NJ's Uneven Fall in Births Foretells Starker State Aid Inequalities, Economic Stagnation

Since the 1980s the number of births in New Jersey has been steadily falling year to year, but not steadily falling place to place.

According to state statistics, The number of births in NJ peaked in 1990, when 123,125 babies were born in the Garden State.  Despite the overall growth in our population,  in 2015, only 102,199 babies were born here, a 17% fall.

The slowdown in births since 1990 has only had momentary and tiny letups since 1990. The number of births falls more steeply during recessions than in times of growth, but it hasn't completely rebound after recessions either.

Update: 99,549 babies were born in NJ in 2019, so the decline has continued:
Update 2024: NJ's birthcount rebounded in 2021 and 2022 to ~103k, although fell again in 2023 by 2%.  
  
Without going too far into the causes, I think there are two major ones:
1.  The disproportionate departure from New Jersey of Millennials, who are the largest generation in

Millennials Are Abandoning NJ.

American history.
2.  A cultural trend toward having smaller families in general.

New Jersey's Total Fertility Rate has fallen from 2.09 in 2007 to only 1.8 today, which is the 15th lowest in the United States.  2024 Update: NJ's fertility rate is at the national average again, but it is 1.75, which is lower than it was in 2015.

Given that populations grow and shrink exponentially, the decline in the Total Fertility Rate will have accelerating demographic consequences for NJ.  If a society's TFR is 1.8 instead of 2.0, then in two generations it will have 19% fewer children, not 10% fewer.  (81% = 1.8²/2.0²)  Thus, the number of births in New
Jersey should decrease further as the steadily smaller cohorts of children born in the 1990s and 2000s enter their childbearing years.

So, unless there is a massive increase in immigration, the demographic challenge will not end.

(The difference in two generations between 2.09 and 1.8 is 25%.)

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As you would expect, the decline in births has been highly uneven.  Since 1990, Sussex County's births have fallen by 49%, from 2,274 in 1990 then to 1,154 per year today.  Warren has fallen by 45%, Hunterdon by 38%, and Monmouth by 30%.

	1990	2000	2015	Change Since 1990	Change since 2000
Ocean	6277	6542	8494	35.3%	29.8%
Hudson	9828	8868	10390	5.7%	17.2%
Cumberland	2348	2026	1958	-16.6%	-3.4%
Gloucester	3538	3178	2805	-20.7%	-11.7%
Passaic	8414	7936	6982	-17.0%	-12.0%
Middlesex	10346	10590	9313	-10.0%	-12.1%
Union	7,653	7,727	6,782	-11.4%	-12.2%
Bergen	10,507	10,897	9,413	-10.4%	-13.6%
Mercer	5077	4672	4027	-20.7%	-13.8%
Atlantic	4,070	3,421	2,936	-27.9%	-14.2%
Camden	8,869	7,028	6,020	-32.1%	-14.3%
Essex	14469	12156	10294	-28.9%	-15.3%
Cape May	1,373	1,043	881	-35.8%	-15.5%
Burlington	5,949	5,186	4,353	-26.8%	-16.1%
Salem	899	811	649	-27.8%	-20.0%
Somerset	4031	4425	3297	-18.2%	-25.5%
Morris	5882	6438	4717	-19.8%	-26.7%
Monmouth	8379	8051	5849	-30.2%	-27.4%
Sussex	2274	1778	1154	-49.3%	-35.1%
Hunterdon	1487	1441	916	-38.4%	-36.4%
Warren	1449	1328	792	-45.3%	-40.4%

The only two counties that have had growth in births are Ocean County and Hudson County, both of which are demographically and educationally unusual.

If Lakewood were excluded from the Ocean County count, Ocean County's number of births would have declined by 12% (there were 4,598 births to non-Lakewood Ocean County women in 2000 but only 4,030 in 2015)

If you know anything about Lakewood, you know that most of the children born to Lakewood-resident mothers will not go to public school.  The increase in the non-public student population will create strain on the Lakewood Public Schools for transportation and Out-of-District tuition, although the strain would not be as much as it would be if those students were enrolled in public schools.

