NJ Auditor's Report Finds Deep Flaws in State Aid

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NJ's Auditor has come out with a report on school funding and admits what we already know: that state aid appropriations bear no relationship with SFRA recommendations, tax base, or current student demographics.

Funding is not based on current district data.
The SFRA formula distributes aid based on district enrollment and student demographics  (income, special education, language barriers, etc.), as well as other factors such as district  wealth and property values. In fiscal years 2015 and 2016, funding remained static for each district at the fiscal year 2014 funding level for SFRA formula aid categories (with the exception of School Choice and Preschool Aid). Changes in districts’ enrollments, student demographics, and other factors influencing aid were not considered.

The SFRA formula aid has not been distributed per statute since fiscal year 2009. Starting in fiscal year 2010, the Appropriations Acts began superseding part, or all, of the formula.  Through fiscal year 2014, the methods followed for the annual calculations blended past and  current data from multiple years to determine funding, making the distribution convoluted. During fiscal years 2015 and 2016, no data from either year was applied to the formula to determine funding. Consequently, there were significant differences between actual funding and what the SFRA dictates.

I was encouraged to see that the report criticized Adjustment Aid, even though Adjustment Aid is part of SFRA:

Additionally, it should be noted that even though the SFRA formula aid was not distributed in accordance with statute, districts may have received Adjustment Aid. This aid is provided so districts do not receive less aid than their fiscal year 2009 amount. In addition, in fiscal year 2014, Additional Adjustment Aid was distributed per the Appropriations Act to ensure districts would not receive less than their fiscal year 2013 funding. Adjustment Aid and Additional Adjustment Aid can be contrary to the objective of the SFRA since funding may exceed the districts’ actual needs for their current student populations.

More originally, the report claims that SFRA's formula for Special Ed Aid, which assumes that every district in NJ has a 14% classification rate, does not work for scores of districts:

"Our review of districts with 100 or more special education students in fiscal years 2015 and 2016 found that 234 districts (59 percent) and 258 districts (64 percent), respectively, had an actual classification rate that deviated more than 10 percentage points from the statewide average classification rate of 14.78 percent. As a result, district funding is not commensurate with actual enrollment of classified students in many instances."

The report also found that every district getting PreK aid OVERestimated its enrollment.  The overestimates result in an extra payment of $32.9 MILLION.

Our review also noted that every district overestimated their projected enrollment in fiscal year 2015, resulting in overpayments to 32 districts totaling $25.7 million. In fiscal year 2016, 33 districts overestimated their projected enrollment, resulting in 30 districts being overpaid a total of $32.9 million. However, using actual enrollment data, we determined that seven and ten of the SDA districts in fiscal years 2015 and 2016 would still have been held harmless to their fiscal year 2009 funding, resulting in additional overpayments of $10.9 million and $28.2 million, respectively.

The report revealed something I did not know, which is that Abbott districts have been "held harmless" for PreK aid and not just K-12 aid.  This means that if an Abbott districts has fewer PreK students now than it had in 2008, it gets the same amount of money it got before.

The SDA [Abbott] school districts are held harmless to fiscal year 2009 thresholds. They will receive the greater of their calculated fiscal year 2015 or 2016 Preschool Education Aid, as explained above; the amount of aid they received in fiscal year 2009; or their fiscal year 2009 per pupil amount multiplied by their current year total projected enrollment. During our audit period, seven SDA districts were held harmless providing them with $11.8 million and $16.5 million in excess funding for fiscal years 2015 and 2016, respectively.  [my emphasis]

The report also demonstrates disparities in Pre-K aid that are rarely covered:

Districts can operate full-day, half-day, or a combination of both for their preschool programs. The [Early Childhood Program Aid] per pupil amounts are based on full-day preschool programs. Students attending half-day programs receive half of the per pupil amount for each enrolled student. We noted that the per pupil amounts for the 93 districts ranged from $2,036 to $27,663. This disproportionate funding creates educational inequities among the students being served by this aid. 

The DOE response is included.  The DOE concurs with all recommendations except the one for Specia Education.  The DOE says it is working to make Pre-K distributions match enrollment.