Tuesday, March 19, 2019

2019-20 State Aid Gets Fairer, but Deficit Grows

For 2019-20 school year Phil Murphy proposed to increase overall K-12 opex aid by $206 million and redistribute another $90 million of Adjustment Aid, for an all-in increase of $296 million for underaided districts, with the bulk of that new money going to districts who are severely underaided.

However, despite the increase in state aid, the deficit for the underaided districts rose from $1.75 billion to $1.78 billion.

Although $296 million increase is very large and appreciated by the recipient districts, since the deficit constantly grows, the increase is only sufficient to prevent further backsliding into
deeper deficit, as New Jersey struggles to advance against a strong headwind of inflation and then enrollment growth and tax base erosion that is disproportionately in districts who are already underaided.

Indeed, inflation's contribution to the growth of the funding target in 2019-20 is particularly large due to the FY2020 Education Adequacy Report and the $566 per student increase in the base cost per student.

This post is a first look at state aid disparities in 2019-20 and emphasize that SFRA funding targets are dynamic.  In 2018-19 it would have cost $9,562,210,757 to fully fund SFRA, but in 2019-20 it would cost $9,801,544,588 to fully fund SFRA.  The increase in costs is disproportionately in underaided districts, hence the constant growth of their aid deficit.    

Note, the deficits reflected above would be the _net_ deficit if every district was funded at exactly 100% (implying that
all Adjustment Aid were eliminated).  The more meaningful deficit is that for the underaided districts, which is $1.787 billion for 2019-20.

Thus, the number of underaided districts slightly grew, and so did the deficit itself, which rose from $1.75 billion to $1.8 billion.

Despite the size of the $90 million reduction in surplus aid (ie, "Adjustment Aid"), the total amount of excess aid is only falling by $10 million, from $651.9 million to $641.7 million aid surplus, which simultaneously grew due to continued enrollment loss, tax base growth, and the DOE's changes to the formula for Local Fair Share.  The stability of Adjustment Aid is due to continuing enrollment loss and tax base growth, although the contribution of tax base growth is disproportionately from Jersey City alone.   (discussion below).

Lakewood, despite being overaided in 2018-19, gained $14.9 million in SFRA-non compliant aid, which the DOE is listing in its normal state aid releases.  Lakewood's increase also appears to increase the statewide amount of excess aid.

This blog post is based on state aid information from the Department of Education which I received after an OPRA request.  The calculations of state aid deficits, percentage overaiding/underaiding, dollars per student overaiding/underaiding and tax stress are done by me.  The 2019-20 State Aid Disparities information is available online here.

The Big Picture

Statewide, the median district has a deficit of $383 per student and gets 86% of its Uncapped Aid.  The median deficit is smaller than in 2018-19, when it was $417 per student and the median percentage is slightly better than 2018-19, when it was 86%.

There are 383 underaided districts, with a total deficit of $1.8 billion and 209 overaided districts with a total surplus of $641 million.

There are zero districts who get exactly 100% of their state aid, which is a contrast from 2018-19, when 16 districts got 100%. The slippage of any districts getting 100% is the reason there are apparent increases in the number of overaided and underaided districts.  (the lack of 100% funded districts is due to S2)

The Underaided

There are 96 districts who are underaided by more than $2,000 per student for 2019-20, versus 109 districts with deficits over $2,000 per student in 2018-19.  In 2019-20 there will be 30 districts are underaided by more than $4,000 per student, versus 35 in 2018-19.

So this is incremental reduction in severe underaiding.

The district with the largest state aid deficit is Atlantic City, whose deficit is -$56 million, or -$8,534 per student.  (this deficit includes AC's $20 million in "Commercial Valuation Stabilization Aid,"  

After Atlantic City, the districts with the biggest deficits are:

DistrictDeficit in Dollars PPDistrictDeficit in Dollars PP

These deficits are unacceptable, and yet an improvement from 2018-19, when there were 109
Bound Brook, NJ.
Still one of NJ's most underaided school districts.
districts who were underaided by at least $2,000 per student and 35 who are underaided by at least $4,000 per student or more. 

Bound Brook also shows improvement. The -$6,776 deficit is huge, but it is smaller than in 2017-18, when Bound Brook's deficit was -$9,546 per student or 2016-17 when Bound Brook's deficit was -$9,836.

The reason the increase for Bound Brook hasn't been larger is significant loss of tax base there and corresponding increase in the Uncapped Aid target.  Although tax base erosion is the rarest cause of severe underaiding

In order to demonstrate the decline in severe underaiding, the following table shows the most underaided districts starting with 2016-17, the rock bottom year of state aid injustice, and how Steve Sweeney's fight for fairness (now supported by Phil Murphy) has brought results, although equity is still years away (and perhaps unattainable).

DistrictDeficit Per Pupil in 2016-17Gain in Dollars Per Student for 2017-18Gain in Dollars Per Student for 2018-19Gain in Dollars Per Student for 2019-20Deficit Per Pupil in 2019-20 (projected)
Ridgefield Park-$6,740$491$1,764$290-$1,942
Atlantic City-$7,270$816$700TBDTBD
Hi Nella-$7,302$427$817$981-$6,562
Atlantic Co Voc-Tech-$7,529$733$2,213$888-$5,942
Passaic Co Voc-Tech-$7,551$520$1,302$914-$6,115
Fairview Boro-$7,625$630$1,951$937-$6,268
Freehold Boro-$8,243$0$1,890$851-$5,694
Manchester Reg-$8,698$653$1,830$850-$5,689
East Newark-$8,716$397$514$464-$3,106
Bound Brook-$9,836$865$2,289$1,013-$6,776
Because state aid is dynamic, 2016-17 deficit + new aid will not equal the 19-20 deficit.

