Wednesday, December 20, 2017

Mila Jasey on State Aid & the Budget

For the past several months rumors have circulated that Mila Jasey is under serious consideration 
to be Phil Murphy's Commissioner of Education.

Whether or not Jasey is named as Commissioner of Education, she has been one of the most active legislators on education since she joined the Assembly in 2007.  She also might become the chair of the Assembly Education Committee.

This post looks at her record on state aid and the budget.


In her pre-politics life, Jasey was a public health nurse and homemaker in South Orange.  Her husband was a counsel for the Prudential before becoming an Essex County judge.  Her daughter, Rhena Jasey, went to Harvard and became a teacher in South Orange-Maplewood.  Rhena Jasey was a subject of the documentary "American Teacher."

Jasey was a member of the South Orange-Maplewood Board of Education from 1999-2007, including service as president.

During her service the South Orange-Maplewood Board of Education enforced a ban on all Christmas music (including secular Christmas songs like Rudolph the Red-Nosed Reindeer).  The rule was trivial in its educational impact, but the controversy around it consumed large amounts of Board attention, including litigation that nearly went to the US Supreme Court.  The district's ban on Christmas music became part of a conservative litany that there existed a "War on Christmas."

Jasey has represented District 27 in the Assembly since November 2007, when she replaced Mims Hackett.  Jasey has served as chair of the Committee on Higher Education since 2015.

Jasey's path from the BOE to the Assembly was helped by the Essex County Democratic organization and Senator Dick Codey.

In terms of contributions to her campaigns, the NJEA was Jasey's second largest contributor in the most recently election, giving $11,500.  PreK-Our-Way funder and port tycoon Brian Maher was her largest individual donor, giving $3500.

Voting Against SFRA

Jasey joined the Assembly in November 2007.  Despite her background as a BOE member in a school district whose state aid had been flat since the early 1990s, Jasey voted AGAINST the School Funding Reform Act of 2008.

Although District 27 is now entirely suburban, back in in 2008 it included Orange and parts of Newark, so Jasey's opposition may have been motivated by a desire to protect the Abbotts.  Nonetheless, after SFRA was passed and approved by the Supreme Court, Jasey has been committed to it.

During the Corzine years and Christie years Jasey consistently supported a Millionaires' Tax, which would help with school funding, but she also opposed Chapter 78, which saved the state billions that could then go into operating aid.

Jasey did vote for the 2% tax cap in 2010.  She also voted for the Transportation Trust Fund compromise in 2016.

Jasey has also voted for various anti-outsourcing bills that would prohibit localities from subcontracting workers and create tenure-like protections for non-teachers.  These bills have been opposed by the NJSBA because they would increase costs to districts.

For Unlimited Interdistrict Choice

As a legislator, one of Jasey's signature accomplishments was the 2010 law that expanded New Jersey's Interdistrict Choice program from pilot program that capped participation at one district per county to a full-fledged state policy with unlimited district and student participation.

Under this law, the state's costs increased exponentially, going from $9.8 million a year in 2010-11 to $20 million in 2011-12 to $33 million in 2012-13 to $49 million in 2013-14.

Although by 2013-14 regular state aid was frozen and every district in District 27 was underaided, Mila Jasey attacked the Christie administration's cap on Interdistrict Choice, calling the cap "ill-advised and short-sighted."

The decision of the DOE to cap the program by imposing a 5 percent growth limit is very troublesome to me, and I am disappointed by the decision,” said state Assemblywoman Mila Jasey (D-Essex). 
“It circumvents the intent of the Legislature to expand the program,” she said. “Even more troubling, it thwarts the ability of interested families to follow through on their decision as to how to best meet their children's needs in a public school setting.”
Although she accepted the necessity of capping Interdistrict Choice's growth, over the next few years, Jasey did very little publicly to advance state aid fairness, despite South Orange-Maplewood's and West Orange's own appeals for greater fairness in the distribution.

After Steve Sweeney began a high-profile fight in 2016 to increase school aid, redistribute Adjustment Aid, Mila Jasey stood aloof.