Hudson County's family size is average, but it has a disproportionately large population of people of child-bearing age.  What I see as educationally unusual about Hudson County is that many of the parents there move out before their kids enter public school.

For instance, there have been over 1,000 babies born to women resident in Hoboken for the last five years, but the first grade cohort in Hoboken (charter and public), has about 350 kids.  Likewise for Jersey City - although not as extreme - there 4,300-4,400 babies are born per year, but the first grade cohort there has about 3,000 kids.

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Implications for Public Schools

Due to the fall in the number of births, New Jersey's student population actually peaked in 2005-06 at 1,393,782.  It has fallen now to 1,373,267.

That decline is only 1.6% and may not sound like a lot, but it occurred despite a lower drop-out rate, closings of Catholic schools, and some PreK expansion.  (source, NJ Enrollment Files)

The chart below shows the percentage change in births from 2000 to 2015.

There are many implications of the decline of births for New Jersey's public education system, state aid distribution, and the economy.

1.  The State Aid Distribution Will Become Even More Uneven

As the populations of rural districts fall, their formula aid will decline even more and be replaced by Adjustment Aid.  This enrollment decline will continue to push up the state's total of excess aid, even as the deficit grows for underaided districts.

SFRA, as it was written in 2008, does allow a district to lose state aid if its post-2008 enrollment loss exceeds 5%.  It is likely that more districts will encounter the enrollment loss threshold that allows some aid loss under SFRA's status quo.

Since the state has severe budgetary problems, the huge excess aid totals of permanently shrinking districts will be harder to justify when scores of other districts are severely underaided.

The distribution of PreK aid will also need to be redistribution.

Some districts will need more PreK money, like Hoboken and Jersey City.

 In 2015 there were 1,124 babies born to Hoboken mothers, up from 729 in 2005.  In 2015  there were 4,495 babies born to Jersey City mothers, up from 3,733 in 2005.)

On the other hand, other Abbotts have had a decline in births.  In 2015 Union City mothers only had 954 babies, compared to 1,119 in 2005.  In 2015 Pleasantville moms only had 303 babies, compared to 363 in 2005.

2.  Shrinking Areas Will Continue to Shrink

Consolidating New Jersey's rural counties into superdistricts won't just be a "could do" or "should do," but a "must do."  Cape May, Salem, Hunterdon, Warren already have fewer than 1,000 babies born per year, and Sussex is just 1,154 per year.

These five counties are New Jersey's smallest.

• Sussex's total enrollment is 20,512.00
• Salem's total enrollment is 10,906.50.
• Hunterdon's total enrollment is 19,474.50.
• Cape May's total enrollment is 12,583.00.
• Warren's total enrollment is 16,443.50.
  

And there's more contraction ahead for all of them.

As districts shrink, many will find it difficult to sustain the classes and extracurriculars that most parents think their kids should have.

As shrinking districts shrink further, their per student costs will become even higher.  If these districts actually lose Adjustment Aid, their taxpayers may not be able to make up the difference, since a district's fall in costs is not proportional to the fall in enrollment.

(see "Sussex County Consolidation.")

3.  The State's Economy will Face a Demographic Headwind

Population growth isn't, by itself, a good thing, but it is something that an economy usually needs to grow and is, itself, a sign of economic growth.

New Jersey already has the country's worst net outmigration rate and has 80,000 more people leave the state than it has new arrivals from other states.

As New Jersey has smaller cohorts enter the labor force (and so many young New Jerseyans leave

Source, http://bit.ly/2ib9Zmb.  NCES.

anyway) employers may struggle to find enough workers.  Many employers who contemplate a New Jersey expansion or investment will decide against it, given concerns about the labor supply.

The shrinking population will also harm the economy on the consumer-side, since there will be less aggregate demand, ie, less spending, less household formation etc.  Less aggregate demand equals less sales tax, less corporate tax etc for the Treasury.

New Jersey's unemployment rate should stay low, which is a plus.  Housing prices will be lower than they would otherwise be, which is another plus.  Perhaps an equilibrium will be established by our net outmigration decreasing.

