Additional Adjustment Aid: Real Money for Non-existent Students

One of the most unfair things in New Jersey's deeply unfair aid distribution is an obscure aid stream called "Additional Adjustment Aid."

Additional Adjustment Aid's calculation is very opaque but many of the districts that receive it are Interdistrict Choice districts that have lost Choice enrollment.

Interdistrict Choice is a program in which state taxpayers pay tuition for students to attend school outside of the district they live in. The formula for Choice Aid is simple:

Local Fair Share x # of Choice Students Enrolled = Choice Aid

The average Choice Aid payment is nearly $11,000 per Choice student.

Interdistrict Choice is supposed to be based on competition: if a district can't hold onto its students it is supposed to lose Choice money.

However, Chris Christie, for purely political reasons, opposes letting any district lose money, no matter how overaided it is. Thus for the 2014-2015 aid distribution he decided that Choice districts that LOST Choice students would still get the same amount of money they got the year previous with the aid being rechanneled from Choice Aid into "Additional Adjustment Aid."

Since Choice districts are paid "Additional Adjustment Aid" for students who have left it is literally taxpayer payment for non-existent students. It means that while scores of non-Choice districts have to figure out how to educate growing student populations with the same amount of money Choice districts get to figure out how to spend the same amount of money on shrinking student populations. 

This undermines the integrity of Interdistrict Choice.  If Choice districts keep their Choice money, no matter what, they have little incentive to retain their Choice students.

The Department of Education makes no announcement of this policy.  No journalist covers it.  Taxpayer groups do not protest.  The Education Law Center, supposedly the guardian of low-resource districts, does not protest the diversion of money away from the state's neediest districts.

The announcement is buried in obscure legislative documents like this from 2015-2016:

The FY 2016 recommended budget provides little increase in direct K-12 State aid to school districts, with such funding increasing by 0.07 percent ($5.2 million) Statewide to $7.96 billion. The only school districts that would receive an increase in State aid under the proposal are 83 districts that participate in the interdistrict public school choice program that are projected to serve more students in that program in the 2015- 2016 school year than in the 2014-2015 school year. All other school districts will receive the same amount of total State aid in FY 2016 as was received in FY 2015; this includes 26 school choice districts that will receive additional adjustment aid to offset a decrease in school choice aid that resulted from the districts serving fewer students in the program.

And here's the version for 2014-2015:

Most school districts will receive the same amount of adjustment aid in FY 2015 as was received in FY 2014. The one exception is for the 19 school districts that participate in the interdistrict public school choice program. The districts are projected to experience a decrease in the number of school choice students enrolling in the districts’ schools in the 2014-2015 school year, and will receive less school choice aid in FY 2015 as a result. These districts will receive an increase in adjustment aid to fully offset the decrease in school choice aid. 

Additional Adjustment Aid is the most opaque of all the aid streams. The DOE doesn't release which districts are getting the aid, nor the total amount.

However, here are a few I've found through careful digging into the State Aid Summaries:

• The Morris School District is getting $316,000 in Additional Adjustment Aid for non-existent students.

• Cumberland Regional $138,000 for non-existent students.

The Christie Administration is even letting Choice districts even carry over their Additional Adjustment Aid into the next year.  

Hence:

• Englewood got $497,000 in Additional Adjustment Aid for 2014-2015 and now it is getting that same amount for 2015-2016.

• Hoboken (which is involved in every aid hoarding scheme) got $255,000 in Additional Adjustment Aid in 2014-2015 and is now keeping that money for 2015-2016.

This is especially infuriating because Englewood and Hoboken are resuming their increase in Choice students and getting even more money.  Englewood is getting another $331,380.  Hoboken is getting another $749,133.

I try not to blame Christie for everything but this is completely his unfair, irrational fault. The only mitigating circumstance that Christie has is that the NJ legislature rubberstamped this.

Again, why does this matter?  Why am I angry about other districts' "good fortune"?  It's because the state is broke and exactly 513 districts got exactly $0 in increase, often despite growing residential enrollments. When the state can only find another $2.2 million for Extraordinary Aid there is no justification for even a few million to "educate" students who are no longer in a district.

The Grotesque Overaiding of Hoboken

The Poster Child for Everything That’s Wrong with New Jersey School Aid

There are numerous problems with New Jersey’s Abbott funding system, but there is no facet of Abbott more problematic - nay, morally obscene - than the fact that Hoboken, New Jersey’s richest K-12 district, remains an Abbott.

Although Hoboken is a uniquely high-resource, high-aid district, the continuing overaiding of Hoboken amidst the severe underaiding of the rest of the state exemplifies the rigidity of New Jersey distribution of education aid and its failure to adjust to changing economic realities.