In 2016 Jasey, to the applause of PreK Our Way, authored legislation, with Vincent Prieto, that would dedicate an additional $110 million a year to PreK.  The funding source would be the "Property Tax Relief Fund," ie, the same income tax money that funds K-12 education.

When Jasey was asked where the $110 million would come from she answered "budgets reflect priorities and I believe that we have to take the education of our children, beginning with the youngest ones, a priority."  She did not actually say what else would be cut to make room for the additional $110 million per year.

In March 2016 Jasey, along with district-mate John McKeon, did sponsor a bill to increase K-12 state aid by $122 million to districts whose school tax rates exceeded 135% of the state average, a policy that would benefit her home district of South Orange-Maplewell as well as West Orange, but not many severely underaided districts whose tax rates happen to not be that high.

Although Sweeney's more comprehensive plan would have brought immediate and long-term relief, Jasey and McKeon contrasted their plan with Sweeney's by saying "unlike Senate President Sweeney's proposal, our plan could be put together within a year, not five.

Jasey also did not explain where the additional $122 million per year would come from.

Jasey has said that she favors some reduction of Adjustment Aid in some informal settings and in 2016 she implied that districts with increasing property wealth should see reductions:
Based on sometimes vague parameters - some of which were not meant to be factored into the equation - the use of adjustment aid has also failed to take into account the rise in property values within certain districts.  [ibid]
Anyway, The Jasey-McKeon K-12 state aid plan attracted no co-sponsors.

Very Nuanced, Inconsistent on Charters

Jasey has also been highly nuanced stance on charter schools.  A critic could say she has been inconsistent, but a supporter might say she has evolved.

Jasey was the primary sponsor in 2010-2011 of the law that allows private schools in "failing school districts" [sic] to convert to charter schools.  (Its title was A-2806)

Under this law, the state would pay charter tuition the first year after a conversion, with sending-districts paying thereafter.

Jasey was also the author of the charter school "authorizer bill" which would have been helpful to charters by improving oversight. Yet, Jasey also supported requiring local votes to allow a charter to open.

At this time in 2011 Jasey said of charters:
Charter schools have an important role to play in the education of our state's children, but more clarification and accountability are necessary," said Assemblywoman Mila Jasey, (D-Essex), who also expressed concern about the Education Department's ability to provide proper oversight. "It is absolutely imperative that the application process be rigorous and that we review what charters are accomplishing in comparison to traditional public schools."  (source below) 

Her daughter Rhena actually left South Orange-Maplewood to teach at a high-profile charter school in the Bronx called The Equity Project.

Perhaps it was a personal ideological change, perhaps it was a response to Christie's aggressive charter school expansion policy, or perhaps it was heeding the NJEA, but, only four years later, in 2015, Jasey had become adversarial towards charters and sponsored a moratorium on charter school creation and expansion.

Jasey's demand for a charter school moratorium brought 100 protesters to her office in the normally placid suburb of Maplewood.  It also earned an angry rebuke from the Newark City Council, which voted 7-2 against a charter school moratorium, although the Newark School Advisory Board supported the moratorium.

In any case, that moratorium bill did not make it out of the Assembly Education committee.

For Prieto Until Late in the Game

Mila Jasey was a supporter of Vincent Prieto during the early stages of the Prieto-Coughlin leadership battle, but in August 2017 she switched to Coughlin along with the rest of the Essex Assembly Democratic delegation.


The above is only a state aid-focused history of Mila Jasey's positions on education, but it is also worth noting that she is strongly opposed to the PARCC exam. She also authored legislation to ban any standardized testing for students in grades K-2.

Source of Jasey quote

"N.J. charter school applications keep pouring in - State looks at 42 proposals in latest round"

Monday, December 11, 2017

Seven State Aid Predictions for the Murphy Era

New Jersey is only one month away from the inauguration of Phil Murphy as governor. 

Murphy has never held elective office before and he typically avoided talking about the details of state aid during most of the campaign.

Most of Murphy's opinions on the details of SFRA are unknown.  Murphy has said he supports "tweaks" to SFRA, but never explained what that means.

However, the stances of people in Murphy's circle, like Sheila Oliver, as well as constituencies within the Democratic Party, are known.

My predictions are based on what Democratic constituencies and Sheila Oliver have said.

