Tuesday, October 16, 2018

Brick, Toms River, and their State Aid


Since the beginning of Steve Sweeney's efforts to redistribute Adjustment Aid, Toms River and Brick have been two of the most vocal opponents of reform.

The two districts have launched petitions for their Adjustment Aid, initiated lobbying, and now commenced a lawsuit, for which Brick's BOE has already authorized $10,000 and Toms River has authorized $5,000.

Brick and Toms River have depicted the prospect of "only" being funded at 100% as "decimating"
The day of reckoning we have been describing for the last four years is here," [Toms River] Superintendent David M. Healy said. "This year’s state aid losses as well as the future projections will unequivocally devastate this school district in terms of programs, services, staff, class sizes, property taxes, facilities and our ability to provide a thorough and efficient education to our children."
And:
"[Loss of Adjustment Aid] will certainly start decimating our district, starting now."

Brick's Democratic mayor, John Ducey, has just endorsed Chris Christie's already-dead equal funding proposal:

"Why is a kid in another district worth more than a kid here in Brick Township?" Brick Mayor John G. Ducey said Tuesday. "They're not. Every kid should be equally funded. It's just a total abomination of our constitution here in New Jersey."

This blog post will look at Brick and Toms Rivers' tax capacity, loss of enrollment, and then pivot to agreeing with Brick that SFRA itself is not fair to middle-income districts in New Jersey.

Background: 

Despite the aid cuts of 2018-19, Brick and Toms River are substantially advantaged by the state aid status quo.

Whereas the median district is underaided by $417 per student, Brick is overaided by $2,525 per student and Toms River by $1,157 per student.



Brick's 2018-19 state aid surplus is $21,331,456. Toms Rivers' surplus is $17,581,822.

The deficit for the underaided districts is $1.75 billion.

In 2017-18 and before, Brick and Toms River were more advantaged than in 2018-19. Brick's surplus was $2,703 per student and Toms Rivers' was $1,376 per student.

Brick and Toms River Have Low School Taxes

First, Brick and Toms River both have school tax rates that are much lower than the state average.

Whereas New Jersey's average school tax rate is 1.2, Brick and Toms River have tax rates that are approximately 1%, 1.0666% for Brick and 0.9244% for Toms River.

For Brick, the 2018-19 school tax levy is 82.6% of its Local Fair Share. For Toms River, the 2018-19 school tax levy is 78.5% of its Local Fair Share.

The median district in NJ pays 98.5% of its Local Fair Share.

2018-19 Local Fair Share 2018-19 Local Tax Levy Tax Deficit 2018-19 Adjustment Aid
Brick $129,909,386 $107,261,323 ($22,648,063) $21,331,456
Toms River $197,787,405 $155,329,012 ($42,458,393) $17,581,822




Again, the amount of state aid that Brick and Toms River are projected to lose over the next six years is not even equal to the deficit in each district's tax capacity.

Counting municipal and county taxes, neither Brick nor Toms River has high all-in taxes.  Brick's all-in tax rate is 2.058%.  Toms Rivers' is 1.895%.  The state average all-in property tax rate is 2.4%.

Although Brick and Toms River would be rightly concerned about the tax cap, based on the experience of other towns in NJ who exist with higher school taxes, Brick and Toms River are able to pay for a larger percentage of their local schools than they currently do.

Loss of Enrollment, Loss of Equalized Valuation

Both Brick and Toms River have had substantial enrollment loss in last 15-20 years, losing 24% and 15% of their enrollments, respectively.  Although Hurricane Sandy was an enrollment-loss inflection point, the enrollment loss began several years before Hurricane Sandy and is mirrored in other towns in non-metropolitan New Jersey who are not affected by Hurricane Sandy.

Brick's enrollment peaked in 2003-04, at 11,450. Toms River's enrollment also peaked in 2003-04, at 18,192.5.



By contrast, the state's enrollment is only down by 1% since its 2005-2006 peak.

Hurricane Sandy

There's no denying that Brick and Toms River have lost tax base over the last few years, in part by Hurricane Sandy.   From 2008 to 2018, Brick lost 17% of its Equalized Valuation and Toms River lost 10%, compared to the state's average loss of only 6.6%.

HOWEVER, SFRA compensates Brick and Toms River for the loss of tax base, since as a district's Equalized Valuation and Aggregate Income shrink, so does its Local Fair Share.  As Local Fair Share decreases, Equalization Aid increases.

