Assemblyman Jack Ciattarelli denounces Jersey City PILOTs, Jersey Journal doesn't comprehend

Assemblyman Jack Ciattarelli gets it about Jersey City's overuse of PILOTs and how this hurts the rest of New Jersey:

Assemblyman Jack Ciattarelli, R-Somerville, said the $80 million lost in Jersey City property taxes is unfair to the rest of the state's taxpayers, who fund a large portion of the city's school district."This report reveals the tip of an iceberg that is vast and mostly underwater," said Ciattarelli, who serves as the assistant Republic Whip. "Short-term property tax abatements, under very special circumstances, may have their place. What's happening in Jersey City and elsewhere is crony capitalism at its worst and an injustice to all New Jersey taxpayers.A draft of the city's budget revealed that Jersey City collects $119.2 million from 146 payment-in-lieu-of-taxes (PILOT) agreements, compared to the $198.6 million the city could have collected last year if the properties had been billed in full."At a time when the state is experiencing a painful squeeze on its budget and can't afford to make the full teachers' pension payment, the abatements exploit the state school funding formula," Ciattarelli said. "If communities want to provide tax abatements to encourage development, they should fund them from municipal and county taxes, not school property taxes."

The Jersey Journal, for its part, concludes the article with a total lack of comprehension of what Jack Ciatterelli is accusing Jersey City of.

City officials, who told The Jersey Journal that many of the tax abatements listed date back before Democratic Mayor Steve Fulop took office, said only $19 million -- not $80 million -- is actually lost tax revenue. The city keeps a large share of PILOTs but it splits normal property tax revenue with the county and the school district.

Umm, Ciatterri is accusing Jersey City of hurting STATE taxpayers.  The "$19 million" figure from the Jersey City press office refers to lost revenue to the Jersey City municipal government, not to the state, the Jersey City schools, or Hudson County.

"Extraordinary Aid Continues to Dwindle"

NJ Spotlight covers inadequate funding for "Extraordinary Aid."

http://www.njspotlight.com/stories/15/07/30/extraordinary-aid-to-offset-special-needs-costs-continues-to-dwindle/

Extraordinary Aid is the state's (partial) reimbursement program for extremely high Out of District tuition costs.  It's called "Extraordinary Aid" because the costs can be "extraordinarily high" (over $100,000 a student) and unpredictable.  Without Extraordinary Aid, a small district could be destabilized because of the random chance that a family moves in with several children with severe handicaps.

And now Extraordinary Aid payments are being cut relative to the costs of Out of District tuition.

Earlier this month, the state Department of Education alerted districts applying for the extra aid that it would pay 58 percent of the eligible costs. The funding level is a drop from 63 percent last year, and marks a significant drop from even the aftermath of the state’s fiscal crisis in 2012, when the state paid 77 percent.

Nonetheless, overall funding for extraordinary aid has remained steady. This year, the state has earmarked $165 million for such aid, the same as last year, and a slight increase over the $162.8 million budgeted in 2013.

And state officials point out that the aid has gone to offset the costs of educating more special-needs students, albeit at a smaller share per student. This year, the money is going to supplement funding for 13,200 students.

Still, as the cost of educating these students has increased, the shrinking share of extraordinary aid is emblematic of the fiscal constraints that schools are facing in addressing rising special-education costs.

The minute increase in Extraordinary Aid is the reason why I protest Adjustment Aid, Interdistrict Choice, Montclair's attempt to seize an extra $1 million, and Jersey City's growing Pre-K costs.

When the state is in a budget crisis, every dollar counts!  Jersey City alone is getting anotehr $2.7 million for Pre-K next year.  Hoboken is getting another $749,000 for Interdistrict Choice.  This gifts to high-resource districts and affluent parents on the Abbott Gold Coast hurt kids who live elsewhere!