Prediction 1: $200-$300 million in Adjustment Aid will be redistributed. 

Basis: Phil Murphy said this at a town hall in Maplewood, NJ and again in a televised forum with Tom Moran. It is budgetarily necessary as well.

  • Sub-conjecture: There will be some complex mechanism of cutting Adjustment Aid. The districts to lose Adjustment Aid will be ones who are above Adequacy and/or severely under Local Fair Share.
  • Basis for Belief: The Education Law Center, which is NJEA funded, only (with extreme reluctance) accepts the loss of Adjustment Aid to above Adequacy districts.  Politically it will be necessary to cut Jersey City's state aid, since it taxes at one-third of Local Fair Share, but is below Adequacy.  
A few Adjustment Aid districts do not have the capacity to pay higher taxes and East Orange is one of them (the EOPS is overaided by $22.5 million, but the town has a 4.638 all-in tax rate, so making up that money will local taxes would be impossible). East Orange is Sheila Oliver's home.

The Education Law Center only wants districts that are below Adequacy to receive additional state aid "State aid increases must be directed to under adequacy districts" but this is such an extreme stance and contrary to what the legislature will want that I don't see Murphy completely denying over-Adequacy districts.

On the other hand, I would not be surprised if under-Adequacy districts get larger percentage state aid increases, which is what SFRA already calls for.  Underaided districts that are nonetheless above Adequacy due to their own high taxes, like Cherry Hill and West Orange, may not receive very much new aid.

Prediction 2: The Distribution PILOT Revenue Will be Changed So that the Money is Apportioned in the Same Way Regular Taxes Are:

Basis: This is something Steve Sweeney wants to see happen, it is something many Republicans (like Mike Doherty) want to see happen, and there isn't anyone visibly opposing this change. Even Steve Fulop of Jersey City is willing to let the Jersey City public schools have 10% of PILOT revenue (instead of 25% of regular taxes)

NJ's Urban Mayors Association met in November 2017 and endorsed this.

At present, 95% of PILOT revenue is given to the municipality and 5% goes to the county.  The local public schools get 0%.

Prediction 3: There will be an Attempt to Reduce Local Fair Share for Districts with High Municipal Taxes:

Basis: It makes fiscal sense, it would satisfy the powerful urban constituency within the Democratic Party, and it an Education Law Center demand.

EG, here is the Education Law Center's demand "Lawmakers must consider providing relief for school districts facing municipal overburden. These districts have high tax rates, but low rates of local school funding due to the high costs of other municipal obligations."

I agree that some urban districts have municipal taxes that are too high to allow them to meet their Local Fair Shares. New Jersey's average municipal tax rate is 0.694, but Newark's muni rate is 1.642, Trenton's is
A town like East Orange cannot pay
its full Local Fair Share.
3.329, Paterson's is 2.578, Elizabeth's is 2.206. East Orange's muni rate is 3.353, which is one of the highest in New Jersey.

It isn't a surprise then that these districts have school taxes that are so far below Local Fair Share. Newark's tax levy is $45 million below LFS, Trenton's tax levy is $16 million below LFS, Paterson's is $51 million below LFS, Elizabeth's is $36 million below LFS, East Orange's is $20 million below LFS.

IMO, factoring in municipal tax rate into the calculation of Local Fair Share would create an incentive to have high muni tax rates.  A fairer solution would be to condition Local Fair Share on a place having a low-income, since that is outside the control of politicians.

Prediction 4: The state will increase its reimbursement of districts for their charter students.

Basis:   Sheila Oliver does not like the principle of "money following the child" and neither does the NJEA.

In August 2017  at a forum with Randi Weingarten of the AFT Oliver said:
Oliver reaffirmed her support for [traditional] public schools. 
“The expansion and growth of charter schools has hurt our public schools,” she said. “We will make sure that our public schools will be front and center on our agenda.” 
Oliver said that although she embraces all kinds of schools, funds should not be diverted away from public education. 
We can’t take funds out of district budgets to support them," she said.

If "we can't take funds out of district budgets to support" charters, then charters ought not to exist or districts should be double-funded for charter students.

Oliver has also said "What I am vehemently opposed to is using the money that goes to our public school system to support charters."