But the state economy will grow very slowly and New Jersey will struggle mightily against its debts until there is a federal rescue or another round of pension cuts.

37% of New Jersey college students already go to college out-of-state.  When the students look back home towards New Jersey in its death throes, it'll be hard to think of a reason to come back.

After more NJ-born college students don't come back, the demographic headwind will become a hurricane.

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State Aid Deficits and Surpluses are Dynamic

The fact that NJ's population continues to grow in some places and shrink in others underscores how dynamic the state aid distribution is.  

Given the continued decline of births in NJ - and outright collapse in some places - the districts in NJ that have lost enrollment over the last few years have not seen the end of it.

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See Also:

• They're Staying Away in Droves, NJ's Outmigration is Really a Lack of In-Migration

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2020 Update.  NJ's birthcount has continued to fall.

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Update for 2022:

Atlantic City Should be an Abbott

In 1990, when the Abbott list crystalized, Atlantic City met the Supreme Court's two criteria for Abbottization, ie, status in DFG A or B and classification by the Department of Community Affairs as an "urban municipality."

Though Atlantic City was demographically poorer and more "urban" than

many districts who were Abbottized, Atlantic City was excluded from the Abbott list by Chief Justice Robert Wilentz himself due to its extremely strong casino-based tax base.

Exclusion from the Abbott list was something that Atlantic City could manage given how enormous its tax base was until the 2010s.

Throughout the 1990s and again in 2008 when its Equalized Valuation peaked at $22.2 billion, Atlantic City had the largest Equalized Valuation in New Jersey.   At its peak in 2008, Atlantic City's school tax rate was only 0.44 and yet it was able to sustain $17,600 per student in spending, a much higher amount than the South Jersey Abbotts like Vineland, Bridgeton, Millville, and Pleasantville.

Atlantic City remained a high-tax base district until the 2010s.

Then, unfortunately, other Mid-Atlantic states got the idea to open casinos, Atlantic City tourist numbers dropped, and Atlantic City's tax base started to implode.

In 2013 alone, the Borgata challenged its $2.3 billion assessment and got it down to $870 million.  Then, in 2015, the Borgota appealed again and got another lower assessment.

Then other casinos started to close altogether like the Sands, the Revel, Showboat, the Trump Plaza, and the Atlantic Club.  Atlantic City mayor Don Guardian predicted Atlantic City's valuation would stabilize around $7 billion.

As Atlantic City's casinos closed and the tax base collapsed, Atlantic City did not cut its tax levy proportionally and the tax rate soared and fell more heavily on residential homeowners.   By 2014-15 the school tax rate had risen from 0.44 to 1.1691. 

In 2015 Senate President Steve Sweeney said that Atlantic City should become an Abbott.

After hearing complaints from residents facing a huge hike in their property taxes, state Senate President Stephen Sweeney (D-Gloucester) today said that the state should consider sending more aid to Atlantic City schools. 

Sweeney, on a South Jersey radio call-in show, suggested making Atlantic City an “Abbott district,” which is named for a series of court cases in which the state Supreme Court said residents of New Jersey's poorest cities have a right to well-funded schools. 

“One of the other things that has to be looked at now is, with all these tax decisions does Atlantic City now qualify or deserve to be an Abbott district?” Sweeney said on the show, Pinky’s Corner. “When the casino revenues were high, no they didn’t qualify. But now the numbers have to look at, the picture has to be reevaluated. That would help the tax base in Atlantic City.”

In 2015 Atlantic City still had an above-average tax base (its Equalized Valuation was $11.3 billion, the seventh largest in NJ), so I disagreed with Sweeney at the time, but by now Atlantic City has fallen farther than even pessimists predicted and Abbott status is merited.

In 2014-15 Atlantic City's school tax rate had been 1.1691, but by 2017-18 it was 1.1911.  For 2018-19, if new state aid does not arrive and the tax levy stays constant at $82 million, the tax rate would be 1.86!  (1.86 = $82 million / $4.4 billion)

Demographics

The first reason Abbott status is warranted is that Atlantic City's demographics are among the most challenging in New Jersey.