Hoboken is Rich

If you thought that Princeton, Millburn, or Paramus had a lot of money for schools, Hoboken dwarfs them all.

Hoboken now has $13.26 billion in equalized valuation, the fourth highest in New Jeersey, but only 2,705 K-12 students, or $4.9 million a student. Hoboken has so much ratables, so few kids, and gets so much state aid that its tax rate is 0.3237. This means that someone with a condo with a $1,000,000 market value would pay $3,237 in school taxes a year. Even with that tiny tax rate, Hoboken spends $22,199 per student, the highest of any K-12 district in NJ other than Asbury Park.

If Hoboken had just a 1.0 school tax rate it would raise $130 million a year, enough to send every Hoboken child to a Swiss boarding school.

Just how high is $4.9 million a student? Paramus, an upper middle class town that is home to the biggest shopping mecca of New Jersey, “only” has $2.2 million per student. Princeton, with its mansions and corporate office parks, “only” has $1.9 million. Millburn, which also has mansions and a large mall, “only” has $1.7 million per student. (Yes, that 2,705 figure includes Hoboken’s charter school students).

In income Hoboken isn’t an outlier like it is in property wealth, but its median income is $108,000, which is similar to Princeton and Scotch Plains, two more towns not considered poor by anyone.

However, Hoboken's Total Income, which is used by the DOE to calculate Local Fair Share, is $3.6 billion for 2015-16, the fifth highest in New Jersey.

Since the formula for Local Fair Share is:

Equalized Valuation x 0.014909959 x 50% + District Income x 0.052921406 x 50%

$12,431,717,099 (the 2015-16 amount) x 0.014909959 x 50% + $3,567,442,637 x 0.052921406 x 50%

Hoboken's Local Fair Share works out to a staggering:

$187,075,236

This is the fourth highest in New Jersey, after Jersey City, Edison, and Toms River and ahead of Newark, all of whom have much, much larger student populations.

Hoboken Pulls in Lots of Aid

Its unequaled wealth would allow Hoboken to have low taxes and high school spending no matter what, but on top of all that local wealth, Hoboken receives $20.8 million in state aid for its schools from taxpayers statewide; $10.6 million for K-12 and $10.2 million in Pre-K aid. Hoboken’s $20.8 million in aid is three times higher than West Orange’s $6.9 million, even though West Orange has almost three times as many children and an $850,000 per student property base.


Hoboken’s K-12 aid works out to $4,200 a student, dramatically more that what working class districts with average property valuations like Clifton and Red Bank Boro get. Even these disparities underestimate how privileged Hoboken is, since as an Abbott it gets its capital improvements paid for by state taxpayers.

To be fair, Hoboken doesn't receive more aid than every district that is lower-resource than it is, but it receives more aid than many.




Hoboken's aid aid combined with its immense property wealth puts it in a league of its own for student spending.

And if that wasn’t enough for Hoboken, Hoboken is getting more and more money per year! While 90% of New Jersey’s school districts saw not a dime in new aid for 2015-16 and the total K-12 increase was only $5.2 million (for 590 districts), Hoboken is getting another $749,133, or 14% of the total aid increase. The $749,133 comes via Interdistrict Choice, a program where the state pays tuition for students who live outside a district to attend school elsewhere. Hoboken receives $2,645,874 for only 160 students, or $16,000 a student, one of the highest costs per student in the whole Interdistrict Choice network.  (Hoboken tells the public that it is only getting $79,695)



The other $58,000 in new money is for Pre-K. Hoboken is an Abbott and therefore the New Jersey Supreme Court requires that state pay for “free” Pre-K for all three and four year old children living there, no matter how wealthy their parents are. This fact means that the children of investment bankers in Hoboken receive two years of “free” Pre-K. While the state has tens of thousands of children living in poverty outside of the Abbotts, they usually have no Pre-K access at all. Clifton, Belleville, and Bloomfield receive $0, but their low-income residents, as state taxpayers, pay for “free” Pre-K in Hoboken.

And if that isn't bad enough, $255,000 of Hoboken's aid is for students who aren't even there via Chris Christie's "Additional Adjustment Aid" program. Additional Adjustment Aid is given to Interdistrict Choice districts that once lost Choice students. Rather than let any district lose aid, Christie lets Choice districts keep their total aid amount by redirecting the lost Choice Aid via "Additional Adjustment Aid."

What’s more, Hoboken also has hundreds of millions of dollars of ratables hidden from the state’s aid formula behind PILOT agreements. When a town grants a development a PILOT town receives money from the building’s owner that are akin to taxes, but in the eyes of the state’s formulas for school aid, the PILOTed buildings are invisible and are equivalent to a tax-exempt church, hospital, or private school, ie, it doesn’t count as property wealth.

