Tuesday, February 14, 2017

SFRA Was Never Fully Funded

One of the most pernicious myths about the School Funding Reform Act is that it was fully funded in its first year, 2008-2009.

This myth is spread by the Education Law Center
NJ’s weighted student funding formula – codified as the School Funding Reform Act (SFRA) – stands as a national model of state public school finance. But the formula has not been fully funded since its first year in law (2008-09), and was cut in 2010-11 by Governor Chris Christie.

Including from Paul Tractenberg himself:

Tractenberg said the current state funding formula under the School Funding Reform Act has only been fully funded once under Christie. That's the real problem that should be addressed, he said.

and picked up by many journalists.

Example, Meir Rinde of NJSpotlight

The formula was run and funded for one year. Then the recession hit, Christie was elected, and he cut education aid overall by $1 billion (though half of that was eventually restored to Abbott districts).

“The school funding formula that is written into law has only been fully funded once in the last seven years.”
And even the state legislature:
WHEREAS, While the SFRA was used to distribute State school aid for the 2008-2009 school year, since then the SFRA has not been fully funded and its provisions which lay out a constitutional pathway for the distribution of State school aid have been ignored and overridden;
However, SFRA was never fully funded in a real sense because in that first year districts were only funded at their Capped Aid levels.

It's rarely explained, but SFRA contains a cap in the amount of aid an underaided district can gain in a single year, either a 10% boost if the district is above Adequacy or a 20% boost if the district is below Adequacy.

From the statute itself:
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. 

Due to the existence of these caps, there is a difference between the statutory full funding of SFRA and the real full funding of SFRA, which would be funding every district at uncapped aid.

In 2008-09, yes, every district was funded at its Capped Aid level, but there was a $1 billion funding deficit between actual aid and uncapped aid, which, again, is the real demographic-economic aid level for districts.

I got these data from the Department of Education via an OPRA request and have put the Actual Aid vs Capped Aid data online.

Let's look at Clifton as an example of how the State Aid Growth Limits (aka "caps") reduce a district's aid:

SFRA's formulas looked at Clifton's enrollment and tax capacity and determined Clifton should get $55,999,000, which would have been $5300 per student.

But what did Clifton actually get in 2008-2009, the year SFRA was "fully funded"?

$27,374,845.

Which is only $2,600 per student.

$27 million is actually 40% higher than Clifton's 2007-08 aid of $19 million, so I admit I don't know quite was going on here, but I know 

$27,374,845  $55,999,000.

And there are 278 districts that were, like Clifton, not fully funded in 2008-09, despite so many groups and journalists saying they were.

These are just the largest deficits in absolute terms:

The data I received from the DOE had errors for certain districts which I have removed from this graph, and yet reappear in the original source material:
http://bit.ly/2knaI6K

River Edge was the most underaided in NJ in percentage terms, getting only 19% of its uncapped aid. Northvale, Clinton, and Chesterfield also in the bottom four.

I don't have comprehensive enrollment data, but it appears that Manchester Regional was the most underaided in per student terms, with a $5300 per student deficit.

Overall, in that year there were 44 districts who got less than 50% of their uncapped aid.  That is also substantially better than at present, when 141 districts get less than 50% of their uncapped aid.
So, again, in 2008-2009, SFRA was fully funded in a statutory sense, but not a real sense.

The total cumulative deficit for the 279 underaided districts that year was $1.05 billion (not counting vo-techs).

Adjustment Aid was $850,612,518 ($948 million with inflation) that year so the net deficit appears to have been smaller then than now (It is now $1.4 billion in 2016 dollars, counting vo-techs), but when so many districts were still in 2008-09 substantially underaided, it's wildly inaccurate to say that "SFRA was fully funded in its first year."

Here's the bottom line:

New Jersey, going back to the 1970s, has always struggled to fully fund its aid formula.

Since the Great Depression, New Jersey's fiscal situation has never been worse, nor its economy more slowly growing.

New Jersey did not fully fund SFRA in 2008-09, and our oncoming pension depletion, stagnant economic growth, and the high spending targets of SFRA make fully funding SFRA now unrealistic unless the Democrats were to pass tax increases much larger than they have ever hinted at.

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