Atlantic City's FRL-eligibility rate is in the bottom ten for New Jersey.

1.  Camden City, 95%
2.  Union City, 95%
3.  Seaside Heights, 94%
4.  Woodlynne, 93%
5.  Asbury Park, 93%
6.  Bridgeton,  93%
7.  Passaic, 91%
8.  Paterson, 90%
9.  Trenton, 89%
10.  Atlantic City, 89%

Tax Base

Atlantic City's tax base is well below the state's average, although it is not at the same ranking as its FRL-eligibility.

For 2017-18 Atlantic City's tax base is $8300 per student compared to the state median of $13,300 per student.   (AC = ($55.86 million in Local Fair Share for 6700 students).

That $8300 per student is low, but is only in the state's bottom quarter.

However, the 2017-18 Local Fair Share is based on Atlantic City's $6.4 billion in Equalized Valuation for tax year 2017.

Since then, the tax year 2018 Equalized Valuations have come out and Atlantic City's Equalized Valuation fell from $6.4 billion to $4.4 billion.  That $2 billion drop in Equalized Valuation should diminish Atlantic City's Local Fair Share by at least $14 million, or a 25% fall.

Since the 2017-18 Local Fair Shares are already out of date, I will calculate Equalized Valuation per student for the Abbotts.

This is the Equalized Valuation per student of all the Abbotts, plus Atlantic City.  Although Atlantic City's Equalized Valuation per student is still above the Abbott average, there are several Abbotts whose tax bases are superior and yet do not even have equivalent student poverty.

District	Equalized Valuation Per Student (based on tax year 2018 EV)
HOBOKEN	$6,194,298
NEPTUNE TWP	$1,111,837
LONG BRANCH CITY	$950,114
JERSEY CITY	$924,101
ASBURY PARK	$703,676
ATLANTIC CITY	$653,744
HARRISON	$596,929
GARFIELD	$559,809
BURLINGTON CITY	$465,910
VINELAND	$407,270
KEANSBURG	$371,185
WEST NEW YORK	$358,421
NEW BRUNSWICK	$346,825
PEMBERTON	$345,188
MILLVILLE	$329,073
NEWARK	$312,648
EAST ORANGE	$309,757
UNION CITY	$308,499
PERTH AMBOY CITY	$301,569
CITY OF ORANGE TWP	$298,012
ELIZABETH	$289,422
PHILLIPSBURG	$279,214
PLAINFIELD	$277,555
GLOUCESTER CITY	$272,747
IRVINGTON	$262,452
PASSAIC	$248,136
PATERSON	$231,049
PLEASANTVILLE	$205,939
TRENTON	$165,947
SALEM CITY	$135,244
CAMDEN	$114,639
BRIDGETON	$85,150

Implications of Abbottization?

It's hard to say what becoming an Abbott would mean for Atlantic City.  

SFRA created a unitary funding formula for K-12 aid, but preserved the Abbotts' rights to100% state funding for construction and 100% funding for PreK for all 3s and 4s in the Abbotts.

Due to SFRA's unitary formula for K-12 aid, Atlantic City's problem for K-12 aid isn't that it lacks Abbott status, it is that it is severely underaided anyway.  For 2017-18 SFRA already says that Atlantic City should get $79.3 million, but the state only gives it $56 million (which is $24 million in regular DOE money and another $32 million in "Commercial Valuation Stabilization Aid" which comes from other state agencies.)

Atlantic City already gets $3.3 million in PreK aid, which I can infer is much less than it would get if it were an Abbott.   

I do not know the size of Atlantic City's age 3 and age 4 cohort, but based on proportionality with the Abbotts, Atlantic City is not getting nearly enough PreK money for every child there.

For instance, Pleasantville, which has 3,000 fewer students than Atlantic City, gets $6.9 million in PreK money.  Millville, which has 1800 fewer students than Atlantic City, gets $8.5 million in PreK money.  Long Branch, which has 1600 fewer students than Atlantic City gets $9.8 million.  (source, DOE State Aid Summaries)

Keansburg has only 1400 students total and it gets $2.8 million for PreK.

