PILOT law too.  It's too bad that the Education Law Center doesn't protest PILOT deals, but they're the NJEA's law firm you know, and the NJEA is too furious about charter schools to notice the unfairness around tax abatements.

Fortunately, Steve Sweeney's state aid proposal has always had a provision to reform PILOTing. Let's hope he is able to get his proposal past Vincent Prieto.

See Also:

Sunday, January 29, 2017

The NJEA is Against Reform Too

The NJEA Opposes Reform Too.

On this blog, I've repeatedly criticized Vincent Prieto for betraying his own  severely underaided constituents by blocking state aid reform.  I've criticized Phil Murphy repeatedly too for his deafening indifference to state aid reform.

Prieto's real reasons for opposing reform aren't public, but much evidence points to Prieto's relationship with Jersey City Mayor Steve Fulop.

Fulop, who showed his hostility to fair taxation through his strenuous and years-long opposition to a desperately-needed property tax reval for Jersey City, openly brags "I have significant clout with Speaker Prieto," repeatedly dismisses the significance of state aid reform and has confidently said "there's a long road" before any loss of Jersey City's state aid happens.

Insiders have reported to me that Fulop sees the potential of aid losses for Jersey City as intended to "hurt" hims personally and Jersey City as a whole.  As his opposition to a reval showed his lack of concern for working class parts of Jersey City, he has an even less of a concern for school children who live outside of his Gold Coast Abbott bubble.

Fulop's belief that aid reform is intended to hurt him personally is a strange belief for an informed New Jerseyan to have, but then again, Steve Fulop also said that the push for a property tax reval in Jersey City was "motivated purely by hatred for me," so Fulop's reasoning is more self-centered than a normal person's would be.

Not every Jersey City politician (and resident) is as bad as Steve Fulop is.  Jersey City's state senators, Sandra Cunningham and Brian Stack, appear to accept reform, but Steve Fulop and his clique certainly are absolutely indifferent to any taxpayer or student who lives outside of Jersey City.

I focus on Jersey City's role in opposition to state aid reform because it is so much more powerful than any other overaided district.  Other overaided districts are in the same legislative districts as underaided districts and so their opposition is neutralized.  For instance, Asbury Park is in the same legislative district as Freehold Boro and Red Bank Boro, and so Asbury Park's three representatives (Sen. Jennifer Beck, Asm. Eric Hougtaling and Asw. Joann Downey) are strongly pro-reform.  Pemberton has even publicly accepted state aid redistribution.

HOWEVER, Steve Fulop isn't the only special interest Vincent Prieto is listening to.

New Jersey's most powerful lobby, the NJEA, is also against reform and is making that opposition clearer.  The NJEA's opposition to aid reform goes back decades; the NJEA originally opposed the aid increases+redistribution that Jim Florio wanted as part of Abbott implementation in the early 1990s.

Since Steve Sweeney started fighting for reform, the NJEA has been conspicuously absent from the struggle for fairness, even though it would benefit tens of thousands of teachers in underaided districts.

The NJEA already called the concept of state aid redistribution "divisive" but at last week's legislative hearings on state aid, it put its power firmly against reform and for Vincent Prieto's nebulous plan for another committee.

NJEA Vice President Marie Blistan today called on members of the Joint Committee on Public Schools to commit to fully funding the state’s existing school funding formula, known as SFRA. She pointed out that since 2010, SFRA has been underfunded by approximately $1 billion per year by the Christie Administration. As a result, school funding across the state has been distorted, leading to what she called “gross inequities” among districts. 
Blistan also noted that it is incorrect to say that the SFRA formula itself is the problem, because it has been neglected for so long. She told legislators that talk about how to “fix” the formula is a diversion, because the real problem is that it’s never been funded. 
Blistan criticized two competing school funding proposals, one from Gov. Christie and one from Senate President Steve Sweeney that purport to address problems with school funding. Both proposals would reduce funding to hundreds of thousands of students. While Christie’s proposal is more draconian, Sweeney’s would reduce aid to approximately 715,000 students across the state. Both proposals would pit communities against each other and reduce funding too. Blistan was adamant that “choosing the lesser of two evils is not acceptable here.” She urged legislators to support a proposal championed by Assembly Speaker Vincent Prieto that would preserve the existing formula while also studying it to determine where it could be more effective.
What the NJEA should be doing is supporting reform, but also favoring an amendment to the tax cap law so that the BOEs of aid-losing districts have the automatic power to raise their tax levies without a referendum to make up for lost aid.   This provision is already in Steve Sweeney's state aid reform bill, but the NJEA ignores it.

As usual, the NJEA demanded that the state change charter school funding and impose a moratorium on charter school expansions and approvals.
Blistan also called on the legislators to recognize the need to address charter school issues in any examination of school funding, calling for much greater transparency in how they report their finances. “Charter schools were never intended to create a separate system,” Blistan told legislators. She reiterated NJEA’s call for a moratorium on charter school approvals and expansions until a full study of New Jersey’s charter school law and its effects over the last 20 years can be completed. She lauded Assemblywoman Mila Jasey and Senator Ron Rice for sponsoring a bill to put that moratorium in place.
The charter school notion is a pathetic distraction.  Most of New Jersey's underfunded districts are not affected by charter schools in any way or any substantial way.  A change in charter school funding would do nothing for Bound Brook, Manchester Regional, Dover etc.

Several NJ districts who are affected by charter schools, such as Hoboken, Vineland, Camden, and (of course) Jersey City, are OVERFUNDED.  

Clifton is Devastated by Underaiding and Huge Cost
Increase for the Passaic County Technical Institute.

The NJEA Doesn't Give a F*^k. 
As usual, the NJEA ignores the negative financial affects of any school choice model that doesn't include charters.

For instance, the NJEA is silent on the deleterious affects of the Passaic County Technical Institute's expansion for Passaic County districts.  The expansion of the PCTI has been a large growing expense for districts like Clifton, since the Clifton BOE must pay $18,000 per student for each Clifton student at the PCTI and Clifton had an additional 70 students enroll for 2016-17.  The cost increases for the PCTI were a very large cause of Clifton's devastating 2016 budget cuts in which 50 teachers were laid off from a district whose class sizes were already very large.  

The NJEA's opposition to aid reform is also a likely explanation for Phil Murphy's indifference and silence on state aid.

Murphy, who was UNANIMOUSLY endorsed by the 125 member NJEA politburo back in October, has been extremely evasive on whether or not he thinks redistribution is appropriate. and his official stance is that he will "fully fund the formula," despite the state's budget crisis and Murphy's own clear prioritization of pension, post-retirement medical, higher ed, PreK, EITC funding plus a slew of new tax credits.

VINCENT PRIETO's opposition to state aid reform is blatantly political and is a true betrayal of PRieto's own severely underaided constituents in District 32 (including North Bergen, East Newark, Fairview, Kearny, and Guttenberg).

Yet, Prieto's opposition is motivated by more than just his subservience to Steve Fulop.  The NJEA's opposition likely plays a part as well.

