Wednesday, March 28, 2018

Yes Education Law Center, Jersey City is Ridiculously Overaided

There is no district that exemplifies the absurdity of the frozen aid allocation more than Jersey City.

Note: Jersey City's Local Fair Share is $375 million for 2018-19.  

Jersey City's derelict wharves have given way to gleaming skyscarpers.  Jersey City's empty factories have become million-dollar lofts.  Jersey City's mayor calls Jersey City "New Jersey's Economic Powerhouse" and realtors and even residents call it "the Gold Coast."

There are several quantitative ways to measure this transformation, but by real estate value alone, since 1998 Jersey City's share of New Jersey's total Equalized Valuation has risen from 1.05% of the state's total to 2.35%.  Were Jersey City's $11.6 billion in PILOTed properties included in Equalized Valuation, Jersey City would possess 3.25% of New Jersey's total real estate wealth.

Note, this graphic was updated in Oct 2018 to reflect release of new Equalized Valuations.

Yet, despite that staggering increase in wealth, Jersey City still receives state aid as if it were the struggling city of the 1980s; getting $410.4 million in K-12 operating aid for 2017-18, an amount that is $151.5 million in excess of the $258.8 million that SFRA's core formulas actually say that Jersey City needs.

Thus, despite a 2018 Equalized Valuation of $28.4 billion, the Jersey City taxpayers only pay $116 million in school taxes, or 20% of the Jersey City Public Schools' budget.  Despite having New Jersey's largest tax base, Jersey City only has the 16th largest tax levy, behind poorer and/or smaller towns like Newark, Cherry Hill, Clifton, and West Orange.

Despite Jersey City's substantial growth in overall population, Jersey City's gentrification appears to have actually DECREASED student enrollment, from 31,328 in 2009-10 to a (projected) 30,815 for 2018, as childless residents and private-school families displace children who would have been in the public schools.

As public school families leave Jersey City, they often move to Jersey City's neighbors, contributing to enrollment increases and budget problems in most of the non-gentrified towns of Hudson County.

Note 1: Yes, these numbers include charter students.
Note 2: Weehawken and Hoboken have seen enrollment growth since 09-10, but they were thoroughly gentrified in 2009-10 anyway. 


It is obvious to many people that Jersey City's level of state aid is unfair, but not the Danielle Farrie of the Education Law Center.

The Education Law Center's case against redistributing Jersey City's Adjustment Aid isn't an argument so much as a redefinition of the words "overfunded" and "overaided" to mean "above Adequacy."  The Education Law Center denies the legitimacy of the common usage of the term, which means that a district receives more state money than SFRA's core formulas say it needs.

Here's the core of the Farrie/Education Law Center argument/redefinition:
JCPS receives more state aid for its adequacy budget than the formula would provide because of its allocation of transitional Adjustment Aid under the SFRA. However, this does not mean that the district is “overfunded,” “overaided,” or spending in “excess” of what students need for a thorough and efficient education. In fact, Adjustment Aid does not fully cover the district’s $253 million local levy gap.  
Adjustment Aid in Jersey City does not fund spending in excess of the level required under the SFRA for a thorough and efficient education for all district students. Even with Adjustment Aid, the district is spending $100 million below its adequacy target. A reduction in Adjustment Aid would have a severe impact on the district, further eroding the resources that are required to adequately educate all students to the state’s academic standards. For example, using average district compensation levels ($99,158 annual salary plus benefits), the total loss of $151 million in adjustment aid would require the district to cut over 1,500 positions, or one-half of all certificated staff.  [my emphasis]

Essentially the Education Law Center claims a monopoly on the right to define the words "overfunded" "overaided."  Instead of allowing those words to refer to state aid only (hence my preferred "overaided"), they say they must refer to spending relative to Adequacy.

In the Education Law Center's logic, since Jersey City's schools are only spending $17,149 per student and its full Adequacy budget calls for spending of $20,321 per student, therefore the Jersey City Public Schools cannot be "overfunded" or "overaided."


(note, Jersey City actually spent $23,466 per pupil in 2014-15, but SFRA's definition of spending excludes several significant revenue sources and spending categories, hence Jersey City's "spending as defined" is only $17,149.)

The Erasure of the Rest of New Jersey

There are many aggravating things about the Education Law Center's defense of Jersey City's aid hoarding, mostly that it sees the Jersey City Public Schools in isolation, ignores the budgetary needs of other school districts, ignores New Jersey's chronic budget crisis, and denies that the motivation to redistribute Jersey City's Adjustment Aid is to GIVE IT TO OTHER DISTRICTS WHO ARE UNDERAIDED AND FARTHER BELOW ADEQUACY THAN JERSEY CITY.

The Education Law center worries about cuts to Adjustment Aid, but it does not worry about what harm will be caused to non-Jersey City students whose schools remain badly to severely underaided (and below Adequacy) due to the state's failure to redistribute Adjustment Aid.

The Education Law Center's argument is only logical if you erase from your consciousness the children of Bayonne, Clifton, Plainfield, New Brunswick, Freehold Boro, Kingsway, Atlantic City, and other underaided districts.  It only works if you assume a profound selfishness on the part of Jersey City's taxpayers not to make up for Adjustment Aid losses with local taxdollars.