Although Abbottizing Atlantic City doesn't seem to be on the table anymore, I hope it does come up because a conversation around Abbottizing Atlantic City might also inspire conversation about other updates to the Abbott list, including the deAbbottization of definitely Hoboken and perhaps Jersey City, Long Branch and Pemberton.  

Overaided Districts Regain $4.8 million and $6 million in Loans

There hasn't been much reporting on this, but the Christie Department of Education has just restored $4.8 million in Adjustment Aid to 23 overaided districts and made $6 million in ten-year loans (or "loans") to another three districts.

So far the only reporting I've seen on this was from Amanda Oglesby of the Asbury Park Press, who wrote an article about the restoration of state aid to five districts in the Asbury Park Press's coverage zone, (Marlboro, Toms River, Brick, Middletown, and Keansburg) on October 17th.

Five Jersey Shore school districts that faced hundreds of thousands of dollars in state aid cuts have learned that the money will be restored, according to the New Jersey Department of Education. 

The announcement came from the department this week that schools in Brick, Keansburg, Marlboro, Middletown and Toms River will receive thousands of dollars more in state support than had been promised last summer. 

Early last spring, each district balanced its budget on a state aid promise that would later prove ephemeral. State Democrats struck a deal over the summer that moved a portion of the districts' promised money to schools that were not receiving their fair share under the State Funding Reform Act.

After a query to Ms. Oglesby and the Department of Education I learned that there were other districts who either got all of their Adjustment Aid back or received a loan to be repaid over ten years out of future state aid. 

These are the districts who are having their Adjustment Aid restored.  

District	Restoration
Andover	$47,195
Brick	$720,507
Burlington City	$149,493
Easthampton	$56,982
Englewood	$160,731
Frelinghuysen	$12,367
Hopatcong Boro	$227,978
Keansburg	$517,808
Kittatinny Regional	$121,727
Marlboro	$233,031
Middletown	$356,772
North Warren Regional	$66,201
Stanhope	$30,324
Stillwater	$36,145
Toms River	$1,366,845
Ventnor	$42,081
Vernon Township	$300,000
Wallkill Valley	$94,904
Washington Township	$52,765
Weymouth Township	$47,472
White Twp	$34,902
Wildwood City	$104,221
TOTAL	$4,780,451

Several of these districts are massively overaided.  Hopatcong's excess was going to be $5,888 per student even before the restoration.  Weymouth was going to be overaided by $9,463 per student.  Brick by $2,703 per student.  

The Department of Education letters do not go into any detail as to what the justifications were for the restorations.  The letters begin like this.  

Pursuant  to  the  provisions  of  P.L.  2017,  c.  99,  the  New  Jersey  Department  of  Education (Department) has performed a review of your district’s application for additional general fund state aid for fiscal year 2018.  Our review has been conducted in the form of a needs assessment; the purpose of which is to evaluate the merits of the district’s request for additional general fund state aid.  Your district’s 2017-18  general  fund  state  aid  was  originally  $2,373,620  and  had  been  reduced  by  $47,472  to $2,326,148. Your application requested $47,472 in additional general fund state aid.  Based upon our review and the recommendation of the Executive County Superintendent, your district’s application is approved for additional state assistance in the amount of $47,472.

Another three districts are getting loans, East Orange (+$3,130,330), Millville (+$811,983), and Vineland ($2,059,792). 

May 2018 Update: The loans were converted to grants in Phil Murphy's FY2019 budget.

I do not know why these districts got loans and not grants.  

Great Meadows's application was denied.  

Although the total new aid ($4.7 million) is a tiny percentage of NJ's deficit against Uncapped Aid ($2 billion without redistribution, $1.328 billion with redistribution), these restorations to the overaided strike me as deeply unfair.

Although it was difficult for overaided districts to make cuts in the summer of 2017, if NJ has new money to give out, it should still have gone into TPAF or, if it had to be spent on opex aid, to the most severely underaided districts such as Bound Brook, with its $9500 per student deficit, Manchester Regional, with its taxes in excess of 200% of Local Fair Share, and Atlantic City, whose tax base has just lost another $2 billion since state aid was calculated.