If you are not an NJEA member there is no hope in persuading the NJEA to be realistic.  If you don't live in Jersey City there's nothing you can do to influence Steve Fulop.  But if you have not already called Vincent Prieto's office about state aid reform and Assembly Education Chair Marlene Caride's office, please do so now!

Prieto's number is (201) 770-1303

Marlene Caride's number is 201- 943-0615

The Assembly Democrats' office number is (609) 847-3500

Call them as soon as you can!

Friday, January 27, 2017

Three Cheers for Pemberton!

Tony Trogone of Pemberton:
Doing the Right Thing

The State Senate Education Funding Committee's hearing at Kingsway Regional had a great deal of emotional testimony from parents and administrators of underfunded school districts who demanded a redistribution of Adjustment Aid.

I will write more of that soon, but I wanted to highlight the surprising testimony by Pemberton's Superintendent.

The Pemberton is actually NJ's second most overfunded district (after Jersey City), with over $26 million in excess aid, or nearly $6,000 per student.

At the hearing, Pemberton's superintendent said that Pemberton was ready to lose Adjustment Aid:

Pemberton Township is one of the so-called overfunded districts and stands to lose millions if it's adjustment aid is eliminated. That's no easy pill to swallow, but township school officials say it's still preferable to Gov. Chris Christie's proposal to scrap the funding formula altogether and give all districts a flat per-pupil amount. 
Doing so would likely result in significant aid increases for many underfunded districts, but Pemberton Township would stand to lose $52 million [this is erroneous, the amount is $26 million] , well over half of its $83 million in annual aid. 
Superintendent Tony Trongone made the trip to Kingsway to testify in favor of his district, which has large populations of students from military families serving on Joint Base McGuire-Dix-Lakehurst, as well as substantial populations of students from poor families. Most of the township is also in the protected Pinelands Reserve, which limits its ability to grow its tax base. 
Despite those challenges, Trongone supports Sweeney's approach and said the district has spent several years trying to reduce its reliance on Adjustment Aid. 
"We've been waiting for this shoe to drop. The district has been fiscally prudent for when this time has come," he said, adding that he believes there is also a moral obligation to support fairness for school districts like Delran and Chesterfield that have been shortchanged. 
"I want to do everything I can for Pemberton. But I know we have to look at the bigger picture," Trongone said.

The source of this quote is from this Burlington County Times article (which has some errors in it)

Pemberton's Mayor has also come out in acceptance of losing Adjustment Aid.  I now feel bad about calling Pemberton an "aid hoarder."  

Troy Singleton Epitomizes the Breakdown of the Legislative Process on State Aid

Update: Troy Singleton has Tweeted to me that he is actually a sponsor of Steve Sweeney's state aid reform resolution in the Assembly. Since Sweeney's bill is all about redistribution, I find that hard to square with the anti-redistribution comments Singleton has made.  I await further elaboration from the Assemblyman.

What On Earth Are You Thinking?
Troy Singleton is an Assemblyman from New Jersey's 7th Legislative District, located entirely in Burlington County.

Singleton is the vice-chair of the Assembly Education Committee, behind Marlene Caride.  Singleton's comments on education often are reported in the media.

The school districts making up District 7 are:

Beverly, Bordentown Regional, Burlington Township, Cinnaminson, Delanco, Delran, Edgewater Park, Florence, Moorestown, Mount Laurel, Palmyra, Riverside, Riverton, and Willingboro.

It does NOT include Pemberton.  (relevance to come)

Yet, even though Singleton is on the Education Committee, and as a legislator ought to understand how deep NJ's fiscal problems are, he has no coherent view on state aid.  

Back in April 2016, Singleton appeared to be a glimmer of hope on state aid reform, saying at an Assembly hearing, "I still believe that 'Hold Harmless Aid' is a misnomer."

At the time I was thrilled by that and thought Singleton was one of the Good Guys, so you can imagine my disappointment when I read the following recent statement from him on the subject of state aid redistribution:

"Assemblyman Troy Singleton, D-7th of Palmyra, cited an Office of Legislative Services study that found that at least 20 school districts in Burlington County would receive less aid if all existing school funding was prorated solely according to the formula. Some districts like Beverly, Burlington City, Pemberton and Willingboro would lose considerable amounts of aid and force those communities to either drastically raise property taxes or make significant cuts to school programs. 
"I can't believe that's what we really all want. We have to find a way to come up with the resources needed," Singleton said."
This statement of Singleton's is truly unbelievable.  District 7 has exactly two overaided districts, Beverly City and Willingboro, and each district is barely overaided, so they face minor losses of state aid and, if they wanted to make up the losses through taxes, relatively small increases.  

Willingboro is overaided by a trivial amount: $529,312, or $144 per student. That aid surplus is equivalent to only 0.7% of Willingboro's $71 million total operating budget. Beverly City is more overaided, by$184,330, or $619 per student, but that surplus is still only 2.7% of Beverly City's $6,810,533 total operating budget.

So I have no idea what Singleton's definition of "considerable" is, Willingboro and Beverly City's excesses don't count as "considerable" in my book.  

By contrast, Singleton's District 7 has EIGHT (8) districts who are more underaided than Beverly City is overaided.

  • Delran is underaided by $4781 per student.
  • Riverside is underaided by $4018 per student.
  • Bordentown Regional is underaided by $3420 per student.
  • Edgewater Park is underaided by $3187 per student
  • Burlington Township is underaided by $3166 per student.
  • Palmyra is underaided by $2205 per student.
  • Riverton is underaided by $1447 per student.
  • Florence Township is underaided by $1194 per student.
Delran, in fact, is one of NJ's greatest activists for fair aid. OurFairShareNJ, in fact, was founded by Delran residents. 

Click to Enlarge
Click to Enlarge

Again, Pemberton Township is not in Singleton's district, but it is New Jersey's second biggest aid hoarder, after Jersey City, with a monstrous $25.8 million aid surplus, or $5,981 per student, itself a figure that is the 9th highest per pupil aid surplus in New Jersey.

Even though Pemberton is about 44% FRL eligible and has barely any ELLs, Pemberton gets $19,000 per student.  That $19,000 per student the third biggest state aid package in New Jersey, after fellow Abbotts Asbury Park and Keansburg.  

(As an Abbott district, Pemberton also gets PreK and 100% state-funded facilities.)

Finally, although aid redistribution should not be conditioned on spending relative to Adequacy, Willingboro and Beverly City are both ABOVE Adequacy by amounts greater than what they would lose. Willingboro is $2,167,656 above Adequacy. Beverly City is $1,048,242 above Adequacy.  

For the last two years, cost increases for
Pensions, Health Care, and Debt have
Exceeded or Equaled Revenue
So Troy Singleton, What Are You Thinking When you Put Pemberton's Grotesque Excess Ahead of Your Own Constituents?!!?!?!?

Singleton answer. as recorded at the hearing and in a Twitter comment to me, is that the formula should be fully funded, "We have to find a way to come up with the resources needed,"

But Singleton has no idea how to do this BECAUSE THERE IS NO WAY TO DO THIS.  NJ's increased costs for Pensions, Health Care, and Debt consume all new revenue and the politically plausible tax increases we could pass on the rich would be insufficient to fully fund SFRA.  