To show how acute need is outside of Jersey City, just look at Hudson County alone, since there are eight districts in Hudson County who were underaided, higher taxing and farther below Adequacy than Jersey City and who would benefit from the redistribution of Adjustment Aid from Jersey City and other overaided districts.

DistrictActual State AidUncapped SFRA AidAid GapLocal Tax LevyLocal Fair ShareTax GapAdequacy Surplus or DeficitAdequacy Excess or Deficit Per Student
Hoboken $10,468,870$3,166,333$7,302,537$42,502,765$204,865,488-$162,362,723$7,820,582$2,949
Secaucus $1,130,674$2,756,466-$1,625,792$33,987,669$49,980,321-$15,992,652$547,026$261
Weehawken $2,668,254$1,637,823$1,030,431$19,127,272$35,287,202-$16,159,930-$734,970-$551
JERSEY CITY$410,696,575$258,849,750$151,846,825$114,404,361$370,261,455-$255,857,094-$97,547,549-$3,172
Harrison $25,459,593$27,530,776-$2,071,183$9,229,913$16,876,180-$7,646,267-$9,374,329-$4,416
Kearny $33,119,896$66,094,340-$32,974,444$50,681,091$46,112,551$4,568,540-$27,160,572-$4,640
North Bergen $58,323,031$76,240,347-$17,917,316$46,734,214$69,500,758-$22,766,544-$38,730,930-$5,352
Union City$181,270,544$221,997,208-$40,726,664$15,418,637$49,554,960-$34,136,323-$74,133,383-$5,936
Bayonne $56,916,073$105,009,173-$48,093,100$62,876,035$76,982,891-$14,106,856-$60,551,038-$6,484
West New York $95,592,169$120,944,172-$25,352,003$16,061,559$44,357,307-$28,295,748-$52,605,527-$6,757
East Newark $3,578,845$6,251,466-$2,672,621$1,453,439$1,924,110-$470,671-$3,076,326-$8,011

Indeed, Jersey City is $3,172 per student below Adequacy, which is the 49th biggest deficit in New Jersey, but most of Jersey City's neighbors are significantly worse off and five Hudson County school districts are in New Jersey's bottom ten of below-Adequacy spending.

Guttenberg and East Newark are, in fact, $8,152 per student and $8,011 per student below Adequacy, respectively, making them the two most under Adequacy districts in New Jersey.

West New York is $6,757 per student below Adequacy, the 6th worst in New Jersey and worst-off of any Abbott.  Bayonne is $6,483 per student below Adequacy, the 7th worst.  Union City is $5,936 per student below Adequacy, the 10th worst.

Nearby is Fairview Boro, in southern Bergen County, is the fifth most under Adequacy district, with a deficit $7,167 per student.

With the exception of West New York, all of the exceptionally under-Adequacy districts of Hudson County are hurt more by insufficient state aid than they are by insufficient local tax effort.  New Jersey underaids Guttenberg $3 for every $1 Guttenberg taxes below Local Fair Share. New Jersey underaids East Newark by $11 for every $2 East Newark taxes below Local Fair Share.  New Jersey underaids Bayonne $7 for every $2 Bayonne does not tax itself.  For Union City underaiding is more of a factor than undertaxing, though not as dramatically as for Guttenberg, East Newark, and Bayonne.

Fairview taxes at 100% of Local Fair Share, so its $7,167 per student sub-Adequacy spending is entirely the state's fault.

The Education Law Center's no-redistribution position is also eased by constant lies about what New Jersey's state aid deficit is, using the statutory (but artificial) deficit of  $1 billion and not the authentic Uncapped Aid deficit of $2 billion it was for 2017-18.  The Education Law Center, quite
The JCBOE doesn't want to close its Adequacy Gap
literally, says that "Capped Aid = full funding."

Jersey City's BOE Does Not Want to Raise Taxes Above the Tax Cap

The Education Law Center repeatedly presents an image of a Jersey City Board of Education that yearns to close its spending gap against Adequacy but is prevented by the tax cap.
"Jersey City has increased local revenue every year since 2008, but the state’s 2% annual property tax cap limits JCPS’s ability to make more progress towards closing the large local levy gap."  [my emphasis]
"In other words, Jersey City is increasingly reliant on Adjustment Aid because it is unable to increase the local levy to keep pace with its growing adequacy budget and its increasing obligation to fund its budget through local revenues. "  [my emphasis]
"Contrary to much speculation, JCPS has largely been living up to its obligation under the SFRA to increase local revenue for schools, but it is constrained by the state’s property tax cap. Year after year, the SFRA requires Jersey City to support a greater portion of its budget, and yet at the same time it will not allow the district to raise more local revenue."

The Education Law Center states that Jersey City's taxes remain low due to the tax cap, but the Jersey City Board of Education has not even consistently raised taxes at 2.0%.  In 2013-14 the Jersey City BOE only raised taxes by 1.78% and in 2014-15 the Jersey City BOE only raised taxes by 1.5%.

These are not the actions of a Board of Education that is determined to reach its Adequacy budget with local taxes.