NJ Supreme Court to Hear COLA Case

The NJ Supreme Court has voted unanimously to hear the case on the constitutionality of suspending COLA increases for pensions.  (COLA=Cost of Living Allowances). 

COLA increases were suspended in 2011 in order to save the state $80 billion dollars.

Pension increases were expected to remain frozen for all retired public workers until the pension funds returned to sound fiscal footing, which was considered to be funded at a level of 80 percent and was at first expected to take two to three decades starting in 2011.


In recent years, however, New Jersey’s economic growth failed to match Christie’s rosy forecasts and the governor began to cut yearly budget contributions to the struggling pension system, undermining one of the central beams of his plan to replenish the pension system.


The state pension funds – which have 773,000 beneficiaries – are facing $40 billion in unfunded liabilities, according to state actuaries. The system is funded at a level of 51 percent and may run dry within a decade, financial analysts say.

If the Supreme Court rules in favor of COLA benefits the demise of state aid will come even sooner and more severely than I or anyone else anticipates.

We are doomed.



http://www.northjersey.com/news/supreme-court-to-hear-n-j-pension-cost-of-living-case-1.1383835

Jersey City's Development Boom, Pre-K, and the Aid Cuts Coming Your Way

It's a great time to be mayor of Jersey City. With new construction everywhere around him, Mayor Steve Fulop has predicted that Jersey City will overtake Newark to become the state's largest city by the end of 2016.

"I think that as New York City — Manhattan — has become less affordable, people look for alternatives. We’re situated in a sweet spot. We have 5,600 units under construction — more than any other city in the state — and another 7,000 on deck next year."

[Above: "Journal Squared"]

I'm not saying that this growth isn't good for New Jersey as a whole, but it comes with a downside for school finance for non-Abbott districts. The downside for school finance is that Jersey City's development boom is expected to increase the size of the Pre-K population by 25% by 2017 and keep growing thereafter. Since Jersey City is an Abbott and the NJ Supreme Court requires the state to pay 100% of Pre-K costs for all children in the Abbott districts, this means that New Jersey will have at least a 25% increase in Pre-K costs for Jersey City.  Although the residents of Jersey City's new construction will pay state taxes, reality is that all that new state revenue will go to the Pension Crisis. This means that that Jersey City's Pre-K growth will but even more pressure on education aid for other school districts.

Steve Fulop understands that the Pre-K population is going to increase. He is thus offering tax abatements to developers who provide space for Pre-K classrooms in new buildings.

Building more pre-K centers is a signature initiative of the Fulop administration, which is offering developers longer tax breaks if they commit to building them. The district doesn’t have enough public space for the 4,500 pre-K students enrolled now, and that number is expected to grow dramatically as development in Jersey City expands.

Just how much is Jersey City's Pre-K population boom going to cost New Jersey?

Jersey City now gets $67.5 million for Pre-K. With 2% inflation and 25% population growth, this means that in five years Jersey City's Pre-K will cost $93.5 million. Unless the New Jersey Supreme Court comes to its senses, that additional $26 million will be taken away from other New Jersey school districts.

The Pension Crisis is the predominant pressure on K-12 aid across the state, but increased expenditures for Pre-K funding in the Abbotts also hurt and Jersey City's increase is disproportionate to the other Abbotts. For 2015-16 Jersey City's increase for Pre-K was $2.7 million. That might not sound like a lot at first, but remember that the whole Pre-K and K-12 increase for New Jersey was only $8 million.

What's additionally ridiculous about this is that most of Jersey City's new residents are high-income. Over the next few years the absurdity of rich Abbott residents getting "free" Pre-K while poor non-Abbott residents go hang is going to become even more common.

Jersey City residents seem to be clueless about their exorbitant privilege. The Hudson Reporter ran this story about a creative director named Josh Bryant who waited in line for 48 hours for his son's "free" Pre-K education.