The K-12 component of SFRA is underfunded by $1,946,380,097 if redistribution is not allowed and that $1,946,380,097 figure is an increasing target.

The PreK component of SFRA is underfunded by about $675 million.  ($675 m = 50k eligible students * $13,500 per student)

NJ's higher education system has been underfunded (and irrationally funded) too.  

NJ's non-pension debt servicing will decline starting in 2019 and perhaps economic growth will accelerate, but the tax cuts that were part of the TTF deal will consume $1 billion a year starting in FY2018  (which Singleton voted FOR) combined with the many non-education obligations we need to increase spending on means that we are in no position to fully fund SFRA.

Singleton Proves Sweeney is Right on the Process

Since June 2016, Steve Sweeney has proposed not an ordinary legislative process to restructure state aid, but the creation of an ad hoc, empowered committee that would decide on changes and then have a straight up-or-down vote in the legislature.

Sweeney's argument is that the legislature is incapable of redistributing state aid because legislators would fail to see the big picture and protect their own constituents.

Troy Singleton, sadly, proves how correct Sweeney's judgment is, since not only does Singleton want to protect (some of) his own constituents, but other districts that happen to be in Burlington County, including indefensibly overaided Pemberton.

And even if NJ could fully fund SFRA, how is it fair to have some districts at 100% funding while others are at 120%, 160%, even 500% of their funding?

Troy Singleton was never passionate about state aid, but last spring he appeared to be a Good Guy.  I don't know what happened.  This stance could be an attempt to curry favor with Vincent Prieto (who in turn is working for Steve Fulop) or the NJEA.  It could be just a delusion that NJ is rich enough to not have to cut any district's state aid.

Sigh.  For state aid reform to happen, underaided districts are going to have to push a lot harder.

Singleton's office number is (856) 234-2790. Call him.

Wednesday, January 25, 2017

What Trump Might Mean Budgetarily for NJ Public Schools

Since Donald Trump's election, there's been a lot of commentary and speculation on what his election means for education in general and New Jersey.

Last week the NJSpotlight looked at Trump's and Betsy Devos' records in a piece titled, "DECODING DEVOS: WHAT NEW EDUCATION SECRETARY COULD MEAN FOR NEW JERSEY."  The piece focused on Trump and DeVos' support for charter schools and school vouchers:

No doubt, DeVos will bring a very pro-charter orientation to the federal Department of Education.
Although the Obama administration always opposed vouchers for private schools, the NJSpotlight said it might not be that big a shift after all:

That’s hardly a big shift; President Barack Obama and his education secretaries were also supportive of charters. But a Trump administration appears to want to step that up a notch, including a possible infusion of tens of billions of dollars into the choice movement. One promise from Trump was a $20 billion grant program, although how that would work has never been detailed.
For New Jersey, that could mean some mobilization of what is already a strong charter movement of more than 80 schools and 40,000 students. A massive grant program to further expand charters or even bring back private-school vouchers could force the state to move in some novel directions.

I don't disagree with these conjectures, but I think they are missing two indirect changes which will have profound consequences for New Jersey in the realm of school budgets.

  1. The Abood decision will be overturned and NJ's public sector will become right-to-work. Right-to-work will disempower the NJEA and the fiscal tug-of-war between teacher interests and taxpayer interests will shift in favor of taxpayers and, arguably, students.
  2. The reduction of taxes on high-earners and retreat from Wall Street regulation will be an economic stimulus for New Jersey, improve the state's fiscal situation, and give the state more room to increase its own taxes.

We do not know what Trump's education budgets will look like, although I expect them to be less generous than a Democratic president's would be. It's possible that Trump will cut Title I spending, which would harm high poverty schools, although federal money for education is very small compared to state and local.

It's also possible (likely?) that Trump will lower federal payments to states, forcing states to cut services and/or compensate for the loss of federal dollars from other budget categories.

However, I think that expansionary fiscal policy through taxation and labor deregulation overturning Abood will have significant long-term effects on New Jersey school finance that should not be overlooked.

Antonin Scalia's replacement will
likely be part of a 5-4 decision that will
disempower public sector unions.
1.  Reversing Abood

Abood v. Detroit Board of Education is a 1977 Supreme Court decision that said in a union-shop state (like New Jersey), public employees could still be required to pay "agency fees" even if they disagreed with the union's agenda and never wanted to be a union member.

The rationale is that since unions are required (and want to) negotiate for all employees, if certain employees did not pay "fair share fees," they would be free riders.

The Abood decision was a compromise because it said that workers could be required to contribute to negotiations, but not be required to contribute money for political activities, even in a "union security" state.

Abood was challenged from the right in 2015's Supreme Court case Friedrichs v. CTA, a case that union supporters called "a dagger at the heart of the trade union movement," although it would only affect the public sector.

(See this by Jersey Jazzman for a critical look at the Friedrichs plaintiffs and their case.)

Legal experts and unions themselves had expected the Supreme Court's five conservative majority to overrule Abood and make the entire country right-to-work for the public sector, but Antonin Scalia's death in January 2016 deprived conservatives of their majority and the Supreme Court's eventual 4-4 decision upheld a lower court decision affirming Abood and mandatory fair-share fees.

Presumably Donald Trump's Supreme Court nominee will vote with Alito, Thomas, Roberts, and Kennedy to overturn Abood when the Constitutionality of mandatory agency-fees in the public sector is re-heard.  (the legal vehicle for overturning Abood is now Janus v. ASFCME, a case out of Illinois.)

The relevance of Abood to New Jersey is that the NJEA's fees for full-time teachers and other school staff are $866 per year and the NJEA has 200,000 members.

(The $866 is a constant head tax -- it does not depend on salary.  That $866 amount doesn't include county and local education association fees either.)

In New Jersey, the NJEA determines that 82% of its expenses are spent on negotiations, so if a staff member wanted to not join the union, the reduction in fees would be very small, about $155.   As a consequence of the smallness of the savings, 99% of eligible school staff in New Jersey are full-paying NJEA members, although I am sure that the NJEA's leadership does not have a 99% approval rating from members.

As a consequence of a 200,000 membership paying so much, the NJEA has a $160 million budget and over 1,000 employees.

Without peer, the NJEA is New Jersey's lobbying giant, easily outspending all other groups:

Labor unions — particularly the New Jersey Education Association — have dominated special interest spending on New Jersey elections over the last 15 years, according to an analysis released today by the state’s campaign finance watchdog agency. 
The Election Law Enforcement Commission (ELEC) found that the state's top 25 special interest groups — which include unions, business advocacy organizations, ideological organizations and regulated utilities — spent $311 million from 1999 to 2013 on campaign contributions, independent spending and lobbying lawmakers and the executive branch. 
Unions, both from the private and public sector, accounted for more than half of that, spending nearly $171 million. And of those unions, none came close to the NJEA, which represents nearly 200,000 teachers and school staff, making it the largest public workers union in New Jersey.