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See Also: 

• Updated State Aid Disparities for 2017-18

Update:

Since this post appeared, there's been some more reporting on the state aid restorations.

• From the Press of Atlantic City
• From the NJ Herald (Sussex County)

2017 Changes in Equalized Valuation: the Urban Core Grows

The Department of Treasury has just released the Equalized Valuation of every town in New Jersey and thus given us an insight into NJ economic and demographic trends.

Equalized Valuation is the market value of all the (taxable) property in a town.  It updated every year by the county tax assessor and is used to apportion county taxes and, theoretically, school aid.  The way county taxes are apportioned is that if a town has 10% of a county's total Equalized Valuation, it pays 10% of county taxes.  Equalized Valuation also determines tax apportionment in (most) regional school districts.

Equalized Valuation is not the same thing as the aggregate assessed value, which is the sum of all the individual assessments on properties and may not reflect market value at all if the reval was not done recently.  Assessed values are only used for a town's internal tax apportionment.

(see note at bottom for how Equalized Valuation is calculated)

Equalized Valuation is supposed to be used, along with Aggregate Income, to determine a town's state aid, but SFRA is a non-operating law and this use of Equalized Valuation is dormant. Even if SFRA were operating, Adjustment Aid disallows changes to the state aid of a third of New Jersey's school districts.

Nevertheless, after this review of changes in Equalized Valuation we'll look at how these changes affect districts's (theoretical) Uncapped Aid state aid.

The Broad View 

The State's total Equalized Valuation grew from $1,208,823,762,826 to $1,242,801,663,665, a one year net increase of $33.6 billion, or 2.78%.  The median town, however, only gained 1.6%.

Although Equalized Valutaion increases due to new construction, the change is mostly due to the increase or decrease in the existing physical stock and so Equalized Valuation is a rough way to gauge changes in real estate in a town.  Since inflation was 1.9%, we can see that the state (overall), beat inflation, although we must not assume that the average home increased by more than inflation, due to the concentration of the increase in only a few places and the increase in EV that comes from new construction. 

Looking longer term, this is an increase of 6.9% from 2013, when the state's total Equalized Valuation was $1.16 trillion.  The five year inflation rate was 4.98%.

The towns with Equalized Valuations above $10 billion are, with their change in ranking from last year:

1. Jersey City, $28.4 billion (unchanged)
2.  Hoboken, $16.427 billion (+2)
3.  Edison, $16.414 billion (-1)
4.  Newark, $16.1 billion (+1)
5.  Toms River, $15.4 billion (-1)
6. Jersey City's PILOTed property, estimate at $12-$13 billion.
7.  Ocean City, $12.2 billion (unchanged)
8.  Middletown, $10.849 billion (unchanged)
9. Woodbridge, $10.839 billion,  (unchanged)
10. Brick, $10.7 billion  (unchanged)
11. Millburn, $10.3 billion (+1)
12.  Franklin Township, $10.105 billion (+2)
13. Lakewood, $10.097 billion (+3)


The Urban Core Grows, Triumph of the Train Line Suburbs

As always, the average masks diversity and New Jersey's gain in real estate value was uneven.  Half of New Jersey's growth in Equalized Valuation took place in three counties, Essex, Bergen, and Hudson.

Of New Jersey's 21 counties, only seven gained more than the state average of 2.78% and only another two beat inflation.  Thus most towns in New Jersey are not doing well and homes are a poor investment for their owners.

Hudson County was, again, the biggest gainer, reaching $77.7 billion, which is growth of 8.86%, or $6.3 billion.  Hudson County's gain was 19% of New Jersey's total net gain, of $33.6 billion. For last year, Hudson County's gain was 25% of the state's total gain ($11 billion out of $43 billion).

Jersey City gained $2.7 billion, growing from $25.7 billion to $28.4 billion).

Jersey City's Equalized Valuation is now more than Gloucester County

Jersey City's $28.4 billion Equalized Valuation is equal
to 2.35% of the state's total.