Josh Bryant, a 39-year-old tattooed creative director at a publishing company, used to wait in line to see bands like The Clash.
Now, he's waiting in line for something more important: his son's education.
Bryant and dozens of other parents are queued up – for up to nearly 48 hours – to secure one of 90 free (that is, state-paid) "first come, first served" preK spots for their 3-year-olds at Concordia Childhood Learning Center.
It's one of 38 preschool programs with Jersey City Board of Education contracts, Concordia's director Migdalia Viole said - but it's become so desirable that some professional parents worried about a segregative effect.
"I sort of regret the fact that I am able to take two days off work to sit here. Not everybody can do that," said Bryant, who started waiting at 11 a.m. Thursday.

Jersey City kids still get "free" Pre-K no matter what. Josh Bryant should "regret" the fact that poor kids outside the Abbott bubble GET NOTHING.

In conclusion, the rigid Abbott Pre-K mandate combined with the Pension Crisis means that Jersey City will enjoy funding increases while the rest of the state's districts see decreases.

Your number of the day: 4.58%.

4.58%  

It's a number everyone who cares about NJ school finance should know.

Why?

Because it's what the investment return was on NJ's pension funds was through May for FY 2014 (meaning ending this June). The final, exact figure won't be known until September, but it is expected to be lower since May 2015 was a bad month on the stock market.

From the Star-Ledger:

New Jersey's $80 billion pension fund likely won't hit its target investment return for the fiscal year that wrapped up in June after several years of double-digit gains that kept the giant pension system from falling into even deeper trouble.

Tom Byrne, chairman of the panel overseeing the pension fund investment portfolio, reported a gain of 4.58 percent through May, one month shy of the full fiscal year that ended June 30. Because of a weak June, final results, which won't be available until September, are expected to be even lower, he said at Wednesday's State Investment Council meeting.

New Jersey's assumed rate of return, the amount actuaries say it needs to avoid adding to its liabilities, is 7.9 percent. And while 4.58 percent is "decent" and outperformed its benchmark, Byrne said, it's a departure from the 16.9 percent the fund reaped the year before, the fourth consecutive year churning out double-digits.

Whatever the final amount is, the result for the state's school aid distribution is the same: without higher investment returns the state's pension liability is even higher and we cannot afford to fully SFRA.

What the lower return means is that the zero-out dates for New Jersey's pension funds move up. Instead of the Judges' fund zeroing-out in 2021, maybe it will zero-out in 2019 or 2020. Maybe instead of PERS zeroing-out in 2024 it will zero-out in 2022 or 2023. Maybe instead of zeroing-out in 2027 the Teachers' fund, TPAF, will zero-out in 2025 or 2026.  The pension funds' official value fell from $81 billion to $78 billion.

The scale of the Pension Crisis is so large that the exact time of the funds going broke is immaterial from the POV of state aid. The result is the same: New Jersey can never afford to fully fund SFRA and even the $8.6 billion Pre-K+K-12 aid stream is unsustainable.  Those of us from underaided, overtaxed districts cannot wait: we need redistribution now!

Update Sept 24th: 

The final number of FY 2014 has just come out and New Jersey's pension funds returned 4.16%.

Paterson's Budget Problems, a $20 Million Appropriation, and Some Context

Paterson is one of many New Jersey school districts suffering severe budget stress. Faced with a $20 million shortfall, Paterson is going to lay off over 360 staff members, including 197 teachers.

By a 5-4 vote, the Board of Education on Monday night approved a $565 million schools budget that district officials say will result in the elimination of 363 jobs.

Despite the large number of jobs at stake, less than 30 people attended the budget meeting and only five people spoke during the public hearing.
Among the jobs being cut are 197 instructional positions, which include teachers, officials said. The job reductions will generate about $21 million in savings, according to state-appointed schools superintendent Donnie Evans. 

Several people who spoke during the hearing predicted that the cuts will increase class sizes in a district that where student test scores are among the lowest in the state. 

“I’m struggling to understand how this reduction is going to have minimal effect on the children,” said Rosie Grant, head of the Paterson Education Fund, an advocacy group. “It has to be that class sizes are going to go up and supplies are less.” 

“This is going to lead to frustrated kids, it will lead to discipline problems, and it’s going to lead to increased dropouts,” Grant added. “We’re going to feed the school-to-prison pipeline unless we find the resources they need.”

School board president Jonathan Hodges cast the deciding vote in favor of the budget. Under the system of state control of city schools, Evans could have implemented the budget even if the board had voted it down.
Joining Hodges in voting for the budget were Christopher Irving, Manny Martinez, Flavio Rivera and Kenneth Simmons. Voting against it were Chrystal Cleaves, Errol Kerr, Lilisa Mimms and Corey Teague. 

Kerr called the district’s spending plan “the dumb the children down budget.” He asserted that the district does not have so much fat in its budget to withstand the $21 million in personnel cuts. Kerr also said the reductions would undermine the academic progress the district has made. “We are trying to destroy the entire thing,” Kerr said.

The budget stress is common across New Jersey, but what is unique about Paterson is that the New Jersey legislature tried to come to Paterson's aid with a $19.7 million appropriation for something the legislature called "Programmatic Stabilization Aid." Although many districts are also at risk of "destabilization" or were destabilized years ago, Paterson and Egg Harbor City (which was to get $300,000) were the only two districts that were going to get money from this off-formula aid stream.

Paterson, unlike Montclair (which almost got $1 million), is a truly needy district. 90% of Paterson students are FRL-eligible, the eighth highest percentage in New Jersey. Unlike many other Abbotts, Paterson does not receive Adjustment Aid and is thus not an aid hoarder. Paterson does receive $400 million in state operating aid for 28,139 students, or $14,200 a student, which is high, although not extraordinary considering what Paterson's needs are. Combined with its local and federal money, Paterson's school spending is $16,696, again, high, but not exorbitant compared to other Abbotts.


As Assemblyman Benjie Wimberly said of the money, “It saves a lot of jobs, it saves hundreds of jobs. We have to do what we have to do.”

As sympathetic as I am towards Paterson and any individual who might lose a job, the situation is complex.

The budgetary problem with Paterson (and many other Abbotts) is that it does not want to raise its own taxes. Since 2009 Paterson's Local Tax Levy has been the same $38,955,956. Its equalized tax rate is 0.5788, which is much lower than what a non-Abbott would pay and even lower than what many other Abbotts pay. Newark pays 0.8. Trenton pays 0.9175.




What makes Paterson's case more sympathetic is that it has had a loss of Equalized Valuation.   Indeed, the appropriation language cited this fact.

Programmatic Stabilization Aid shall be used by the Commissioner of Education to provde State aid to a school district, other than a school district that participates in Interdistrict public school choice program that 1)between October 2010 and October 2014, experienced an increase in its actual resident enrollment of at least 4.5% 2) between the 2013-2014 school year and the 2015-16 school year experienced a loss of Equalized Valuation of at least 21%.  

Giving the $19.7 million to Paterson is a very tough call, but people have to remember that as sad as it is for Paterson to have to lay people off that there are many similarly high-need districts that already receive much less than Paterson and have been hit similarly hard by the recession.

Paterson's spending, while not exceptional by Abbott standards, is higher than what other high-FRL districts spend. Woodlynne (93% FRL) spends only $12,241. Lakewood (86% FRL) spends $11,682. Red Bank Boro (89% FRL) spends $13,130. East Newark spends $9,980. Compared to its high-FRL peers Paterson is still doing ok.



Giving the $19.7 million to Paterson sounds nice, but is that a better use of money than expanding Pre-K in non-Abbotts? The $19.7 million for Paterson and $300,000 for Egg Harbor City could pay for Pre-K for 1,300 children.  Is it better than bringing desperately underaided and underfunded districts like the ones above closer to Adequacy?