The 2% Tax Cap is not an Insurmountable Barrier to Raising Taxes above 2% 

The Education Law Center concedes that the Jersey City BOE has not used the existing allowances in the tax cap for medical costs, admitting that the BOE has "failed to capture some available revenue. For example, the district could have raised an additional $4 million in 2018 to offset increases in health care costs."

A Board of Education already has the power to ask its voters to raise the tax levy.  It is problematic that the higher levy, if approved, would not go into effect into the middle of the next school year, but nevertheless, the power to hold a referendum exists and is costless to a school district.  The Jersey City Board of Education has yet to show a desire to do so.

So this claim by Danielle Farrie/the Education Law Center, "increases in local revenue from
The voting booth already gives a school
district the power to exceed the tax cap and state
aid reformers have hinted at changing the tax cap
to make exceeding 2% even easier.
year to year are statutorily capped at 2% of the prior year’s revenue amount" is not completely true.

Jersey City Can Afford to Raise Taxes More Easily Than Almost Any Other Town in NJ

Jersey City has the state's strongest real estate market, gaining 38.4% in Equalized Valuation from 2010-2016 and continuing since then.

So the refusal to raise taxes by more than 2.0% can best be explained by a lack of any desire to do so.  

The Jersey City BOE would gladly spend $20,321 per student - or whatever New Jersey says it should spend - if the state were paying.  But once Jersey City taxpayers themselves would have to pay, the Jersey City BOE begins to see the decreasing utility of spending above $18,000 per student.  I'm sure the Jersey City BOE wants the best for Jersey City children, but in their hearts, the Jersey City BOE members do not agree with the Abbottist doctrine that spending needs to be $20,000 per student to provide a "thorough and efficient education."

This reluctance to employ the allowances within the existing tax cap or go to a referendum exists despite Jersey City's school tax rate has fallen by a third since 2013-14 alone.

Sometimes towns with strong real estate markets see their tax rates fall due to the appreciation of the existing housing stock, while individual tax bills increase, but in Jersey City tax rates are falling due to appreciation and new construction, thereby actually reducing the average homeowner's tax bill itself relative to inflation.

Tracking the all-in school+municipal+county tax produces the same pattern of
tax bills lagging inflation and even falling in some years.

As the Education Law Center says, it is true that Jersey City has increased its tax levy since 2009 by more than the average NJ district (35% vs 24%), but Jersey City was starting at an abnormally low levy ($86 million) that was lower than what it paid in 1989-90.  The average New Jersey district already had high taxes in 2009 and is so smashed by stagnant property values and already high taxes, that even an increase of 24% is a much larger sacrifice than Jersey City.

Jersey City's Trend of Falling School Tax Rates will Likely Continue into the Future.

Jersey City sees a constant stream of new developments and escalating housing prices of the existing housing stock.

One development, 99 Hudson Street, will be New Jersey's tallest building, and will alone will create a palpable reduction in the average Jersey City taxpayer's property taxes.

Conservatively estimated,
99 Hudson Street alone
will offset Jersey City's muni+school
taxes by 2.5%.
99 Hudson will have 780 apartments plus 15,000 square feet of retail.  The apartments will start at $770,000, so we can conservatively estimate that the total Equalized Valuation of 99 Hudson will be $700 million, or 2.5% of Jersey City's current Equalized Valuation.

Given the rapid pace of redevelopment in Jersey City and the expiration of PILOT agreements, even if Jersey City lost $30 million in Adjustment Aid per year and made up for those losses with local taxes, the tax rate increase would not be proportionate and individuals' taxes would not increase so dramatically.  In fact, for 2018-19 Jersey City's Local Fair Share grew to $399 million from $370 million.

For Jersey City to lose $151 million in state aid and make up for all those losses with local revenue it would be equivalent to a 130% increase in school taxes.  I admit that that would be a hardship for some people, but there are solutions for at least senior citizens in the form of NJ's property tax freeze and reverse-mortgages.  Jersey City residents would still be better off in taxes than people in most other towns, whose school taxes are often higher and real estate appreciation less (or negative.)

Undoubtedly, while paying higher school taxes might be very difficult for some Jersey Cityans, my greater sympathy will always be with people who have to pay higher taxes on depreciating houses, not appreciating ones.  (The median NJ town's Equalized Valuation has lagged inflation for years.)

Also, the Education Law Center has no right to worry now about taxes rising so fast, since in the early 1990s it supported a state aid plan that would have taken all state aid - include pension payments - away from a quarter of New Jersey's school districts.  Among the school districts slated to lose most or almost all of their state aid were working class and middle-class districts like Belleville, Hackensack, and West Orange.  (see the NYT article  "Jim Florio's Dream is One Town's Nightmare")

Hints of Changing the Tax Cap for Aid-Losing Towns

A more significant omission from Danielle Farrie and the Education Law Center is not acknowledging that Steve Sweeney's state aid reform plan has always had a provision in it to change the tax cap anyway.

For instance, the Senate 2016 resolution to create a school funding commission contained this language to have the committee evaluate the tax cap.
  1. (2) the tax levy growth limitation as established and calculated pursuant to section 3 of P.L.2007, c.62 (C.18A:7F-38) and its impact on the ability of school districts to adequately fund operating expenses;
In September 2017 when the Senate passed the concurrent resolution identical language about the tax cap was included.