However, residents of PILOTed properties get all the same privileges of other Hoboken/Abbott residents, including two years of “free” Pre-K paid for by taxpayers statewide.

Comprehensive and up to date figures are difficult to come by, but the state comptroller in 2010 gave a “conservative” assessment for Hoboken’s PILOTed property at $298 million (which is the official valuation, not the Equalized valuation). Even at Hoboken’s extremely low school tax rate that property would produce over $1,000,000 for the schools a year.



Hoboken’s original status as an Abbott goes back to its poverty and low resources in the early 1980s, when the Abbott lawsuit emerged and when Hoboken was indeed one of NJ’s poorest districts.

Hoboken’s student population has not changed as dramatically as its ratable situation, but change has occurred and Hoboken’s students are now 49% FRL-eligible, which is not significantly above the state’s average of 36% FRL eligible. 95% of Hoboken students speak English at home.

Hoboken’s students still more disadvantaged than average , but this is financially irrelevant. The point is that at a 0.36 tax rate and $4.2 million in property valuation per student, Hoboken easily has the local resources to fund its schools, including Pre-K. When NJ is in a budget crisis and cannot increase aid, state aid is zero sum and that every dollar that Hoboken clings to is one dollar less that is available to children in the rest of New Jersey. If poor children in Hoboken deserve extra resources than poor children in other districts with even more economic disadvantage and barely a tenth of Hoboken’s property wealth deserve it either more.

Additionally, it needs to be underscored that Hoboken's public student population is proportionally miniscule.  Hoboken's total population is 52,000, but it only has 2,600 students (yes, that includes students in charters), or barely 6% of its total population.

This is a third of New Jersey's average.

Hoboken's tiny student population means that even though the student population may proportionally have a high FRL-eligible rate, there are few FRL-eligible students there period.

Many diverse suburbs in New Jersey actually have more or almost as many FRL-eligible students than Hoboken (plus many non-FRL eligible students.)  These districts are not remotely as rich as Hoboken and yet get far less aid.

	Total Student Pop.	% FRL Eligible	Number of FRL-eligible students	Amount of K-12 State Aid
Hoboken	2,639	49%	1,293	$10,656,560
Montclair	6,743	22%	1,483	$6,722,691
South Orange-Maplewood	6,846	20%	1,369	$4,216,218
Teaneck	4,044	30%	1,213	$5,266,235
West Orange	7,026	38%	2,670	$6,950,527

Hoboken's ELL percentage is only 1%, the lowest percentage in Hudson County.  The state average is 5%.

Conclusion

Since the recession hit in 2010 and state aid has be cut, numerous critics, especially Save Our Schools NJ and the Education Law Center, have slammed the state and Chris Christie for underfunding the state’s school aid law, the School Funding Reform Act of 2008 (SFRA).

Underaiding is a valid criticism (if one is oblivious to the pension crisis) but the problem with state aid in New Jersey isn’t only underfunding, it is the rigidity of the distribution. Powerful legislators and special interests prevent districts from losing aid, no matter how unjustified that aid is in light of more acute budget problems elsewhere.

Hoboken is not the only district in New Jersey that is overaided. There are over 200 districts that get more than 100% of what SFRA recommends and a few dozen that would lose aid even if SFRA were funded at capped aid levels. Hoboken only stands out because of its extraordinary wealth and the scale of its overaiding. The contrast between poverty stricken families in non-Abbotts getting nothing for Pre-K while affluent families in Hoboken with six-figure incomes getting “free” Pre-K is grotesque and just one of the most unfair results of the Abbott decision.

See: "Dear Hoboken, Your Charter Schools are Not Bankrupting You."

See: "Even Demographically, Hoboken has no right to be an Abbott."

The Press of Atlantic City gets it!

The Press of Atlantic City should be commended for writing about the problems of the Christie-Legislature policy of not letting any district lose state aid no-matter-what.

The focus of this article by Diane D'Amico is that Interdistrict Choice districts that have lost Choice students are being allowed to keep money for non-existent students through Additional Adjustment Aid. Additional Adjustment Aid, aka, Phantom Student Aid, allows many Choice districts, including high-resource ones like Deal, Hoboken, and Englewood are being paid hundreds of thousands of dollars each for phantom students, while hundreds of NJ districts that have seen residential student population growth see no increases and aid declines in real terms.

“Enrollments change, and now some districts are getting money for students who are not there, and others are not getting money for additional students,” she said. “Everything gets exaggerated when they do flat funding. The more time goes by, the more extreme it gets.”