If Paterson had gotten the $20 million it would have come out of NJ's pension contributions and cost the state more in the future or it would have come out of the budgets of other school districts and caused layoffs elsewhere. Raising state taxes by exactly $20 million just for Paterson and Egg Harbor City doesn't seem appropriate either. If the NJ legislature had proposed a tangible offset - reducing Adjustment Aid, Interdistrict Choice Aid, or categorical aid for ultra high-resource districts (eg, Hoboken, Ocean Twnship Cape May) - than I would be glad about the $20 million for Paterson and Egg Harbor City, but without an offset this wasn't a wise move.

$20 million in one year might not sound like a lot of money, but what about the year after and the year after that? The costs add up.

I also don't think that Paterson should be ahead of Woodlynne, Lakewood, Red Bank Boro, and East Newark for more aid. Even if the legislature took $20 million away from the Aid Hoarders I don't think that Paterson should be the first to get it. I wish Christie had proposed a spending offset somehow, but without the offset I think Christie made the right call with the line-item veto.

Adjustment Aid and DFG B: Who Gets It and Who Doesn't

I just wanted to make a quick follow up on my post yesterday about Adjustment Aid and who does and doesn't get it.

DFB B is the second poorest of the eight District Factor Groups.

Only 40% of DFG B districts get any Adjustment Aid.  This is lower than the 49% of DFG A districts that get it. Like with DFG A, the aid is usually a very small portion of district revenue with only a handful of exceptions

With DFG B you see how Adjustment Aid is really skewed towards the Jersey Shore (as well as rural areas).  Cape May, Ocean, and Atlantic counties have 11 of the 27 DFG B districts getting Adjustment Aid.

This is yet another reason why Adjustment Aid is so problematic.  Even if these Jersey Shore districts have higher-than-average FRL rates, that doesn't mean that they are low-resource.

Wildwood Crest has $2,147,644,070 in valuation for 250 students, or $8.6 million per student.  Even if you assign only two thirds of that to Wildwood Crest since it is only K-8, it still has $5.7 million per student, a figure even higher than Hoboken.

Lower Cape May Regional has $6,874,334,464 in equalized valuation for only 1,449 students, or $4.7 million a student.  Lower Cape May Regional is just a high school, but even if you assigned it only a third of that valuation per student, it would still have over $1.5 million a student, an extremely high figure.

Middle Township is a K-12 district with $2,720,079,400 in valuation for 2,588 students, or $1.05 million per student.  Also a high figure.

Upper Township has $1,924,606,756 for 1338 students, or $1.4 million per student.  It's another K-8 district, but even at two thirds valuation, it still has almost a million per student, an above-average figure.

What's more, the above districts are Interdistrict Choice districts, so they get additional money on top of their Adjustment Aid.  The NJ DOE originally wanted to make offsetting cuts to Adjustment Aid districts participating in Interdistrict Choice but never followed through on this due to opposition from several Cape May districts.


I need to emphasize that the real story here is Jersey City.  Jersey City gets $114.4 million in Adjustment Aid.  The other DFG B districts that get Adjustment Aid only combine for $73.4 million.

Jersey City only has about $550,000 in valuation per student (not counting its PILOTed property). That's a lower than average figure, but Jersey City's school tax rate is only 0.58, a an extremely low rate.  Jersey City's Local Tax Levy is $109 million on $18.3 billion in valuation.

When the state looks at sources for revenue for its many badly underfunded and underaided schools it needs to look at Adjustment Aid.  The districts that get Adjustment Aid are better positioned to absorb cuts than other districts are.

As for "Who doesn't get Adjustment Aid?"  It should be clear.  It's most districts period, but the program does nothing for most poor students.  In terms of geography suburban districts are the victims as usual.

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• See "Clifton Board of Education Demands Equitable Aid Distribution" for a deeper explanation of how Adjustment Aid is supposed to work.
• Adjustment Aid Has No Statutory Sunset