Monday, April 24, 2017

Adjustment Aid Has No Statutory Sunset

One claim I often see regarding Adjustment Aid is that Adjustment Aid was intended to be temporary:

For instance, journalists make this claim, eg, the New Jersey Spotlight:

Adjustment Aid, sometimes called “hold harmless aid,” was created by the 2008 School Funding Reform Act (SFRA) to make sure districts would not see big drops in their state aid when the new formula went into effect. It was calculated based on their aid packages in 2007-2008, and was supposed to gradually phase out as districts adapted to their lower aid allotment.

And so do politicians, eg, Steve Sweeney:

The original formula was altered to include provisions that have prevented districts with increased student enrollment from receiving fair compensation at the same time other school systems are overcompensated with money for students they don’t have. These add-ons – “growth caps” and “Adjustment Aid” – were intended to be temporary but continue to be funded eight years later.

Ok, the above is not correct.  SFRA only allows the most marginal decreases in Adjustment Aid, and only for districts that lose enrollment after 2008.  There are no decreases allowed for districts whose wealth increases but whose student enrollment is stable.  

The only section of SFRA that contains any references to reducing Adjustment Aid is this excerpted section:

For the 2011-2012 school year and for each subsequent school year, a district that has a decline in its weighted enrollment, adjusted for bilingual and at-risk pupils, between the 2008-2009 school year and the budget year that is not greater than 5% will receive Adjustment Aid in such amount as to ensure that the district receives the greater of the amount of State aid calculated under the bill or the amount of State aid that the district received in the 2008-2009 school year. In the case of a school district that has had such a decline in enrollment that is greater than 5%, the district will experience a reduction in Adjustment Aid in accordance with its percentage decline in resident enrollment that exceeds 5%.

What this means is that if a district loses 15% of its (weighted) enrollment post 2008-09, would lose Adjustment Aid equivalent to 10% of its 2008-08 per pupil Adjustment Aid.  (10% = 15% - 5%).

(In reality there is an additional complication because the amount of Adjustment Aid the district is entitled to could (theoretically) change due to changes in Local Fair Share, but the basic rule is as above.) 

The provision respecting the loss of Adjustment Aid is significantly flawed because it misses the following important scenarios under which a district's aid could become unfairly high:

  • Districts were already overaided in 2008-09, hence the existence of Adjustment Aid in the first year of SFRA.  So, if a district had enrollment loss prior to 2008-09 and received Adjustment Aid in 2008-09, but thereafter its enrollment was stable, it does not lose Adjustment Aid, since SFRA's clock starts ticking only in 2008-09.
  • If a district has an increase in wealth post 2008-09 and becomes overaided (or even more overaided) as a result of that, it likewise does not lose Adjustment Aid.
So, SFRA's mechanism for the reduction of Adjustment Aid only allows for marginal cuts

As SFRA is written, the only real reduction of Adjustment Aid would occur at a decades-long timescale, as inflation and state spending growth gradually push Adequacy Budgets and Categorical Aid spending upwards and Adjustment Aid erodes away under inflation and the increase in other streams of aid.

The inadequacy of the Adjustment Aid-loss provision in SFRA can be seen in the Department of Education's "2017-2018 Additional School Funding Scenario (Information Only)."

These funding scenarios give the amount of aid districts would get if SFRA were followed exactly as the legislature and Jon Corzine wrote SFRA back in 2008, meaning, with Adjustment Aid and the State Aid Growth Limits intact.  

Under these scenarios, there are only 41 districts in all of New Jersey who would lose any state aid and the grand total of their losses is $11.6 million.

Jersey City, which based on the core formulas of SFRA is overaided by $159.9 million, would only lose -$920,741 (0.6% of its Excess Aid). Hoboken would only lose $1.3 million, which is 17% of its Excess Aid, the highest percentage of any aid-losing district.

Asbury Park, which is overaided by $25 million ($11,000 per student) would actually gain $2 million, because the cuts to Adjustment Aid that Christie made in 2012-13 were technically against SFRA. Other districts who are actually substantially overaided based on their economic capacity-demographic needs, like Pemberton, Toms River, Brick, and Keansburg would gain as well.  

Sunday, April 23, 2017

State Aid Disparities Worsen for 2017-18

This post and the underlying data were accurate at the time of writing, but in June 2017 the legislature changed the state aid allotment.  This post reflects the new, updated aid distribution

The Department of Education has finally calculated Uncapped Aid figures.  I have gotten these data via an OPRA request and put everything online.

As expected, another year of Chris Christie's frozen state aid distribution means that New Jersey's state aid disparities have become even worse.