($26.3 billion).  I estimate, based on the $128 million increase in Jersey City's official, assessed valuation, that about $634 million of Jersey City's growth came from new construction and the expiration of PILOTs, with the other $2 billion of the increase coming from appreciation.

As new buildings are built in Jersey City, like 99 Hudson (shown at right), Jersey City's Equalized Valuation will continue to soar.

Hoboken gained $1.3 billion to reach $16.4 billion, putting it ahead of Edison and Newark to become the second most valuable town in New Jersey.  Hoboken's Equalized Valuation is almost as much as Sussex County ($16.9 billion.).

Weehawken gained $359 million (12.6%), to $3.2 billion.

Jersey City's all-in tax rate will probably become about 1.9.  Hoboken's will probably become 1.1.

Hudson County's other riverside towns also did very well, an indication that the "Gold Coast" is spreading.  Bayonne gained 7.9% ($428 million), North Bergen gained $618 million (11.2%). Union City gained $290 million (8.2%).  West New York gained $121 million (4.5%).    Tiny Guttenberg gained $94 million (9.9%).  Edgewater gained $245 million (7.1%).

These school districts are underaided, so the consequence of this growth is that their (hypothetical) Uncapped Aid will decrease.

Essex County had the second biggest gain in percentage terms, at 5.9%, or $5 billion.

Newark (!) Led Essex County
 with a $2.3 billion/17% increase
in Equalized Valuation.

That growth is disproportionately from Newark, which grew from $13.8 billion to $16.1 billion, a remarkable 17% increase.

The other Essex towns on the train lines did well, including urban Essex.  East Orange grew from $2.7 billion to $3 billion.  Orange grew by 8.8%.

The train-line suburbs also thrived. South Orange ($228 million, +8.5%), Maplewood ($250 million, +6.6%), Millburn ($637 million, +6.6%). Montclair, Glen Ridge, and Bloomfield did almost as well.

Only three other counties gained more than 3.0%.  Bergen County gained 3.36%, Union County gained 3.01%, and Monmouth County gained 3.4%.  Monmouth County's gain included an 11% increase from Asbury Park, already one of NJ's most overaided school districts.

Ocean County gained 2.94% ($2.8 billion), disproportionately driven by Lakewood's $1.1 billion (12%) gain.

Morris, Gloucester, Passaic, Salem, Burlington, Warren, Mercer, Camden, Cumberland, Sussex, and Hunterdon all grew, but lagged inflation.  Morristown might be the best performing traditional suburb, with a blistering 12.6% growth.

Atlantic County was the only county county to actually lose Equalized Valuation, dropping from $34.9 billion to $32.7 billion (-6.4%).  That loss was almost all from Atlantic City, which lost another $2 billion ($6.4 to $4.4 billion).  This is remarkable because Atlantic City was once NJ's #1 town in Equalized Valuation, at $22.2 billion in 2008.

New Jersey's other cities held their own or grew.  Elizabeth gained 6.5%. Camden gained 5.5%. New Brunswick had a 5.2% gain. Paterson gained 3.9%. Trenton was the laggard, with a 2.3% gain, which is still respectable considering Trenton's history.

Source, http://www.state.nj.us/treasury/taxation/lpt/lptvalue.shtml

Finally, New Jersey's big suburbs had a mixed year.  Franklin Township had a very good year, with 7.8% growth.  Edison grew at 3.7%, Woodbridge at 3%, but Clifton, Cherry Hill, Toms River, and Hamilton lagged inflation.  Brick and Wayne were nearly unchanged, so that's a significant decline in the real value of real estate there.    Bridgewater actually lost valuation.

Implications for State Aid

Changes in Equalized Valuation have implications for state aid because Equalized Valuation is one component of Local Fair Share and Local Fair Share is a component of the formula for Equalization Aid.

Local Fair Share is the amount of school taxes SFRA indicates a town is capable of paying.