Although I consider deficits in dollars-per-student more significant than percentage deficits, something encouraging about 2019-20 is that there will be only three districts who get less than 50% of their Uncapped Aid: North Brunswick and Cumberland Co Vocational at 48%, and Woodbridge at 46%.

Since in 2016-17 Chesterfield only got 9% of its Uncapped Aid, let it also be marked as an improvement too that the bottom has risen from 9% to 46%.

There are also only 55 districts getting 60% of their Uncapped Aid.  In 2018-19 there were 151.

HOWEVER, some districts are becoming more underaided, especially ones who already receive high percentages of their state aid, but whose state aid targets are so high that even getting 80% of their state aid translates into a large deficit.  For a district already getting a high percentage of its state aid, the gain under S2 will be proportionally small.

This scenario is true of many of the Abbotts.  Paterson, Elizabeth, and Newark all gained state aid, but saw their state aid deficits increase.  (A future post will examine the Abbotts in detail)

The Biggest Gainers

Newark grabbed headlines for gaining $24.7 million, but Newark is a district of 52,000 students, and that only is $469 per student.

Lakewood gained the most in percentage terms at 64%, but Lakewood is sui generis and much of that money will not go to support public education.  Atlantic City gained the second most in percentage terms at 39%, but Atlantic City also seemingly lost $12 million in Commercial Valuation Aid and its net increase is small.

Of normal districts, the biggest gain in percentage terms was Woodbridge, at 22% (+$7.4 million), but that is $531 per student.

The real biggest gainers, in dollars per student are:


The Overaided Districts

There are 209 districts who are receiving more state aid than the SFRA formula says they should
Asbury Park
AP Lost $3 million in Adjustment Aid
But Actually Became MORE Overaided
Due to Tax Base Growth, Enrollment
Loss, and the increase in the LFS formula.
receive, with a total surplus of $641 million.

Of those districts:
  • 130 are overaided by more than $1,000 per student.
  • 75 are overaided by more than $2,000 per student.
  • 37 are overaided by more than $3,000 per student.
  • 13 are overaided by more than $4,000 per student.
Asbury Park, as always, is the most overaided district in New Jersey, with a surplus of $11,026 per student.   (Asbury Park's state aid +186% of its SFRA target)  Asbury Park's excess aid alone is more than the $9324 per student that its high-FRL, severely underaided neighbor Freehold Boro will receive.

In percentage terms, Washington Township in Burlington County is the most overaided, getting $435,110 more for its 55 students than SFRA recommends, or 545% of its SFRA target.

Many Overaided Districts Became More Overaided

Despite the loss of $90 million in Adjustment Aid (13%), a large number of overaided districts became more overaided, the most important of which is Jersey City.

The following 15 districts had the largest Adjustment Aid totals in New Jersey.  Altogether they represent 60% of the 2018-19 total.

As you can see, six of the fifteen districts with the most Adjustment Aid gained Adjustment Aid for 2019-20, despite the 13% Adjustment Aid cuts they experienced.

2018-19 Adjustment Aid2019-20 Adjustment AidAdjustment Aid Gain or Loss
JERSEY CITY$170,778,034$182,106,881$11,328,847
EAST ORANGE$24,391,436$18,288,196-$6,103,240
FREEHOLD REGIONAL$24,090,617$25,302,050$1,211,433
ASBURY PARK$23,563,095$22,933,389-$629,706
TOMS RIVER REG.$17,581,822$18,607,945$1,026,123
JACKSON TWP$15,963,963$15,372,258-$591,705
MANALAPAN-ENGLISHTOWN REG$12,175,534$10,297,786-$1,877,748
NEPTUNE TWP$11,424,541$10,939,598-$484,943
OLD BRIDGE$11,126,695$13,123,877$1,997,182
WASHINGTON (Gloucester)$8,164,374$9,737,141$1,572,767

The causes of the increases are different for each district, but the usual factors are enrollment loss and tax base growth, plus the tweaking of the Local Fair Share multipliers.

Jersey City merits special discussion here:
Jersey City's Local Fair Share grew from $399 million to $474 million (+$75 million).  Although Jersey City's Adequacy Budget grew from $590 million to $622 million (+$32 million), which all-else-being-equal would increase Jersey City's Equalization Aid, the increase in Local Fair Share was so much larger than the increase in the Adequacy Budget and then the cut of $27 million in Adjustment Aid that Jersey City's state aid surplus actually grew by the $11 million you see above.  (See Note 1)

Aside from the usual enrollment loss and/or tax base growth, the Murphy administration also increased the Local Fair Share multipliers by 6% and that drive increases in Local Fair Share that were larger than the increases for Adequacy Budgets.

The 2018-19 Local Fair Share formula was:

(Equalized Valuation x 0.013828828) / 2 + (Aggregate Income x 0.046200477) / 2

Which looks complex, but was really 0.69% of Equalized Valuation plus 2.3% of Income.

But this is the formula for 2019-20

(Equalized Valuation x 0.014523812) / 2 + (Aggregate Income x 0.049819447) / 2 

Which is really 0.73% of Equalized Valuation plus 2.5% of Income.


(1)  This refers to Jersey City's Adequacy Budget for Equalization Aid.

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