The NJEA has spent $57 million since 1999 – including $19.5 million in 2013 alone, when it largely propped up the underfunded and unsuccessful gubernatorial campaign of Democrat Barbara Buono. 
“NJEA is considered a powerhouse in Trenton and for good reason,” wrote Jeff Brindle, ELEC’s executive director. “Few special interest groups come close to matching its financial clout,” said Brindle.

Moreover, the NJEA is also a major contributor to scores of activist groups ($553,500 to the Education Law Center, thousands to the NAACP, thousands to the Latino Institute, thousands to NJ Citizen Action), think tanks ($5,000 the Eagleton Institute of Politics, $125,000 to the NJ Policy Perspective), and completely apolitical charities (eg, Friends of Drumthwacket, the Brain Injury Alliance, Boys & Girls Clubs, Komen Breast Cancer Foundation etc etc).

(see this article about the NEA's reach)

The NJEA is the Education Law Center's biggest single contributor. Two of the ELC's twelve trustees - Vincent Giordano and Edward Richardson - are NJEA executives.

Whether or not agency fees are appropriate or constitutional, the relevant consequence for New Jersey is that if teachers were not required to pay agency fees, many would quit the union completely and pay $0 to the NJEA.  Whether or not this should be called "freeloading" or a principled disagreement with the NJEA's orientation is not the point, the point is that union membership falls in a right-to-work environment.

As a former teacher myself, it is an open secret that numerous union members do not like their unions and would stop paying fees if they could.  Among teachers, the discontent is always highest among new teachers, who are put at the bottom of salary scales, subject to first-firing in Reduction In Forces, and disadvantaged by the pension system's design.

How steep might the NJEA's membership dropoff be if the NJ public sector became right-to-work?

Membership of Michigan's teacher's union has fallen
since Michigan became right-to-work.
In newly right-to-work, Michigan, since 2012, teacher union membership has already fallen by 20% (continuing a pre-right-to-work trend).  However, that is just the beginning because in Michigan many teachers contracts grandfathered-in union-shops.  Once those contracts expire, more and more districts in Michigan will become right-to-work and union membership will fall further.

In Wisconsin, 2011's Act 10 went much farther to disempower public sector unions than a reversal of Abood would, but teacher union membership fell from 98,000 to 40,000 from 2011 to 2015.

If 20% of NJEA members refused to join the join, the NJEA would lose over $30 million.  If the NJEA's dropout rate equaled Wisconsin's, the loss of revenue would be $80 million per year.

A less well-funded NJEA would have less clout within the Democratic Party and less financial muscle to get Democrats elected.  A weaker NJEA would have less money to contribute to officially non-partisan, but pro-spending, organizations such as the Education Law Center.

Although even a weakened NJEA might still fund the ELC and the ELC may not need the NJEA's $550,000 per year anyway, the NJEA's lobbying would be less likely to get the Democratic Party to heed it in areas like banning outsourcing, opposing vouchers, preserving LIFO, and increasing education aid rather than redistributing it. (the NJEA opposes Sweeney's aid redistribution plan as "divisive.") Democrats who want to reduce post-retirement health care benefits would become confident making their voices heard since the NJEA's ability to retaliate would be reduced.

Lower teacher salaries might mean that fewer highly-qualified people go into teaching, but in the short term, having to spend less on staff salaries would give districts more budgetary space than they have now and give them greater flexibility in firing decisions. 

2.  Effects of Tax Cuts

Discussing the fiscal consequences of Trumpism is more difficult than what the legal consequences will be.

Originally I thought Trump's tax cuts would be good for NJ revenue or allow NJ to raise taxes higher than previously contemplated, but now I don't know if those boosts will compensate for cuts Trump will make.

Cutting taxes on high earners would explode the federal deficit, but in the short term it would probably help New Jersey's state finances.

New Jersey has a lot of high-earners, with 7.5% of households being worth over $1 million, the second highest percentage of millionaire households in the US.

Any tax cut targeting the rich will disproportionately benefit New Jersey:
Consider that Blue States send much more money to Washington than they receive, while the reverse is true for Red States, which tend to favor Republicans. Blue States also enjoy significantly higher per capita income than Red States and are home to a disproportionate share of the nation’s highest earners. The upshot is that if the Trump administration cuts taxes on top earners as expected, the federal tax burden on Blue States will fall especially sharply. Those states will thus have new fiscal flexibility, should they choose to offset other aspects of the Trump agenda.
So, if federal taxes are dropping, New Jersey's next governor and legislature might feel they have more leeway to increase NJ's own taxes.
The experience in California is reassuring. Facing budget shortfalls and cutbacks in essential public services, the state’s voters approved Proposition 30 in 2012, which raised the state’s top marginal income tax rate to over 13 percent, significantly higher than that of any other. Opponents predicted that wealthy California taxpayers would flee in droves to Nevada, Oregon and beyond. 
But the Institute on Taxation and Economic Policy in Washington reports that these fears were overblown, citing a recent Stanford University study. It found that million-dollar income earners are actually less likely to move than Americans earning only average wages; fewer than 2 percent of the tiny fraction of those millionaires who did move cited taxes as a factor.
Although I think the article above dismisses too lightly the risk of outmigration of retirees from a small state like New Jersey, there's no better time for a state to raise taxes than when the federal government is lowering taxes.

It's possible that the Fed's actions will end the bull market and this revenue boom may not materialize, but throughout the 1990s the stock market rose despite rate increases, so I would bet on the bull market at this point.

Also, if the mortgage-interest deduction were capped and/or the deduction for state and local taxes were reduced or eliminated, the consequences would be negative for New Jersey.

The second way Trump could help New Jersey's revenue picture is by deregulating Wall Street.  

Like large tax cuts, deregularing Wall Street could be disastrous for the economy in the long-run and would definitely exacerbate inequality, but since New Jersey has a large finance industry (180,000+ employees) that contributes a disproportionate share of GDP ($35 billion), since New Jersey has many additional residents who work in finance in New York, and many more residents who don't work in finance still have relatively large capital gains and dividends, it could be good for our short-term budget picture at least.

(New Jerseyans who work in New York pay income taxes to New York State, but they pay taxes on investment income to New Jersey)


Are these steps right or not?  I do not think so.  I think the federal government should concentrate on shoring up existing programs, not cutting taxes.

While I would personally welcome the outcome of New Jersey's public sector becoming right-to-work, I do not think fair share fees are unconstitutional.  The US Constitution was written decades before anyone had the idea of a union, so ascribing any intention to the Founders regarding unions is impossible.  In my opinion, when the Constitution is silent, the legislation is (usually) constitutional.

BUT if there is a stock market rally and Wall Street grows disproportionately to the rest of the economy, the state will have more money that it could spend on state aid.  If Abood is overturned, the NJEA is disempowered, and teacher salaries and benefits start to increase more slowly, NJ school districts will be in a different place budgetarily and education policy-making will shift dramatically.


(Of course, overturning Abood isn't the only decision the US Supreme Court will make regarding education.  It's just the one I focused on because this blog is on NJ education aid and fiscal policy.)

This article looks at some other major education-related cases that are in progress.