The state calculates Equalization Aid with this simple formula

Equalization Aid = Adequacy Budget - Local Fair Share

The formula for Local Fair Share for 2017-18 is itself slightly more complex:

(0.014009 x Equalized Valuation + 0.047823 x Aggregate Income)/2.

The .014009 number is called the Equalized Valuation Multiplier. The 0.047823 number is called the Income Multiplier. The multipliers are supposed to be tweaked year to year.

Although the formula looks complex, it basically means that the state expects a school district to pay property taxes equal to 0.7% of its Equalized Valuation plus 2.3% of its Aggregate Income.

So, if a district gains $100 million in Equalized Valuation, that alone would increase its Local Fair Share by $700,000.  If a district gains $500 million in Equalized Valuation, that alone would increase its Local Fair Share by $3.5 million.  (assuming no change in Aggregate Income or the multipliers.)

So, for Jersey City to gain $2.7 billion would cause its Local Fair Share to increase by $20 million, Since Jersey City is overaided by $152 million for 2017-18, that means its excess aid for 2018-19 will be at least $172 million.  (not counting the growth in Aggregate Income)

For underaided districts, the increase in Equalized Valuation is hypothetical.  Bayonne's $428 million in new Equalized Valuation would theoretically reduce Bayonne's Uncapped Aid from $105 million to ~$102 million.  Since Bayonne's actual state aid is only $57 million anyway, there is no actual change for Bayonne's aid growth.

Lakewood's $1.1 billion in growth might actually be enough to erase its state aid deficit (which was only $3.2 million in 2017-18).  On one hand, this justifies Lakewood increasing its own tax levy, but it means that SFRA is even less applicable to Lakewood than before.

Atlantic City was already severely underaided and lost another $2 billion this year.  That loss should translate to $14 million in additional state aid, raising Atlantic City's Uncapped Aid from $79 million to $94 million.  Since Atlantic City only gets $46 million now, the change is hypothetical since an already out-of-reach target has now become more out-of-reach.

Since Hoboken's Local Fair Share is already 4.7x larger than its Adequacy Budget, Hoboken does not receive Equalization Aid.  Thus, the growth in Hoboken's Equalized Valuation and Local Fair Share has no implications for state aid.

Changes in Tax Base Indicate the Need to Redistribute State Aid and Amend the Tax Cap law to allow aid-losing districts to tap their tax bases more easily.

The fact that the tax base wealth of New Jersey towns is constantly changing underscores the need to redistribute state aid.  Given the increases in Equalized Valuation in several districts who are already overaided, such Jersey City, East Orange, and Asbury Park, it is likely that the excess aid surplus will increase for 2018-19 again.

Since these towns, however, can't even tap their own tax bases due to the tax cap, we also need to amend the tax cap for districts losing state aid and/or badly under Adequacy.


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See Also

• The Divergent Fates of NJ's Big Cities
• 2016 Equalized Valuations Out (for tax year 2017)
• Biggest Real Estate Gains, Losses in NJ
• Two Cheers for County Taxes!  
• New Jersey and Its Neighbors Job Growth, County by County

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How is Equalized Valuation determined?
Equalized Valuation is determined by calculating the ratio of sales prices to a town's official assessment for its own local taxes.  If sale prices are, on average, 110% of properties's official assessments, then Equalized Valuation would equal 110% of a town's total official assessment.  If sale prices are 93% of official assessment, then Equalized Valuation would equal 93% of a town's total official assessment.

Because Equalized Valuation based on a ratio of sale prices to official assessment, a town's refusal to do a reval does not affect Equalized Valuation.  

Contrary to assertions from Sen. Mike Doherty and the Toms River Board of Education, Jersey City's decades-long refusal to do a reval did not distort its state aid since JC's Equalized Valuation constantly grew along with its real estate market.  Jersey City's state aid was distorted by Adjustment Aid and PILOTing, not the lack of a reval.  

If a town's Local Fair Share exceeds its Adequacy Budget, a change in Equalized Valuation has no theoretical impact on state aid at all, since it doesn't matter if a Local Fair Share exceeds Adequacy Budget by 5% or 150%.  Equalization Aid is $0 in either case.

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