The NJEA does not appear to want "money to follow the child" either.  If a child goes to a charter school, the NJEA wants at least a portion of that money to stay in the residential district.

The NJEA has been a little more vague though, but it has demanded some change.

“NJEA has consistently supported the proposal by Assembly Speaker Vincent Prieto to gather the appropriate stakeholders to develop a plan to transition back to the current funding formula. In addition, we have called for that group to study the funding mechanism for charter schools, as the current mechanism is causing drastic program cuts in the districts from which charters draw their students.
New Jersey should follow a similarly thoughtful and deliberative process for reviewing the current aid formula and recommending reasonable adjustments. That should include an honest look at the adverse financial impact that charter schools have on host district schools and ways to alleviate that harm.

Even the Christie administration has sent extra state aid to districts with growing charter school populations through a unilaterally-created aid stream called "Host District Stabilization Aid," a $27,653,005 expense for 2017-18.

If funds aren't leaving district budgets for charters, then the students have to be kept in districts or the state has to reimburse districts for their charter transfers.

It's also possible that we will see the Department of Education give money directly to charter schools rather than route that money through local school districts.  This might relieve some tension between traditional public schools and charters, but it would be a gimmick in terms of any real budgetary assistance since now school districts would have less money to begin with.

Prediction 5: SFRA will move away from the Census-weighting for Special Education Students in the Calculation of Equalization Aid.

Basis for Belief: It's superficially common sense. Even some politicians already want to do it.

It's a benign demand by the NJEA:

Blistan also highlighted the plan’s commitment to providing relief to districts that have been harmed by the current approach to special education funding. 'Districts should be not be punished for providing students with the special education resources they need. This approach will bring fairness to districts while continuing to meet the needs of students,' said Blistan, who is also a special education resource center teacher in Washington Township.
At present, NJ assumes that every district has 14.69% of its students classified, when everyone knows that classification rate would vary, like all populations vary.

The Department of Education opposed using Census weighting during the Corzine years and Christie years for seemingly sincere reasons, but that may change under Murphy.

Unfortunately, changing the calculation of Adequacy Budgets in Equalization Aid is meaningless as long as the overall distribution is out-of-whack and the state cannot come up with the additional money to fund it.

So this is like renovating the kitchen in a house that is falling into a sinkhole anyway.  

Prediction 6:  There will be a Loosening of the Tax Cap

Basis: Steve Sweeney's state aid reform commission proposed some amendment to the cap, presumably to allow aid-losing districts to tap their tax bases.

The NJSBA supports loosening the cap to allow automatic tax authority to districts with high Out of District tuition costs.

Prediction 7: The State will Expand PreK Disproportionately

Basis: It's something the Democrats all say they want to do and there are well-funded lobbies in place to support PreK expansion, with support from VIPs like Jim Florio and Tom Kean.  From 2011-2016 basically all Democrats in the legislature were more interested in PreK than K-12
In a Zero-Sum Budget Enrivonrment, PreK Expansion
Comes at the Expense of Everything

Although Steve Sweeney is more sensitive to New Jersey's tax stress and indebtedness than most other Democrats, PreK expansion is something he strongly supports nonetheless.

I say the PreK increases will be "disproportionate" because the increases will be much larger percentage-wise for PreK than K-12 education.  NJ's PreK funding was going to be $655 million for FY2018, but the legislative Democrats got it a $25 million increase, or 3.8%.  The legislature's (net) last-minute increase for K-12 aid and Extraordinary Aid was only $125 million, a 1.6% increase.

The Wild Cards

1.  The Republican tax plan.
If the SALT deduction is capped at $10,000 per taxpayer and the Mortgage Interest Deduction is capped at $500,000, real estate values in middle-class and affluent suburbs will decline by perhaps as much as 10%.  

If real estate values fall, then it would reduce those towns' Local Fair Shares and SFRA would, in theory, send them more Equalization Aid.

NJ already has a severe outmigration problem and its suburbs are already in decline, but the capping of the SALT deduction would likely accelerate those trends.