Brick and Toms Rivers' boards of education may decide that their communities do not need to handle paying the state's 1.3% average tax rate, but they have the option of cutting costs.

I do not think that consolidating schools is easy, but it is a prospect in large swathes of New Jersey and at some point it becomes a necessity.

Here Brick and Toms River are actually advantaged because they are very large school districts with 12 and 18 schools, respectively.

Brick is Right About One Big Thing about SFRA

Although I strongly support the redistribution of Adjustment Aid and I believe that Brick and Toms River are in denial about their ability to pay higher local taxes and even consolidate schools, I am in agreement with Brick that SFRA sees Brick as a "wealthy district" when in actuality it is merely middle-income.

"Under the formula, Brick Township is considered a wealthy district."

Without Adjustment Aid, Brick would only receive $12,811,141 for its 8,449 students, which is $1,516 per student.

If you compare Brick's state aid target to the targets of extremely wealthy districts, you can see that Brick is essentially treated as a wealthy district too:


State Aid Target Per StudentLocal Fair Share Per Student
BRICK$1,516$15,376
PRINCETON$1,193$31,619
RUMSON-FAIR HAVEN REG$1,204$27,539
PARAMUS $1,214$27,706
HOBOKEN $1,207$79,106
SPRING LAKE BORO$1,411$166,397
AVALON $2,041$1,935,039
OCEAN CITY$1,127$65,703
FLORHAM PARK $1,126$32,272
MILLBURN $1,125$35,462

I'll compare Brick to Princeton, since Brick has complained about Princeton gaining state aid while it
Avalon is NJ's Richest District in Tax Base Per Student, so
Why on Earth does Avalon, NJ Need $2041 Per Student
in State Aid?
loses state aid, although Princeton is not even close to being NJ's wealthiest district (which is Avalon).

Brick's median household income is $70,655. Princeton's median household income is $118,467.

Although Brick's $1,516 state aid target might be 27% higher than Princeton's in percentage terms, it is only dollars per student that is budgetarily meaningful. 

Brick's $323 superior state funding per student relative to Princeton is very little additional state support in terms of the overall budget.  

To put it another way, Princeton is supposed to fund 92.4% of its Adequacy Budget with local taxes; Brick is supposed to fund 90.6%. 





To put it another way mathematically, SFRA expects Princeton to tax itself at $14,478 per student. It expects Brick to tax itself as $14,692 per student, even though Brick has nowhere near Princeton's wealth. In actuality, Princeton taxes itself at $19,825 per student because it wants to have higher spending.  (and that amount is nowhere near Princeton's Local Fair Share.)

What Brick is complaining about is a statewide problem. For 2018-19, 44% of NJ districts are not supposed to receive Equalization Aid. All in, there are 269/588 districts in NJ are that are supposed to receive less than $2,000 per student.

The reason we haven't heard about how inadequate SFRA's target is for middle-class districts is because most NJ's middle-class districts are underaided compared to their SFRA target anyway, and so for them to get even $1525 per student like Brick is supposed to get would be an improvement.

I will write a future post on making NJ school funding fairer to middle-class districts.

The Bottom Line is that NJ Can't Afford Adjustment Aid

Brick and Toms River aren't wealthy enough to just shrug off the loss of Adjustment Aid, but the bottom line is that they can afford to pay the same tax rates that other non-wealthy towns pay.  I acknowledge that it will be damaging to pay more in taxes, but Brick and Toms Rivers' taxes are artificially low due to the involuntary generosity of taxpayers in the rest of New Jersey.  It would be nice if NJ had a state aid law that helped middle-income districts, but given that we don't, it's inherently unfair to treat some middle-class districts differently than other middle-class districts.

NJ does not have a budgetary choice but to redistribute state aid.  For 2018-19, the state aid deficit for the 370 underaided districts was $1.74 billion and that continually grows.

Although 2018-19 Adjustment Aid was technically $652 million, at least $50 million of that is already roped off from redistribution because it goes to vo-techs or districts with very high municipal taxes.

Given NJ's intensifying needs to fund teacher pensions, post-retirement medical, and other debts, the state cannot create equity in K-12 school funding by increasing state aid alone and redistribution has to be part of the solution.

Redistributing state aid does mean some districts must lose state aid, but these districts will only be reduced to 100% of their recommended funding.  When NJ has 370 districts who are currently given less than 100% funding, I have a hard time seeing the unfairness of that.

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