Monday, January 23, 2017

Obama Administration Admits Money Didn't Really Work

The Obama Department of Education conceded in its last days in office that spending additional billions in the lowest-performing schools through "School Improvement Grants" (SIGs) was ineffective:

One of the Obama administration’s signature efforts in education, which pumped billions of federal dollars into overhauling the nation’s worst schools, failed to produce meaningful results, according to a federal analysis. 
Test scores, graduation rates and college enrollment were no different in schools that received money through the School
Improvement Grants program — the largest federal investment ever targeted to failing schools — than in schools that did not.... 
The School Improvement Grants program has been around since the administration of President George W. Bush, but it received an enormous boost under Obama. The administration funneled $7 billion into the program between 2010 and 2015 — far exceeding the $4 billion it spent on Race to the Top grants.
The money went to states to distribute to their poorest-performing schools — those with exceedingly low graduation rates, or poor math and reading test scores, or both. Individual schools could receive up to $2 million per year for three years, on the condition that they adopt one of the Obama administration’s four preferred measures: replacing the principal and at least half the teachers, converting into a charter school, closing altogether, or undergoing a “transformation,” including hiring a new principal and adopting new instructional strategies, new teacher evaluations and a longer school day.... 
[Arne] Duncan often said that the administration’s school-improvement efforts did not get the attention they deserved, overshadowed by more-controversial efforts to encourage states to adopt new standards and teacher evaluations tied to tests.
The school turnaround effort, he told The Washington Post days before he left office in 2016, was arguably the administration’s “biggest bet.” 
He and other administration officials sought to highlight individual schools that made dramatic improvements after receiving the money. But the new study released this week shows that, as a large-scale effort, School Improvement Grants failed.

The relevance to New Jersey is that the Abbottist spending targets embedded in SFRA for high-FRL districts are going to be beyond the point of effectiveness.

How high are the targets?  For instance, SFRA's Adequacy Budget for non-at-risk high schoolers is $12,770 per student, but it is nearly $10,000 per student higher - $22,750  to be exact - per student for FRL-eligible, LEP high schoolers at schools where the FRL eligibility exceeds 60%. (source is the 2016 Education Funding Report)

And these figures do not represent all that SFRA says that schools should spend, since they are independent of Transportation Aid, Security Aid, Special Education Aid, and federal aid.  A consequence of this, is that a fully-funded high-FRL district in New Jersey should be spending $24,000-25,000 per student according to SFRA.

As always, I do believe that poor districts need to receive much more state aid than middle-class and affluent districts.  I believe their spending targets (ie, Adequacy Budgets) should be somewhat higher as well, but $24,000-$25,000 per student is excessive.

Although my analysis isn't as comprehensive or rigorous as the Department of Education's, the Abbotts do not outperform poor non-Abbotts who spend half as much as they do and who lack PreK:

Education spending does not exist in isolation.  The money the state spends on education is either acquired through taxation or cuts to other government services.  I don't think it's a coincidence that New Jersey is among the highest spending states on PreK and K-12, and yet our higher ed spending is average at best.  I don't think it's a coincidence the rampup of Abbott funding through the 1990s and early 2000s took place at the same time as the abandonment of our pension system.

If New Jersey is going to bring its taxes down into the realm of the national average and consistently fund its schools, it is going to have to drop the utopian spending mission and admit that its spending targets are beyond the point of diminishing returns and subtract from other government obligations.


See Also:

Friday, January 20, 2017

Why the ELC's "Just Fund the Formula" is Impossible

On January 17th, David Sciarra of the Education Law Center appeared
before the Assembly Education Committee and presented his solution to the crisis of New Jersey education aid:

"Just Fund the Formula"

However, before Sciarra got to "solution," he began with a preamble that unintentionally explained the pension crisis, when he boasted that New Jersey:

"leads the nation by funding our public schools not on available dollars or raw political considerations, but on the needs of students and schools"

First, this history inaccurate.  NJ has never properly funded working class and poor non-Abbotts.  The utopian dream that Sciarra refers to only applies to the 31 districts that were lucky enough to receive the NJ Supreme Court's "Abbott Remedy."  [see below for disparities of funding between Abbotts and poor non-Abbotts]

Anyway, Sciarra is right about the overall immensity of the spending though and it is that 20+ year budgetary history of ignoring "available dollars" that pressured Florio, Whitman, and their successors to ultimately abandon New Jersey's pension system.

Anyway, Sciarra started with a message that said, literally and loudly, :  
"Just Fund the Formula"

Let’s get right to the heart of why we’re here today.   
The problem with school funding is not our formula but the fact that Governor Christie, since he took office in 2010, has steadfastly refused to fund it, even at reduced levels. He also cut $1.1 billion from the formula in his first budget, an aid cut yet to be restored in many districts across the state. NJ school districts should be – but are not – receiving an additional $1 billion in state aid in the current school year. 
Another consequence of the Governor’s failure to fund the SFRA is that more school districts are now “below adequacy,” and the gap between “adequacy” and the state and local revenue in district budgets has grown. Each district’s “adequacy budget” is at the heart of the SFRA; it represents the level of spending, based on weighted student enrollment, districts must have to provide a thorough and efficient education. ....

Sciarra then spent much of his testimony criticizing Christie's "Fairness Formula," even though no one had spoken in favor of it, before getting back to his Just Fund the Formula "solution," concluding:

So let’s keep our focus on the SFRA and what we can do to get districts on a path to adequacy through the formula. We can start with three simple steps:
• Beginning with the FY18 State Budget, implement a multi-year phase-in of new state aid through the SFRA formula, targeting the aid to districts that are most under adequacy and/or experiencing significant increases in student population.
       [to be continued on Sciarra's other steps.]

Ok, poor me.

The time it takes to refute bullshit is many times the amount of time it takes to create the bullshit in the first place, but here is my explanation of why Sciarra's "Just Fund the Formula" is impossible.

Here goes:

This is debt as a percentage of state income.
First, Sciarra never says what the cost is of "Just Fund the Formula," but for 2016-17, without redistribution, bringing every district up to its uncapped aid for K-12 would be $2 billion.  However, that $2 billion figure is sure to rise due to inflation and the fact that in most of NJ's underaided towns, Equalized Valuations are falling or lagging.  Since Local Fair Share depends, in part, on Equalized Valuation, this means that Local Fair Shares will fall and the state formula will increase aid targets for districts.

Fully funding the PreK component of SFRA would cost $700 million.  ($700 million = $13,500 per student x 50,000 eligible students)

$2.7 billion would be a large increase for any state, but New Jersey is one of the country's most indebted states, with up to $200 billion (state+local) in debt and unfunded liabilities.

Every year NJ's state revenue increases by about $1 billion through economic growth, but pension costs, medical costs, and debt servicing costs consume all that new revenue:

Although New Jersey's non-pension debt will actually fall by a few hundred million a year, the federal copay for ACA-related Medicaid expansion is also slated to fall too, so NJ's Medicaid expenses might eat up that savings.  

So David, the state is broke?  Get it?

But what about "making the rich and corporations pay their fair share?"

Ok.  Sure.  But raising the top bracket from 8.97% to 10.75% (which would give us the country's second highest top bracket) would only bring in $615 million and $615 million isn't even close to being enough to fully fund SFRA.

Sciarra would probably support other tax increases, like Combined Reporting, but the amount of money NJ might get from that is $100-$200 million.  Perhaps Combined Reporting is appropriate (even Republican Jack Ciattarelli supports it), but Combined Reporting was vigorously protested by businesses when Connecticut imposed it in 2015 and was one factor in GE's decision to leave the Nutmeg State.

Whatever the economic consequences are of Combined Reporting, even another $100-$200 million per year plus the $615 million per year from a higher top bracket are not enough to fully fund SFRA.
Other Education Law Center Ideas:

Aside from "Just Fund the Formula" Sciarra did present a few other ideas on charter schools and limited reductions of Adjustment Aid that I will address now:

Gradually phase out hold harmless aid [ie, Adjustment Aid] to districts that are over their SFRA adequacy budgets and to charter schools. Charter schools should also be required to adhere to the same 2% cap on excess fund balance as districts. 

Ok, if New Jersey only eliminated "Hold Harmless Aid" that currently goes to over Adequacy districts then the total amount of aid that could be redistributed is reduced from about $550 million to less than $100 million.

Also, although the over-Adequacy districts get $174,024,179 in Adjustment Aid, they mostly undertax and therefore they are nowhere near $174 million over Adequacy.

For instance, Asbury Park gets $24 million in (nominal) Adjustment Aid, but it is only $13.9 million above Adequacy.  Hoboken gets $5.4 million in Adjustment Aid, but it is only $1.1 million above Adequacy.  Pleasantville gets $14 million in Adjustment Aid, but it is only about $100,000 above Adequacy.  Etc etc etc.

All in all, if New Jersey follows David Sciarra's advice and no Adjustment Aid district is allowed to sink below Adequacy, the most aid that could be redistributed is $93 million.

The nine most underaided districts alone for 2016-17 (Bound Brook, Manchester Regional, East Newark, Freehold Boro, Atlantic County Vo-Tech, Fairview, Ridgefield Park, Hi Nella, and Atlantic City) have a combined aid deficit of $103 million.  

David Sciarra and the Education Law Center are very hostile to charter schools, so he basically lies about charter school surpluses to distract everyone from the injustice of Adjustment Aid.  "Charter schools should also be required to adhere to the same 2% cap on excess fund balance as districts."

This Education Law Center argument against charter school surpluses goes back to a 2015 report where the Education Law Center claimed that NJ charters had a $100 million hoard  that they were unethically withholding from district schools

However,  the unacknowledged context is:
  1. The Education Law Center looked at charter surpluses in June, when charter school surpluses are at their peak due to the need to save money for salaries in July and August, when charter schools receive no money.
  2. Charter schools do not receive facilities money (or very much of it) and cannot bond money, so they therefore have to save operating money for several years in order to pay for their construction needs.  
In any case, charter schools' purported $100 million cumulative "surplus" is less than one-fifth the "surplus aid" that overaided districts get annually via Adjustment Aid.

Sciarra concluded with a reform to the tax cap law I agree with:

• Raise the 2% cap on increases in local property taxes for school budgets in districts under their adequacy budgets and where there is a sizable gap between their local revenue level (local levy) and the local fair share under the SFRA.

Indeed.  When Jersey City's tax deficit compared to its Local Fair Share is over $200 million, something is wrong.  The Education Law Center should make this point more often.

However, Sciarra made this a peripheral demand compared to "Just Fund the Formula."


David Sciarra began his statement praising New Jersey for ignoring "dollars available" and spending whatever Education Law Center lawyers and utopian Supreme Court judges demanded, however, a state government isn't like the federal government and eventually the money runs out.  New Jersey's economic growth has been half of the national average since 2002, so the money is basically running out now.

Again, Sciarra is also wrong that NJ's state aid has been given out according to the "needs of students and schools," since the Abbott decisions only applied to the 31 Abbott districts, and poor non-Abbotts have been savagely neglected.

Finally, I can't even begin to think how Sciarra believes he is giving an honest argument when he doesn't even give the full cost of fully funding SFRA.

WHAT Steve Sweeney and others are trying to do now is finally right that wrong and restore justice and common sense to a state aid landscape that aligns to need as it was in the 1980s, not today.

The Education Law Center's opposition to this reflects how it has become a reactionary organization that opposes its original tenets.  It is standing athwart common sense and justice.


Below:  As you can see, poor non-Abbotts receive nowhere near as much state aid as Abbott districts do.

This chart does not include PreK money or construction money.

Thursday, January 19, 2017

NJ Superintendents Stand Up for Fair Aid

At the Joint Committee on the Public Schools' hearing on state aid on January 17th, Dr. Ken Greene of Newton and Patrick Fletcher of River Dell, speaking for the NJ Association of School Administrators (eg, superintendents), gave a presentation and address on state aid and why eliminating Adjustment Aid is a must-do for the state of New Jersey.

The School Funding presentation is highly informative and it's something everyone interested in state aid should go through.

The presentation has a very important section "Myths and Facts," which attempts to clear up some widespread misunderstandings:

  • districts all over New Jersey are underaided.  Contrary to some assertions, slightly fewer South Jersey are underaided than Central and North Jersey districts.
  • district of all sizes are underaided, not just small ones.  Contrary to some assertions that school fiscal problems could be resolved by a wave of consolidation, slightly more large districts are underaided than large districts.
  • Abbotts and non-Abbotts are underaided.  Of the 31 Abbotts, 17 are underaided.  
  • Inequity isn't new.  It has always existed and New Jersey has never consistently funded its aid formula going back to 1976.

And, most powerfully:

The presentation also breaks down underfunding into two parts, $1.4 billion in underfunding, and $600 million in "inequitable distribution."  (which I refer to as "excess aid.")

These figures are slightly different from figures I've received from the DOE, in which I had $1.5 billion in underfunding and $550 million in inequitable distribution (of which $50 million is for Interdistrict Choice), but the sum of $2 billion is the same figure I have and reflects the true cost of fully funding SFRA without redistribution.

Saturday, January 14, 2017

Dear NJ Journalists, Vincent Prieto DOESN'T Represent Jersey City (He just acts like he does)

I was bemused by a recent story on PolitickerNJ by JT Aregood about the the politics of state aid reform. The article contrasted Steve Sweeney's plan, which is prescriptive and is clearly an attempt to redistribute Adjustment Aid to underaided districts, with Speaker Vincent Prieto's vague plan for yet another legislative committee "without predetermined outcomes or politics."

In attempting to explain Prieto's frosty attitude towards redistributing state aid, the article made a very telling, very blatant error.

Prieto, whose home district encompasses Jersey City, opposes Sweeney’s plan. 
Jersey City and other districts in Hudson County would stand to lose under Sweeney’s plan to phase out state Adjustment Aid and funding caps for districts with significant enrollment changes over five years. 
Those protections for individual districts were put in place in 2008, the last time lawmakers revised the school funding formula. Sweeney holds that removing Adjustment Aid and funding caps would bring every district in the state to 88 percent funding.
John Reitmeyer made the same error in a piece on NJ Spotlight:
But so far, Prieto is not onboard with Sweeney’s proposal, which could significantly cut funding for school districts in some of the communities Prieto represents, including Jersey City.
wrong Wrong WRONG!!!

Vincent Prieto does NOT represent Jersey City!
Vincent Prieto represents District 32, which includes East Newark, Edgewater, Fairview, Guttenberg, Harrison, Kearny, North Bergen, Secaucus, and West New York.

Jersey City is in legislative Districts 31 and 33. Its Assembly members are Nicholas Chiaravalloti, Angela McKnight, Annette Chaparro, and Raj Mukherji, NOT  Vincent Prieto.

Every single district in District 32 is underaided, with East Newark, Fairview, Guttenberg, and Kearny being severely so.

East Newark, in fact, is the third most underaided district in New Jersey, with an aid deficit of $7782 per student.  East Newark's school spending is barely $10,000 per student and its students attend school built in the 1890s.

Fairview is NJ's fifth most underaided district too, with a deficit of $7,118 per student.

(See: "Will Vincent Prieto Put Hudson County First")

I wouldn't be surprised if Jersey City's four Assemblymembers are urging Prieto to preserve Legalized Aid Hoarding "Adjustment Aid."  Raj Mukherji, for one, has made public statements defending Jersey City's state aid.  But, Vincent Prieto does not have a single Jersey Cityan or Hobokener among his actual constituents.

Then again, maybe Vincent Prieto's most important constituent is just Jersey City Mayor Steve Fulop?

It was Steve Fulop himself who told PolitickerNJ:

“We’re lucky to have the speaker here,” he said, a reference to Assembly Speaker Vinny Prieto (D-32). “I have significant clout with Speaker Prieto.”
Indeed. Steve Fulop has tipped off his influence over Prieto and the Assembly in his statement it would be a "long road" before any state aid changes happened.

Based on Prieto own constituents' interests as well as the state-interests he is supposed to act in as Speaker of the Assembly, Speaker Prieto should be in the vanguard of state aid reform.  His indifference to this issue and clear attempts at stalling reform is hard to understand unless it is an attempt to benefit Jersey City, Weehawken, Hoboken, and Jersey City's mayor, Steve Fulop, at the expense of poor districts.

Why is this?

The 8th Congressional
district does include the
Gold Coast.

Agusten Torres reports that Vincent Prieto wants to represent the 8th Congressional district, after Rep. Albio Sires retires, and the 8th district does include Jersey City and Hoboken.

Prieto's residence in Secaucus is not in the 8th district, but since Prieto is originally from Union City, his personal relocation to a town in the 8th district would not be a major move.

If Prieto does have designs on Sires' seat, then Steve Fulop's support would be critical in the Democratic Party.



Not Everyone from Jersey City is Against Justice

I do not think that every Jersey City politician is opposed to state aid reform.

Sens Sandra Cunningham and Brian Stack actually abstained from voting on Steve Sweeney's aid bill. Councilman Michael Yun has said Jersey City's state aid "doesn't make sense."  Mayoral challenger Bill Matsikoudis seems resigned to, not opposed to, having Jersey City's state aid cut, a position I believe a few Jersey City BOE members also share.

There are also many ordinary Jersey Cityans who recognize that Jersey City has become wealthier and can pay for more than 17% of its school budget.  Many Jersey Cityans warn City Hall to reduce its promiscuous PILOTing due to the inevitability of state aid losses.

The people in Jersey City who are operating contrary to progressive values are Steve Fulop and a clique around him.

Note: This piece has been updated to include the NJSpotlight error.  

Friday, January 6, 2017

Jack Ciattarelli Understands State Aid, Budget Crisis

For years, Assemblyman Jack Ciattarelli (R-Somerset, Warren, Mercer) has made state aid
reform a priority and is among the prominent legislators calling to redistribute state aid away from the overaided to the underaided.

On the Republican side, Ciattarelli, along with Sen. Mike Doherty, has been among the boldest legislators condemning as totally unjust the privileges that Hoboken and Jersey City enjoy due to their towns' status as Abbott districts.  Ciattarelli also condemns how the state allows towns like Jersey City and Asbury Park to conceal their true property wealth behind "PILOT" agreements in which developed land is "invisible" to the state's formula for Equalization Aid.

Yet unlike Mike Doherty (who demands equal aid per student, regardless of district wealth), Ciattarelli DOES favor a progressive aid distribution, in which poorer districts receive more aid than wealthy districts. Unlike Democrats such as Vincent Prieto, Ciattarelli wants that distribution to align with contemporary economic-demographic reality and be more fair to middle-class and working-class towns than is the status quo.

As the gubernatorial campaign gets more attention, Ciattarelli (who is a bona fide PUBLIC SCHOOL PARENT) is doing interviews where he discusses state aid, such as this interview with Jill Horner at Comcast Newsmakers.

It's hard to explain a topic as complex as state aid in only three minutes, but Ciattarelli clearly explains that he thinks the redistribution of state aid is necessary due to NJ's economic reality prohibiting an overall increase in state aid.

The strongest part of Ciattarelli's interview is where he condemns how  the owners of an $800,000 house in Hoboken would pay less in property taxes than the owners of a $300,000 house in Parsippany in part because Hoboken gets $7 million more from the state than SFRA says it needs:

"That's not fair. And in my opinion, it violates the Equal Benefits Clause of our State Constitution. No community is supposed to benefit at the expense of another."

When Horner clarifies that Ciattarelli means to end the "hold harmless" provisions within the state aid law, Ciattarelli says "yes" and even uses the term "Adjustment Aid," which Phil Murphy has never done.

I used the Education Law Center's definition of "low wealth"
here, which is DFG A or B status. However, many DFG A
and B districts getting Adjustment Aid are actually middle-
or high-wealth in terms of tax base per student, such as small
Jersey Shore districts and Jersey City. 
Ciattarelli was speaking extemporaneously - it is not literally true that the owner of an $800,000 townhouse in Hoboken would pay less in all-in taxes than the owner of a $300,000 house in Parsippany, but in school taxes alone, Parsippany's tax rate is literally five times Hoboken's - 1.528 versus 0.3155.   This means that the owner of a Parsippany house valued at $300,000 and a Hoboken townhouse at $1.5 million would pay equal school taxes.

Ciattarelli also does not have the time to explain how very few poor districts actually get any Adjustment Aid, and of most of those that do, it's very little.  If Adjustment Aid were eliminated and redistributed, the biggest gainers would be, in fact, would be poor non-Abbott districts like Atlantic City, Bound Brook, Freehold Boro, Bayonne, Clifton etc.

Ciattarelli's Budget Sketch

Ciattarelli does not talk about increasing education spending overall, citing forecasts for persistent slow growth, a claim that economists at Rutgers, including James Hughes, agree with.

Yet, Ciattarelli has ideas that would be highly beneficial to the state's overall budgetary condition and that could free up more money for school funding after the state reaches the full actuarial payments for pensions.

In a separate section of the same interview with Jill Horner, Ciattarelli said that he wanted to save New Jersey over $2 billion annually by reducing NJ's state post-retirement health insurance expenses.

"It's busting out budget...It's causing a crowding out effect of epic proportions."

And continues:

One of the reasons the teachers fund isn’t fully funded.  For every single retiree from the state and from school districts, we’re paying for their Medicare Gap insurance and their Medicare Part B for the rest of their lives, after they retire. It doesn’t work and it needs to be reformed.

[We're doing this] in a very reasonable and fair way… If your public pension plus your Social Security is more than $50,000. You’re going to be on your own for Medicare Gap Insurance and Medicare Part B. That’s for current retirees, not just future retirees.
The claim of massive savings is backed up by the findings of a bipartisan benefits task force.
"At that time we estimated the state could save over $2 billion in health benefits spending annually and use those savings to preserve pension benefits earned to date," the commission said in its report. "This report confirms the necessary savings can be achieved. Indeed, the new analysis shows this can be done with less impact to employees and retirees than envisioned in our 2015 report." 
Those savings would be recycled to cover pension costs.

Jill Horner asks about current retirees can’t be cut. "Can changes actually be made?"

Ciattarelli uses a moral, economic argument in favor of cutting health benefits for current retirees:

"There's a reasonable argument to be made that things have changed.. These numbers just don't work anymore. My plan is very sympathetic to those who retired years ago and whose pension plus Social Security is less than $50,000 ....  [For people making more than $50,000 per year] it's only fair to ask them to pay for their own [health insurance] so we can save their pension."

But Ciattarelli's plan would be perfectly legal because the 1997 law that made pension benefits a contractual right and made base pensions unimpairable clearly excluded health care benefits.  It is basically undisputed that in New Jersey health benefits do not have the same legal protections that base pensions have.  Even lawyer Charles Ouslander, who said that COLAs could not be cut, conceded that health insurance could be.  In fact, Ouslander argued that since health insurance was specifically excluded from protection, it meant, ipso facto, that COLAs were protected.

'[Benefits program]'  It's a very broad, encompassing phrase,.. They excluded only one thing in the universe of benefits: health care,” Ouslander said. “The very fact that they chose to exclude health care, which is their right, shows you how broad the phrase ‘benefits program’ is.”
It's rarely pointed out, but NJ's state unfunded health care liability is actually LARGER than the unfunded liability for pensions themselves.

Original Source, Pew Fiscal 50, Proximate Source:

Cutting health insurance spending for workers and retirees, or reining in its growth, is critical for New Jersey because this expense is so rapidly increasing for us.

On top of the savings from health care reform, Ciattarelli also supports tax increases on high-income New Jerseyans - starting at $750,000 per year.  He has not spelled out what the new brackets would be, but the new revenue that would come in from raising the top income tax bracket to 10.75% would bring in $600 million.

May 2017 Update: Jack Ciattarelli has clarified/emphasized that he intends to lower other taxes, so there would be no net increase in state revenue even while there are increase in rates.

Ciattarelli also favors legalizing marijuana, although it is unclear if he wants an excise tax or not.

The major tax cut Ciattarelli is proposing is a gradual elimination of the Corporation Business Tax over ten years, a move that would cost the state $2.471 billion if it were in effect for FY2017.   He also supports some of the smaller tax cut deals that were made as part of the Christie-legislature tax cut package.

(NJ's corporate tax has been producing less and less revenue over the last few years, so the long-term annual loss might be less than $2.471 billion.).

Ciattarelli Versus Murphy: Realism Versus Fantasy; Middle-Class Towns Versus the Gold Coast

The difference on state aid between Ciattarelli and Murphy isn't only on policy specifics, in which Ciattarelli is for redistribution and Murphy is opposed, but in prioritization.

Ciattarelli speaks about state aid often, and with passion.  Murphy almost never addresses it at all, even when there is a consensus within the Democratic Party.  After Chris Christie came out with his so-called "Fairness Formula," Phil Murphy took an entire week to say anything about it; after the State Auditor came out with a report outlining the unfairness of NJ's state aid distribution Murphy SAID NOTHING.

Although some of the tax cuts Ciattarelli favors would have a negative effect on the budget, in terms of new spending, he is much more restrained than Murphy is, so the contrast between Ciattarelli and Phil Murphy on state aid and the budget in general is very clear.

Ciattarelli is clear-eyed enough to see that New Jersey's health benefits are out-of-line with even the rest of the public sector, let alone the private sector, and is an area for savings.  Murphy, has ruled out any new reforms to health care and publicly told the NJEA that he would veto a hypothetical renewal of Chapter 78 (which temporarily made health care cost-sharing for school districts and school employees non-negotiable.)

Murphy's opposition to health care reform is in line with his opposition/indifference to any spending cuts whatsoever, as he said to Tom Moran.

(Murphy has repeatedly said he will cut corporate tax incentives, but this is unilateral disarmament in an interstate tax incentive war, and I can't see Murphy following through. If he does follow through, the gains from not giving out tax subsidies might be outweighed by the losses of corporations not expanding in NJ or leaving NJ altogether.  Murphy will also be freezing redevelopment in NJ's struggling cities too, since Camden, Paterson, Newark etc are dependent on tax-incentive facilitated growth.)

On state aid, not just the budget itself, the differences are very stark. In this Larry Mendte interview when Murphy was asked about state aid redistribution he was evasive and gave a flat "I'll implement that formula" answer.

"Implementing the formula" is better than what Christie has done since 2013, but Murphy has never said how much this would cost, let alone where he would get the money from.  (which would be $2 billion per year (without redistribution)).

Murphy has never shown any anger at the injustice of how unfair NJ's state aid distribution is to working class and poor non-Abbotts, even though his gubernatorial campaign was originally headquartered in severely underaided Red Bank Boro.

More recently Murphy has said the state aid formula needs to be "tweaked," but we have no idea what he means by that.

Phil Murphy is accepting support from everywhere he can get it, but his indifference to state aid redistribution comes amidst endorsements from the mayors of mega-aid hoarders such as Dawn Zimmer of Hoboken, Steve Fulop of Jersey City, and John Moor of Asbury Park (who is not a Democrat).  Murphy's frequent condemnations of state tax breaks, but silence on local tax breaks (ie, PILOTs) could be due to the fact that Hoboken, Jersey City, and Newark award PILOTs constantly and the urban-specific nature of NJ's state corporate tax incentives are less well-known.

Zimmer and Fulop purport to be progressive (even though Zimmer endorsed Christie in 2013, Fulop accepted a $1 million donation from the CEO of a notorious hospital price gouger, and both lavishly give out unneeded tax abatements), but their progressivism and morality stop and their municipal borders.  John Moor of Asbury Park, is a fiscal conservative, but his fiscal conservativism is really forcing the rest of New Jersey to pay for services that Asbury Park should be able to pay for by itself.

Murphy also has the enthusiastic backing of the NJEA, which is also not in favor of state aid reform, except in that they want some change to charter school funding that could force the state to double-fund charter school students.

When it comes to state aid reform and fairness for NJ's tax-burdened working class and poor communities, a Republican could actually be the best choice.

Sept 28th, 2016, after a two hour meeting on topics unknown,
Steve Fulop endorsed Phil Murphy.

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