2. The Janus decision

Mark Janus, Illinois Child Care Specialist &
Petitioner in Janus v AFSCME
In June 2018 the United States Supreme Court is expected to rule that mandatory agency fees for public workers are unconstitutional as "compelled speech" and a violation of the principle of free association.

This means that NJ's public sector will become right-to-work and the 20-30% of teachers and other staff who are discontented with the NJEA can stop paying dues. At a 30% dropoff, that would mean a loss of $40 million out of the NJEA's $140 million budget. (see this for NEA affiliate financial resources)

Since NJEA dues will now be voluntary, the NJEA will have to invest more of its remaining money into membership retention and keep dues lower so that more members do not quit. At present NJEA state-dues are $897 per full-time teacher, plus a few hundred dollars more for the national organization, county organization, and local organization.

The NJEA will still be very powerful even if 30% of members leave, but it will not be colossus it is now and the Democrats may have more latitude to side with taxpayers and not the NJEA and other unions.

Saturday, December 2, 2017

How Maryland Does It: How Another Deep-Blue State Has Much Lower Property Taxes than New Jersey

Every once in a while I meet an advocate for school district consolidation in New Jersey who uses Maryland as a beacon state for us to emulate, since Maryland's schools are just as high-performing as New Jersey's, less segregated, and significantly lower spending (and taxing).

Indeed.  All of that is true.

If you could magically transport your typical New Jersey house to Maryland, your property taxes would fall from $8,477 to only $3,437.  Your other taxes would be lower too: Maryland's sales tax is 6% compared to our 6.875%.  Maryland's corporate tax is 8%, instead of 9%, too.

For state and local taxes combined, Maryland takes in less than New Jersey.  Maryland's taxes equal 10.9% of income, whereas New Jersey's taxes equal 12.2% of income.  To put it in terms of dollars per capita, Maryland's state and local taxes are only $5,920 per person.  New Jersey's are $6,926.  (see Table 2; corroboration E-1 to E-4)

Paradoxically, you get more for your taxes in Maryland for some services.  If your kids went to a public college they'll have less debt than their peers in NJ, since Maryland's public higher education system gets 42% more money per capita than New Jersey's.  Maryland lets people take out 529 profits tax-free. If you lose your job, Maryland's property tax "circuit breaker" will reduce your property taxes. You'll have the satisfaction of knowing that your state's bond rating is AAA, so you might feel more confident investing in Maryland too.

So how are Maryland's taxes so much lower?

The most obvious difference between Maryland and New Jersey is that Maryland has only 24 countywide districts whereas New Jersey has 586 town-based districts, but Maryland's school district consolidation versus New Jersey's fragmentation is just the tip of the iceberg as to why Maryland has lower property taxes than the Garden State.

The direct savings of Maryland's district consolidation - ie, less redundancy in administration - are minimal.  It is in the indirect savings created by Maryland's consolidation - ie, less intense interdistrict spending competition - that produce the real savings.

This blog post will look at two under-discussed, and more significant, reasons why Maryland's property taxes are lower than New Jersey's:
1.  Maryland localities have their own income taxes.
2.  Maryland spends 22% less per student.
    a.  That lower spending is across-the-board.
        i.  There are several structural and political reasons for that lower spending.
A subsequent post will look at a third major reason:
3.  Maryland gives more state aid to middle-class districts than New Jersey does.


The source of revenue doesn't make a district higher spending or lower spending, but technically speaking, one reason Maryland's property taxes are lower is because counties have a significant alternative source of revenue.

1.  Maryland Localities Have Their Own Income Taxes

Maryland's average property tax rate is only 1.05, compared to New Jersey's 2.40.  The Maryland jurisdiction with the highest property taxes, Baltimore City, only has a property tax rate of 2.248, which is below New Jersey's average.  The Maryland jurisdiction the lowest property tax rate is Talbot County, which has a rate of 0.547.

New Jersey's property tax average is 2.4.  Irvington, the New Jersey town with the highest all-in property taxes has a 4.9 rate, which is nearly five times Maryland's average. 

Maryland's 1.05 average property tax is a lower tax rate than even the richest towns in New Jersey have.  Millburn's tax rate is 1.8.  Princeton's is 2.0.  Madison's is 1.7.  Franklin Lakes's is 1.5.  Even Hoboken, with its $5.5 million in Adjustment Aid and proportionally small student population, still has a 1.3 tax rate.  The only NJ towns in NJ with property taxes lower than 1.05 are resort towns at the Jersey Shore and wealthy enclaves like Alpine and Harding.

Maryland's county income taxes range from 1.75% to 3.2%, with 3.0%
Source,  pg 28 
as the median.  Baltimore City, mentioned above for its high property tax, has a 3.2% income tax, so you would pay higher local taxes in Baltimore City than you would in most of New Jersey.

On average, Maryland localities get 34.8% of their taxes from income taxes, 53% from property taxes, and then 12% from "other taxes."  (ie, liquor stores)

Aside from Baltimore City, Maryland's property taxes are so much lower than New Jersey's that most New Jerseyans would come out ahead despite the local income tax.  A 3% median income tax is real money, but since Maryland's average property tax is $5,000 lower than New Jersey's, a family would have to make over $166,000 a year before it would pay higher Maryland local taxes than it would in New Jersey, assuming it lived in average-value houses.  Since families making over $166,000 in New Jersey probably live in more expensive-than-average houses anyway and pay higher than the $8,477 average in property taxes, the crossover income point would be higher than $166,000 per year, unless those

families had lived well below their means back in Jersey.
Above, a Montgomery County Liquor Store

Maryland's state income tax brackets are  higher for people at low-incomes, but lower at average to
above-average incomes.

Maryland taxes income $4,000-$100,000 at a 4.75% rate.  New Jersey has lower rates for low income filers, but NJ starts taxing at 5.525% at only $40,000 a year, then 6.37% at $75,000, and then at 8.97% $500,000.

Maryland's top bracket, 5.75%, kicks in at $250,000.  Because Maryland's second-highest and higher brackets are so much lower than NJ's, Maryland collects less in income taxes per capita than NJ ($1,297 p capita versus $1,361 per capita) and Maryland's system is less reliant on its top 1%.

In terms of all state taxes, Maryland captures less than New Jersey, $3,172 per capita versus New Jersey's $3,325 per capita. (see E-12)

How Maryland developed an income tax-based system whereas New Jersey developed a property tax-based system is complicated, but Maryland had a forty year head start on NJ in state income taxes, enacting its own income tax in 1937, whereas New Jersey held out until 1976.  Maryland also enacted a sales tax in 1947, whereas New Jersey didn't enact a sales tax until 1966.

2.  Maryland's Taxes are Lower Because School Spending is 22% Lower than New Jersey's

Maryland's property taxes are lower than New Jersey's because it has local income taxes, but another major factor is that Maryland's PreK-12 schools spend so 22% less per student than New Jersey's. New Jersey's spending is $21,243 per student, compared to Maryland's $16,985 per student, a difference of $4,258 per student.  (see Table F-1)

If New Jersey spent as much as Maryland on PreK-12 schools, we would save $5.9 billion.  At savings at that level, we would have no pension crisis, no NJTransit crisis, no underfunded higher ed, and have enough money left over to lower taxes.

Source, NEA Rankings & Estimates, Table F-1, 2016.

Maryland's spending is also significantly lower in terms of spending as a percentage of State GDP.

Source, Figure 3.  "Median" refers to the national median.

Maryland's lower school spending exists despite its cost of living being the same or higher than New Jersey's. 

There isn't a federal ranking of states by cost of living, but many independent organizations put out their own rankings. The Missouri Fed ranks Maryland's cost of living as higher than New Jersey's. The Council for Community and Economic Research agrees and ranks Maryland higher in cost of living too.

Some sources rank New Jersey's cost of living higher, but the difference in cost of living is not proportional to the difference in school spending.  For instance, the Tax Foundation says that $90.66 in Maryland would only buy $87.34 worth of the same goods and services in New Jersey.  That's a difference, but not something that accounts for a 22% difference in school spending. Giving the closeness in the two states' cost of living, New Jersey's high education spending is due to political-judicial preference, not economic necessity.

Some would consider lower school spending a negative tradeoff, but Maryland's education performance is as high as New Jersey's, despite much lower spending.   Since Maryland's schools perform about as well as New Jersey's (topping Education Week's rankings six years in a row), I would not consider the lower spending a tradeoff except in that Maryland offers less public PreK.

(It's worth pointing out that more Maryland children attend private school than New Jersey children.  Only 85% of Maryland children attend public school, versus 89% of NJ children (see Figure 5)

2a.  Maryland's Spending is Lower than NJ's Across the Board

Many people attribute Maryland's lower spending to having fewer school districts, and thus less administration.
  • Maryland has 24 school districts for 874,514 students, or one district per 36,438 students.
  • New Jersey has 590 school districts for 1,347,166 students, or one district per 2,283 students.
That's a huge difference and yes, Maryland's administrative spending is lower, but Maryland's spending is lower almost everywhere.

Source: Table 7

So Maryland's General Administration is $236 per student lower than New Jersey's.  Maryland's lower General Administrative spending would translate to savings of $328 million, which is a large amount, but only a fraction of the NJ/MD spending difference.

Attributing Maryland's lower taxes to district consolidation and administrative efficiency is correct, but highly incomplete.

The most financially significant difference between Maryland and New Jersey is that Maryland has fewer teachers.  NJ has 112,377 teachers, so a student:teacher ratio is 11.9:1, the second lowest in the US.

Maryland has 60,053 teachers, so a student:teacher ratio is 14.6:1, the 30th lowest in the US.

On top of Maryland having fewer teachers, it pays them less well, at an average salary of $66,456 versus New Jersey's $69,330.

I think the more significant relationship between having big districts is that those districts are socioeconomically diverse, and therefore there are no rich districts like in New Jersey to bid up salaries which middle-class districts end up struggling to match.  IE, Maryland does not have a "Millburn-Princeton Effect."

From an education point-of-view, Maryland's having fewer teachers and then giving those teachers lower salaries is a negative, but from a taxpayer point-of-view, having fewer teachers and lower salaries is a positive. 

i: there are many reasons for MD's lower spending

Why Maryland has lower school spending is a very complex matter, but I think the following are major reasons.

1.  Maryland's teacher unions are less powerful than New Jersey's.

Maryland only gave teacher unions the power to impose agency fees in 2013, and this law hasn't gone into effect statewide because there are counties where too few teachers want to actually join the union to trigger implementation.

New Jersey gave its teacher unions the power to impose agency fees wayyyyy back in 1979.

The newness of mandatory agency fees means that union fees in Maryland have not climbed as high as they have in New Jersey.  In 2014-15 the Maryland State Education Association had a budget of $21.6 million.  By contrast, the NJEA had a budget of $134.4 million.

It is perhaps due to the NJEA's superior power that New Jersey teachers have post-retirement healthcare coverage, which doesn't exist statewide in Maryland.  It is perhaps due to the NJEA's superior power that pensions in NJ are 100% a state obligation, versus a hybrid state-local obligation in Maryland.  It is perhaps due to the NJEA's superior power that NJ pours so much more into PreK-12 education aid than it does into higher education.

2.  Maryland has Far Fewer Students in Out-of-District Placement

New Jersey leads the nation in the percentage of special education students who are in out-of-district placement.  Maryland's placement rate is also above the national average, but barely half of New Jersey's.

According to the most recent data I could find, 0.9% of NJ students are in Out-of-District placement, the highest of all states, versus only 0.47% of Maryland students, which is itself the 6th highest of states.

I do not have data for Out-of-District placement total costs, but the spending difference must be in the hundreds of millions, both for tuition itself and transportation.

Maryland's having large districts may make feasible for districts to create specialized programs for kids that New Jersey's small districts cannot create, however, in Maryland the legal burden-of-proof is on the parents to prove that an in-district program is inadequate, whereas in New Jersey the legal burden-of-proof has been on the district to prove that a program is adequate.

In other words, in Maryland if there is a parent-district special education dispute, the special education program is assumed to be adequate, but in NJ if there is a dispute the special education program is assumed to be inadequate.  Thus, it is very hard for a New Jersey district to win a lawsuit against parents who want their child in a private-school setting.

When a New Jersey district loses special education litigation, the district pays the other side's legal fees, thereby incentivizing the district to accede to the parents' demands before litigation begins.

3.  Maryland does not have a "Princeton-Millburn Effect."

This is the large indirect benefit of having large, diverse districts.

Maryland has many rich towns, but it has no rich districts.  If Maryland's rich towns like Chevy Chase, Potomac, Bethesda, and Ocean City had independent school districts they would surely spend huge amounts of their own money on their own children, but all of those towns are subsumed into big, diverse countywide school districts and therefore they can't spend as much as what Princeton, Livingston, Franklin Lakes, Millburn etc can.

The highest-income school district in Maryland is Howard County, whose median income is $110,238.  That's pretty affluent, but but only 3.1x higher than Maryland's poorest school district, Somerset, whose median income is $35,154.  (see pg 96)

New Jersey has over 40 school districts with a higher median income than Howard County, and our ceiling is closer to $200,000 per year than $100,000.

By contrast, the richest K-12 school district in NJ (by income) is Millburn, whose income is $158,888, an amount that is 5.6x higher than Camden's $28,000.

The richest district in Maryland by tax base per student is Worchester County (on the Atlantic Ocean), but Worchester is only 4.1x richer than Maryland's poorest district by tax base, Caroline County.

Likewise, New Jersey's tax base differential is wider too.  Millburn's tax base per student is 18.6x higher than Camden's, but Millburn's tax base is nothing compared to microdistricts at the Jersey Shore.  Deal, which was cited in the Robinson v Cahill decision as an example of tax rate injustice, has a tax base per student that is 6.5x Millburn's and 121x than Camden's.

Even though Maryland and New Jersey are peers in income on a statewide basis, Maryland has no rich districts like New Jersey has.  One Maryland education expert I talked to said that Montgomery County had more salary competition against Washington, DC than it did against any other county in Maryland. 

In New Jersey, the existence of relatively small, affluent, high-spending districts like Princeton and Millburn has driven up overall education spending through what I will (semi-facetiously) call the "Princeton-Millburn Effect."

(Note: Millburn's spending has always been much lower than Princeton's, even though Millburn is wealthier.)

Residents of New Jersey's affluent districts have several reasons to accept higher taxes.
  1. First, high taxes in small towns give concentrated benefit to the children of that town, whereas in Maryland having big districts means that the benefits of high-spending are diffuse and that extra money may even go to high-poverty schools within that county.  
  2. Second, many people in high-income districts sincerely believe that high-spending = good schools and good schools= higher property values for that town, whereas in Maryland people would be less likely to believe this due to how large districts are and how diffuse any higher spending would be.
Since New Jersey has stronger interdistrict competition in teacher salaries and school services than NJ, affluent high-paying districts of New Jersey have bidded up salary scales statewide.

Indeed, even in the 1970s, New Jersey's property taxes were larger than all state revenue.  In 1990, before the Abbott II decision transformed NJ state aid, New Jersey's all-in property tax rate was 2.0, a figure I believe was the highest in the US.

The secondary Princeton-Millburn Effect is through compensatory state aid, since the existence of high-spending, affluent districts has forced the state to devote massive amounts of income tax revenue to state aid for the Abbott districts in order to equalize spending with affluent suburbs.  By 2006, 22 of the country's 30 highest spending districts in the United States were Abbotts and New Jersey had a U-shaped spending pattern, where poor, urban districts and affluent towns spent the most.  High-spending in the Abbotts added to other districts' upwards pressure on spending.

4.  In Maryland County Councils and Executives Set School Taxes, Not Boards of Education

Maryland school districts are "dependent districts," meaning they do not have their own taxing authority.

Maryland school districts get their money from the county governments they are part of.  The county council and executive determine how much money the school districts will have, not the Boards of Education.

County councils, I would think, would be more taxpayer-sensitive than Boards of Education are, who see their primary responsibility to do what is best for students, not taxpayers.

Part 2: State Aid

Maryland has lower taxes on its middle-class residents because Maryland's middle-class districts get more state aid than their equivalents do in New Jersey.

State aid is a highly complex subject in which interstate comparisons are tricky.  New Jersey has more streams of indirect aid than Maryland does and New Jersey state aid is badly off-formula.  Part 2 of this series addresses state aid.