Changing the tax cap for aid-losing districts also came up in the Senate state aid hearings in 2017, so the idea has already been discussed.

Steve Sweeney has studied SFRA and the aid distribution very closely and we can assume that he and his allies know that the tax cap needs to be changed to allow Jersey City and other aid-losing districts to tap their tax bases.

The Corzine-era 4.0% tax cap allowed a school district to increase the local tax levy if it lost state aid.  So reviving this provision would not be revolutionary.

Nonetheless, I concur with the Education Law Center that it might be necessary to require local tax increases for Jersey City and not leave it to the discretion of Jersey City's anti-tax Board of Education.

PILOT Exploitation

Another facet that makes Jersey City's state aid level especially objectionable has a long and aggressive history of using PILOT arrangements to increase municipal revenue, cut Hudson County out, and continue to leave statewide taxpayers with the bill for the school system.

The way this exploitation works is that in a Payment In Lieu Of Taxes arrangement the municipality gets 95% of the PILOT fees and the county gets 5%. (it used to be 100% municipal). Thus, it is possible to structure a deal where a developer pays less in taxes than under normal taxation, but a municipality gets more. Because PILOTed properties do not count toward a town's Equalized Valuation, they are "invisible" to the formula for Local Fair Share, legally equivalent to a non-profit owned property, like a cemetery. (see "The Problems of PILOTs")

In 2017 Jersey City's PILOTed properties were worth $11.6 billion, or a third of the total tax base.  If that $11.6 billion in property were part of Jersey CIty's Equalized Valuation, Jersey City's Local Fair Share would be $76 million higher than its $351 million for 2017-18.

I assume that all Jersey City politicians understand how PILOTed properties hurt taxpayers in the rest of Hudson County and sustain an artificially low calculation of Local Fair Share, but most of them don't say anything about it in public.

There are exceptions though.  For instance, Jersey City councilwoman Candice Osborne recently defended PILOTization because it
[Sic] He meant "[receive] less in
state aid for our schools."
means more state aid

"When it comes to the funding for schools. I have gone though the numbers multiple times and I've said this many times...The math to me makes sense for both the people getting the abatement as well as traditional taxpayers - because of the state aid."  (see 2:49:30)

Another instance of Jersey City politicians admitting that they grant PILOTs because of county taxation and school aid skews was in 2016, when Jersey City's former mayor (and convicted felon) Jerry McCann defended PILOTization not as a necessary development tool, but precisely because the use of PILOTs allows Jersey City to pay less in county taxes and [get] more state aid.

There is No Budget Pathway to Full Funding without Redistribution

Worse than the Education Law Center's defense of Jersey City's Adjustment Aid is that its repeated assertion that the deficit is only $1 billion per year and not the ever-growing $2 billion (against Uncapped Aid) it was 2017-18. 

Unlike politicians and journalists who use that $1 billion number because they are ignorant of how SFRA works and wouldn't know where to find Uncapped Aid, the Education Law Center does understand how SFRA works and does know how to get Uncapped Aid from the Department of Education.  Prior to the development of the state aid reform movement, the Education Law Center used to release deficits against Uncapped Aid.  (example 1, example 2, example 3)

The use of that simple, round number, "$1 billion," is itself a concealed argument, since it is imaginable for New Jersey to increase K-12 aid by $1 billion over several years, and therefore there is no need to redistribute state aid.

However, if the Education Law Center admitted that the deficit was really an ever-growing $2 billion the possibility of full funding without redistribution would look impossible, and the state's ability to expand PreK would also be called into question.

The reason redistribution is necessary is because New Jersey's economy does not deliver the growth it delivered in the 20th century.

In the late 1990s, New Jersey's income tax increased by 10% a year.  From FY2013 to FY2017, New Jersey's income tax only increased by 15% over five years, from $12.1 billion to $13.96 billion.  FY2018 saw an unanticipated 7.5% surge due to changes in the federal tax code and capital gains that is likely not repeatable.

For FY2019 income tax revenue will increase, but mostly due to a (proposed) rate increase that is certainly not repeatable.

Worse, the massive unfunded liability for the Teachers Pension And Annuity Fund and post-retirement medical for teachers claims the bulk of new income taxes.

For FY2016 TPAF payments increased by $387 million and post-retirement medical increased by $45.5 million.  For FY2017 TPAF payments increased by $324 million and post-retirement medical increased by $48.1 million.  For FY2018 TPAF payments increased by $411 million and post-retirement medical increased by $69.6 million.

Source for 2010
Source for 2019

For FY2017 Phil Murphy has proposed a $757 million income tax increase, but even that plus natural revenue growth only leaves $283 million left over for new K-12 opex aid.  Debt and indirect aid are still taking the bulk of new education-related spending.

For FY2019 TPAF payments from income taxes will increase by $392.5 million, with a few hundred million more from lottery profits, and post-retirement medical will increase by $51.8 million.

Equality is a Goal in and Of Itself

For 2018-19 Jersey City is slated to receive $175 million more than SFRA's core formulas say it needs, or $5,716 per student, the 8th largest state aid surplus in New Jersey. In percentage terms, Jersey City will receive 174.6% and is on a trajectory to receive 200% of its recommended state aid for 2020-21. 

Meanwhile, the median district is underaided by $419 per student and receives 85.4% of its Uncapped Aid.

To me, having equal aid, according to need, is a goal in and of itself.  

If justice is equal treatment under law, and a formerly poor district like Jersey City is allowed to get 200% of its recommended aid, while 75 districts get not even 50% of their recommended aid, than New Jersey's distribution of state aid is savagely unjust.


See Also:

Why is the ELC so Supportive of Adjustment Aid?

The Education Law Center gets over a third of its budget, something above, $550,000 per year - from the NJEA and the NJEA, by virtue of being a teachers union has a bias in favor of higher education spending and an indifference to spending the state's money at its maximum efficiency.  Furthermore, the NJEA's largest local is the Jersey City Education Association.  (the Newark teachers are represented by the AFT).   So the Education Law Center's largest funder has a direct financial interest in sustaining Jersey City's Adjustment Aid.

I have to point out that the Education Law Center is not a disinterested organization. 

Wednesday, March 21, 2018

Looking at the 2018-19 State Aid Disparities



This post compares the proposed state aid levels of all New Jersey districts for 2018-19 with their Uncapped Aid levels.  By comparing actual Aid to Uncapped Aid we can see how stark New Jersey's state aid disparities are. 

While I am very disappointed and angry at the proposed distribution for 2018-19, at least the Murphy administration is attempting to follow some rational distribution of aid.  From 2013 to 2018 the Christie administration more or less flat-funded all districts, with the exception of those who participated in Interdistrict Choice.  For 2017-18, the Christie administration did not even initially calculate Uncapped Aid .

Although the Murphy administration describes itself as a 180 turn from the Christie administration in education policy, and that's the reality in a lot of ways, one thing the Murphy administration and Christie administration have in common is that they have no choice but to prioritize the state's debt payments.  As large as Murphy's $283 million increase in K-12 aid is, it is significantly smaller than the increase for teacher pensions, ie the Teachers Pension And Annuity Fund.

(Note, this does not include money from the lottery that is going to education)

See below for a definition of "Uncapped Aid."

The Scope of the Disparities:

The Big Picture:
There are 212 overaided districts with a total surplus of $708.7 million.  This is almost $70 million more than 2017-18, when the surplus was $643 million.  (I am excluding Interdistrict Choice aid)

The Murphy administration's proposed increase for the 171 of the 212 overaided districts is $28,604,340.
There are 380 underaided districts with a total deficit of $1.913 billion.  This is $52 million less than 2017-18, when the deficit was $1.965 billion.  (again, I am excluding Choice Aid, plus I am also excluding Atlantic City's Commercial Valuation Stabilization Aid, which is $32 million.)

If New Jersey could redistribute Adjustment Aid, the net deficit is only $1.205 billion.

Notes on New Jersey's State Aid Have-Nots
There are 75 districts getting 50% or less of their Uncapped Aid.

If the state wanted to prioritize this sub-50% districts, it would only cost $106 million to bring them all up to at least 50% funding, or less than one-seventh of the total excess aid that the overaided districts receive.

Chesterfield is, yet again, in in last place, getting only 21% of the state aid SFRA recommends for it. River Edge is the next lowest aided, getting 24%, then Hasbrouck Heights at 24.5%, Elmwood Park at 26%, and Robbinsville at 27%.

There are 43 districts whose deficit is larger than $4,000 per student.  To bring all of these districts up to a deficit of $4000 per student (which is still terrible) would require $155.7 million, which is about one-fifth of the state's excess aid.
(The $155.7 million number does include Atlantic City's Commercial Valuation Stabilization Aid)
Atlantic City's Taxes are 287% of Local Fair Share. 
(+$52 million over LFS)
Phil Murphy's proposed budget will give Atlantic City $1.2
million in tax relief.

Bound Brook is the worst-off in deficit in dollars per student, at -$8,999 per student. Then Atlantic City (even with the $32 million CVSA), Manchester Regional, Fairview, and Freehold Boro.

Several vo-techs, like Atlantic County Vo-Tech, Cumberland Vocational, and Passaic County Vocational are also extremely underaided.

Atlantic City, has, by far, the worst taxes, with a tax levy at 287% of Local Fair Share. ($81,888,890 out of $29,396,657) 

Manchester Regional, up until his year, had the worst taxes, but its tax levy was in the low-200% rage of Local Fair Share. Manchester Regional's 2017-18 taxes are still at 219% of Local Fair Share, which is the second worst in New Jersey.

Newark's deficit is the largest in total dollars, $130,042,863.

Notes on New Jerseys' State Aid Haves

There are 68 districts getting 200% or more of what SFRA's real recommendation for them is is.  23 lucky districts get over 300%. Washington Township in Burlington County tops off the overaided districts, getting 563% of its aid target.

If the districts receiving 200% or more of their state aid got their aid reduced to "only" 200%, it would free up $76.8 million.

Tavistock is a non-operating district that claims three students living there.  It is getting $2299 on an aid target of $299, so it technically gets 1003% of its recommended aid.

Jersey City's Taxes are only 29% of Local Fair Share.
Jersey City is Gaining $1.8 Million in State Aid.
Deal, whose tax base is astronomically large, is getting $2,039,184 in Interdistrict Choice money, plus $200,045 in formula aid, on an aid target of only $187,443. That works out to 1195% of Local Fair Share, but I have decided to exclude Interdistrict Choice money from this analysis.

In total dollars, the biggest excess is Jersey City's, at $175 million. Powered by surging real estate and a little additional state aid from Phil Murphy, Jersey City's excess aid is up $24 million from its $151 million excess in 2017-18. Jersey City's school taxes are now only 29% of Local Fair Share.

Jersey City's excess aid is the ninth highest in dollars per student too, $5,716 per student. That's more than the total aid of its impoverished neighbors Guttenberg and Fairview get total!

Jersey City's Local Fair Share is $398 million. This is growth of $30 million in Jersey City's Local Fair Share in one year. This means that if Jersey City lost $30 million in state aid per year and made up for that loss with local taxes that its tax rate would not increase.

Also, Jersey City's Local Fair Share is growing at a rate where it will no longer qualify for Equalization Aid in 6-7 years.  Right now the Local Fair Share is $398 million, but once it reaches Jersey City's $590 million Adequacy Budget (for Equalization Aid) the only state aid Jersey City will qualify for will be the three categorical aids.

This means that even if Jersey City's Adjustment Aid is redistributed the state should still be able to use money currently going to Jersey City for needier school districts.

Hoboken's Local Fair Share is $217 million, which surpasses Edison to be the second largest in NJ after JC.
Hoboken's Local Fair Share is $217 million, the second largest
in NJ.  Hoboken's LFS is  $79,000
per student and yet it gets $10.5 million.
Hoboken's LFS per student is more than 2x Millburn's.

Pemberton's surplus state aid is $25,680,554, the second most in New Jersey.

Asbury Park is overaided by the most per student, with a surplus of $11,827 per student. That excess aid alone is more than what low-wealth non-Abbotts like Freehold Boro, Dover, Guttenberg etc get total for their students.

Loch Arbour is at 100%
Loch Arbor is the only district in New Jersey to get 100% of its Uncapped Aid: getting $3,944 for its 5 students, which is exactly SFRA's recommendation. (Since Loch Arbour's Local Fair Share is $1,301,988, it could give up all of its aid and not notice a thing.)

Abbott Specific Notes

The Abbotts are disparate. They range from Asbury Park and its mammoth $11,827 per student surplus to Plainfield, with its -$4,594 per student deficit (itself the 32nd largest in New Jersey).

For 2018-19 eleven Abbotts will be overaided, which is two fewer than the thirteen overaided Abbotts of 2017-18. The two Abbotts who slipped from overaided to underaided are Salem City and Burlington City. Their slippage, despite additional state aid, underscores how dynamic state aid is and that the deficit against Uncapped Aid constantly grows.

Only three of the Abbotts pay above their Local Fair Share (Burlington City, Salem City, and Phillipsburg)

The median Abbott only pays 56% of Local Fair Share. Hoboken's taxes are only 20% of Local Fair Share, despite having a levy that is extremely high in dollars-per-student.
Lakewood is now overaided!

Lakewood actually has a rapidly growing tax base and its Local Fair Share increased from $92,974,112 for 2016-17 to $102,034,106 for 2017-18 to to $111,534,172 for 2018-19. During that time there has also been a decrease in the student population.

Thus, Lakewood's state aid deficit, which was $19 million for 2016-17, has increased to a small surplus of $1,566,821.

Although SFRA does not work for Lakewood and the district does require additional state aid, the district also has the ability to increase the tax levy in excess of 2% (which it has been doing).

Debt Takes Most of the Money

In a continuation of what happened under Christie, the state is putting much more money into various debt categories than it is putting into

See Also:


Definition of Uncapped Aid:
Uncapped Aid = the real full funding for every school district. The term "Uncapped Aid" derives from the fact that SFRA contains legal "caps" on how much a district can gain in a single year, which are usually a 10% or 20% increase on what the district received the year before. Due to these caps, a school district's statutory "full funding" may differ greatly from what SFRA's formulas say it actually needs.

Uncapped Aid also refers to the amount of state aid that overaided districts would get if it were not for the mechanism of Adjustment Aid delivering over 100% of their state aid to them. In the case of Adjustment Aid districts, "Capped Aid" might more accurately be called the "pre-Adjustment Aid state aid target," but that is too wordy, so I just call it "Uncapped Aid" even though the aid caps do not apply to districts who are already getting over 100% of their recommended state aid.

Friday, March 16, 2018

Despite Aid Increases, Inequalities Worsen: Phil Murphy's FY2019 Aid Proposal


On Thursday, March 15th, the Murphy Department of Education, led by Asbury Park's former superintendent Lamont Repollet, released its proposed state aid figures for 2018-19.

Due to a combination of raising the income tax to 10.75% and a surge in state revenue, the Murphy administration is able to meet the next step of the Christie administration's ten-year rampup to full TPAF funding (+$392.5 million), as well as provide big increases for free community college (+$50 million), free PreK (+$57 million), and what I assume is another round of mostly Abbott construction (+$148 million in debt service)

The Murphy administration is proposing to increase K-12 operating aid by $283 million, which would be the biggest state aid increase since 2012-13. They are claiming this will bring New Jersey to full funding of SFRA, "The Governor is committed to putting New Jersey’s schools on the path to full funding within four years, and is proposing an additional $283 million in formula aid."

While that increase is worth lauding, the Murphy administration is following SFRA (almost) to the letter, including increasing Adjustment Aid for already overaided districts and utilizing SFRA's flawed design of how to distribute new aid.

Therefore, while the underfunding of state aid diminishes slightly, the inequalities of the distribution are exacerbated.

(I have calculated aid growth in dollars per student and put it online here.)
(I also have Actual Aid vs. Uncapped Aid here.)

1.  Insufficient Help Goes to the Lowest Aided

The reason the distribution is unfair to the most underaided districts in NJ is that the Murphy
administration strictly followed the State Aid Growth Limits, which restrict a district's aid gain to 10% or 20% of what it got the year before, regardless of how underaided it is.
For the 2009-2010 school year and thereafter, total stabilized aid shall include Equalization aid, Special Education categorical aid, Security Aid, and Transportation aid.
d. For the purposes of this section, “State aid growth limit” means 10% in the case of a district spending above adequacy and 20% in the case of a district spending below adequacy.
Back in 2008 the authors of SFRA were being overly optimistic about NJ's revenue growth, but Capped Aid was supposed to be an incremental step towards the goal of real, full funding, not the goal itself.

The Murphy administration, however, is treating Capped Aid as the goal in itself, is making the achievement of Capped Aid by FY2023 the goal and calling that "full funding."

Hence, the districts that are supposed to get a 20% gain in one year are stretching that out into four 5% gains.

Phil Murphy to New Jersey
"Capped Aid = Full Funding"
Because the State Aid Growth Limits are calculated based on existing aid, the lower a district's state aid is, the less money it gains in real terms.  (see "The Skews of Capped Aid")

For instance, Freehold Boro got 45% of its recommended, Uncapped Aid for 2017-18 and is underaided by over $7,675 per student.

Under the proposed State Aid distribution, Freehold Boro will gain 5% ($534,991), which equals $318 per student. Likewise, Red Bank Boro, which only gets 38% of its Uncapped Aid (-$4219 per student), will likewise only gain 5%, or $178,503, and yet that only equals $127 per student.  

Bound Brook, NJ's most underaided district in dollars per student (-$9,546 per student for 2017-18)), is gaining 5%, but that is only $300 per student.

In 2017-18 Steve Sweeney and his state aid reform allies - Paul Sarlo, Louis Greenwald, Teresa Ruiz, Joann Downey, Eric Houghtaling - based new state aid on deficits and even though they had only $130 million to work with, they delivered larger aid boosts to the most underaided districts in New Jersey.

On the other hand, districts that are modestly underaided will gain far more.  

Trenton was only underaided by $2856 per student, but for it to gain 5%, equals $793 per student. 

Newark was underaided by $2852 per student for 2017-18 but its 5% gain equals $729 per student.  Paterson was only underaided by $3,062 per student but its 5% gain equals $717 per student.  

Half of all new aid will go to only thirteen districts, all Abbotts.  As usual, the Abbotts get about 55% of all new aid.

Under the Murphy/Repollet plan, any district that already gets 83% or more of its Uncapped Aid will reach full funding in four years, but districts that receive 60% or less will have to wait years, even decades.  

Since Freehold Boro receives 45% of its Uncapped Aid, At increases of 5% a year Freehold Boro will bring only be at 65% of what is its 2017-18 Uncapped Aid by FY2023. Under this pathway it would take Freehold Boro 16 years to reach what is just its 2017-18 Uncapped Aid (neglecting inflation and enrollment growth).

Some districts are even worse off. Chesterfield only got 19% of its Uncapped Aid in 2017-18. Under Murphy's planned 5% increases Chesterfield will take THIRTY SIX YEARS (2054!) to get what is only its 2017-18 Uncapped Aid.  (Chesterfield's aid increase is a paltry $52 per student)

Some districts that are underaided but nonetheless above Adequacy are the most screwed. Cherry Hill was underaided by $1397 per student, but it is gaining only $44 per student.  West Orange was underaided by $2459 per student, but is gaining a pathetic $36 per student.

Although it is a unique district, Lakewood is only gaining $239,242, or $39 per student.

2. Adjustment Aid is Sustained and Increased

Even worse than blindly obeying the flawed State Aid Growth Limits is the restoration of Adjustment Aid to about 172 already-overaided districts, for a grand total of an additional $28,604,340 increase in aid.
  • Marlboro was overaided by $5.3 million, it is gaining $270,369 (+$58 per student)
  • Pemberton was overaided by $25 million, it is gaining $658,924 (+$154 per student)
  • Brick was overaided by $23 million, it is gaining $750,798 (+$88 per student)
  • Asbury Park was overaided by $24 million, it is gaining $796,127 (+$360 per student)
  • Hopatcong was overaided by $9.2 million, it is gaining $169,007 ($109 per student)
  • East Orange was overaided by $22.5 million, it is gaining $1,114,526 (+$115 per student)
  • Jersey City was overaided by $151 million, it is gaining $1,863,714 (+$61 per student)
  • Manalapan was overaided by $13 million, it is gaining $498,300 (+$100 per student)
  • Ocean Township was overaided by $5.5 million, it is gaining $464,924 (+$175 per student)
  • Keansburg was overaided by $6.9 million, it is gaining $160,716 (+$114 per student)
Even Deal, whose Local Fair Share is $17 million for 178 students, is gaining $124,117 (+$697 per student) (this is mostly from Interdistrict Choice)

Asbury Park's state aid gain of $796,127 is actually greater than its severely underaided neighbors, Red Bank Boro (+$178,503) and Freehold Boro (+$534,991) will get COMBINED.  No wonder Asbury Park's superinintendent is "delighted."
Since Murphy plans to "fully fund" (ie overfund) overaided districts for another three years, the total projected gain is $84 million.  

The legal justification for increasing aid to the overaided is that Adjustment Aid technically does not allow a district to receive less than 102% of what it got in 2007-08, but Adjustment Aid was cut in 2010, 2013, and 2017.

What Phil Murphy and Lamont Repollet are trying to do is bring all these overaided districts back to their aid levels of 2008-09. Hence, since Jersey City's aid was then $417.9 million versus $410 million for 2017-18 , the Murphy administration has it on a four year path back to $417.9 million. Likewise, Asbury Park's peak aid was $57.6 million versus the $54.4 million it got in 2017-18, the Murphy adminstration has a four year path for Asbury Park back to that peak.

(See "How Overaided Districts Would GAIN Money if SFRA is Not Changed.")

If Adjustment Aid were reduced by a fifth, according to Steve Sweeney's state aid reform plan, NJ's underaided districts would be gaining an additional $128 million. ($128 million = a fifth of 2017-18's $640 million in excess aid)

3.  Ignoring SFRA When It Benefits the Overaided

Lamont Repollet has already told people that he had "no choice" but to blindly obey Adjustment Aid and the State Aid Growth Limits, but he is ignoring SFRA when it benefits overaided districts.

SFRA has no statutory sunset for Adjustment Aid, but it does allow a minimal decrease in Adjustment Aid is allowed if a district's enrollment loss after 2008 exceeds 5%.    (See "Adjustment Aid Has No Statutory Sunset")

There are actually 45 districts that SFRA calls for $9.8 million in cuts to, but Murphy/Repollet are ignoring this provision of SFRA.

DistrictSFRA Allowed Aid Loss (despite Adj. Aid)Proposed Aid Change for FY2019
Beach Haven Boro-$619$0
West Cape May Boro-$3,929$0
Lawrence Twp-$7,368$0
Deal Boro-$12,602$0
South Amboy City-$13,695$0
Califon Boro-$25,451$0
Milford Boro-$31,640$0
Union Beach-$37,569$0
Hampton Boro-$37,857$0
Upper Freehold Reg.-$47,019$0
Cape May City-$57,377$0
Elk Twp-$60,133$0
Port Republic City-$63,349$0
Montague Twp-$68,702$0
Commercial Twp-$78,341$0
Hillsborough Twp-$81,254$0
Washington Twp-$86,701$0
Delaware Twp-$88,516$0
Downe Twp-$89,019$0
Dennis Twp-$92,124$0
Neptune City-$93,351$0
Oaklyn Boro-$98,879$0
Brooklawn Boro-$132,585$0
Lafayette Twp-$140,013$0
Frenchtown Boro-$154,323$0
East Amwell Twp-$157,165$0
Waterford Twp-$166,921$0
Byram Twp-$179,052$0
Estell Manor City-$202,559$0
Harrison Twp-$206,468$0
Roosevelt Boro-$213,779$0
Upper Pittsgrove-$252,837$0
Ogdensburg Boro-$259,688$0
Bloomsbury Boro-$286,288$0
Clinton Twp-$302,694$0
Delsea Reg. H.S Dist.-$381,559$0
Plumsted Twp-$421,093$0
Greenwich Twp-$455,185$0
Buena Regional-$546,074$0
Tuckerton Boro-$565,991$0
Lower Cape May Reg.-$761,881$0
Clearview Regional-$824,053$0
Freehold Regional-$885,391$0
Hoboken City-$1,069,199$0


New Jersey is proposing to increase income taxes by $765 million and income taxes are actually surging, but only $283 million of that is going into K-12 state aid.

Increasing funding for NJ's many streams of indirect aid - TPAF, post-retirement medical, and construction debt service - is required, and Phil Murpy has a mandate by his electoral victory to increase PreK and community college aid as he wants.

However, Phil Murphy repeatedly promised to "fully fund that formula" and what he is doing will not bring New Jersey anywhere near to that point, and in fact, will preserve inequalities and in many cases, make them worse.  By completely ignoring the legislature's work last year to expose and fix state aid inequalities, he is trying to govern without the input of Democtatic officials who are actually more knowledgeable on state aid than he is.

All of us in the state aid reform community have our work cut out for us in explaining to the public, elected officials, and journalists why the proposed increases have to be changed.


See Also