In 2016-17, the 212 overaided districts had a total surplus of $618 million and the 379 underaided districts had a total deficit of $1.93 billion.

But for 2017-18 things are even more unjust:

  • There are 222 overaided districts with a cumulative surplus of $696,882,364.  ($27 million of this excess is from Interdistrict Choice)
  • There are 369 districts with a cumulative deficit of $2.072 billion.* 
I do not know the Extraordinary Aid deficit, but it is at least $100 million.

Additional Material:

  • The median NJ district gets $4,031 per student in K-12 state aid.
  • The median NJ district is underaided by $460 per student (compared to uncapped aid.)
  • The median NJ district gets 82% of its Uncapped Aid. 
  • There are 72 districts that get 200% or more of their Uncapped Aid.
  • Of the 222 overaided districts, 89 are overaided by $2,000 or more per student.
  • The total excess aid of the overaided districts is $696.9 million.
  • Of the 369 underaided districts, there are 127 districts that get 49.9% or less of their uncapped aid.
  • Of the 369 underaided districts, there are 113 that have aid deficits greater than $2,000 per student and 58 with deficits greater than $4,000 per student.
  • The total deficit for the underaided districts is $2.072 billion.

And to provide extreme examples:

  • Asbury Park is the most overaided in per student terms, with an excess of $11,278 per student. SFRA's target for Asbury Park is $13,401 per student, but Asbury Park's actual aid is $25,595 per student.
  • Deal is the most overaided in percentage terms, getting 1086% of what SFRA recommends. This is due to Interdistrict Choice money, although Deal is a small recipient of Adjustment Aid.
  • Bound Brook is the most underaided in per student terms, with a deficit of $10,592 per student. (It gets $8.2 million when it should get $26 million for 1,724 students.)
  • Chesterfield is the most underaided in percentage terms, getting only 9.5% of what it is supposed to. It gets $419,983 when it should get $4.22 million.
  • Jersey City has the most untapped Local Fair Share. Jersey City's Local Fair Share is now $370 million, but its actual tax levy is $114 million. 

Tuesday, April 18, 2017

The Skews of Capped Aid

Other than the Orwellingly named aid-hoarding mechanism known as "Hold Harmless Aid," the most unfair aspect of New Jersey's School Funding Reform Act is the State Aid Growth Limits, aka "Enrollment Caps."

Due to these limits on how much money a district can gain, the most aid a district can gain is a 10% or 20% of what it got the year previous, no matter how severely underaided it is. 

(Technical Note: due to the cuts of 2010 and how low-aid districts then lost large percentages of their state aid, there are districts who would gain more than 20% from what they get now, however, that is technically due to the mechanism of Adjustment Aid, which overrides the State Aid Growth Limits for districts getting less state aid now than they did when SFRA was passed. Since this is a benign effect of Adjustment Aid, and Adjustment Aid is usually odious aid-hoarding, I prefer not to get into the weeds about it.)

Due to the existence of the Aid Caps and the fact that the Caps are percentage based, the more aid a district already receives, the more aid a district gains in dollars-per-student, which is the real measure of budgetary-tax impact.

(I got Capped Aid and Uncapped Aid amounts via an OPRA request to the DOE.  I've made the data publicly available here)

For instance, the following underaided districts all would be gaining the same amount in percentage terms if SFRA were operating:

But in the all-important dollars-per-student, the amounts the districts are getting are completely different and skewed.

What is unfair about this is that Chesterfield, Bound Brook, Manchester Regional Freehold Boro are New Jersey's most underaided districts against Uncapped Aid (Uncapped Aid = real SFRA full funding).  In percentage terms, Chesterfield does worse than any other district.  For 2017-18, Chesterfield will only get 9.5% of its Uncapped Aid, with Bound Brook (-$10,592), Manchester Regional (-$7,562 pp) and, Freehold Boro (-$8,484 pp) among the worst in dollars per student.

Newark, Paterson, Trenton, and Elizabeth are indeed badly underaided, but not by nearly as much.  Newark's aid deficit is only $3,059 pp, Paterson's is $3,252, Trenton's is $3,003, and Elizabeth's is $3,198.

As a consequence of the percentage-based mechanism of the Aid Caps, new aid under SFRA goes disproportionately to large, moderately underaided districts.

Fortunately, reforming the State Aid Growth Limits (aka Enrollment Caps) is part of Steve Sweeney's state aid proposal.  Unfortunately, no one in the media and few among other politicians understands what the State Aid Growth Limits even are.


See Also: