Saturday, February 29, 2020

NJ's Municipal Aid Distribution Makes Zero Sense

When I first started to notice how unfairly distributed New Jersey's K-12 school aid was distributed back in 2012 I had a huge amount of difficulty finding anyone who could explain to me how school aid was supposed to work and why there were so many poorer, larger districts who got less money than wealthier, smaller districts.  Like, why did Bloomfield get less money per student than Hillsborough?  Why did South Orange-Maplewood get nowhere near as much as Montclair?  Why did Randolph get four times as much per student as West Orange?

I talked with supposed experts who assumed that the distribution was correct and it reflected differences in tax base (eg, Bruce Baker).  I talked with supposed experts who said I was overlooking Equalization Aid.  I talked with experts who thought the disparities were due to transportation spending.  Journalists, elected officials, superintendents, and BOE members were all stumped.

I wrote my first blog post for this blog in 2014 (about the Interdistrict Choice program's problems).  From what I know now in 2020, I don't think my posts from my first few years were that knowledgeable.  I didn't learn I could OPRA "Uncapped Aid" until 2016.

My early posts weren't anything written by an expert but they were right in one essential respect: There Was No Formula Being Used.  The only thing that determined how much aid a NJ district got was the amount it got the year before.  

I admit now that I am not very knowledgeable about Municipal Formula Aid.  I don't know a lot about how the municipal formula is supposed to work.  I don't know how much money various municipalities would get if Municipal Aid were "fully funded."  Like with school aid back in 2012-2015, I've tried to talk with experts and none of them have had an answer.

But I am sure of one thing:

There is No Formula Being Used for Municipal Aid.  The only thing that determines how much aid a NJ municipality gets is the amount it got the year before.   The low inverse correlation (-0.37) that exists between a town's wealth and its state aid is a remnant of the time in the era before 2007, and likely before 2001, when municipal aid was last increased.

New Jersey has several streams of municipal aid, such as Transitional Aid for towns in distress and special transportation grants, but the total amount distributed is not large.  There is also a special aid stream for Trenton ($10 million in FY2021).

The bulk of municipal aid is Consolidated Municipal Property Tax Relief Aid and Energy Tax Receipts, which are actually supposed to be pass-through dollars collected by the state on behalf of municipalities:

the lion's share of the money that municipalities receive from the State is a partial replacement for funds that were originally direct sources of municipal revenue. From Public Utility Gross Receipts and Franchise Taxes, now distributed as Energy Tax Receipts Property Tax Relief, to Business Personal Property Taxes, Financial Business Taxes and Class II Railroad Property Taxes, all of which have been folded into Consolidated Municipal Property Tax Relief Aid, these revenues were intended for municipal use from their beginnings. When the State, at the request and for the convenience of the taxpaying businesses, became the collection agent for these taxes, it pledged to redistribute the funds back to local governments. So, from our perspective, these do not constitute new "aid" from the Treasurer of New Jersey. Instead, we see them as local revenues, temporarily displaced.

What this post looks at is what is called "Formula Aid," which is supposed to help municipalities pay for everyday operations.

Highlights of Irrationality:

  • For instance, Linden has $134k in Equalized Valuation per person. Linden gets $19.9 million in Formula Aid, or $462 per capita. Jackson Township has $130k in Equalized Valuation per capita, and it gets $3.4 million in formula aid, or only $60 per capita.
  • Newark gets $355 per capita and East Orange gets $338 per capita. Paterson gets $222 per capita. Elizabeth gets $224 per capita. 
  • Hoboken $297,968 in Equalized Valuation is the highest of towns with more than 30,000 people. Yet Hoboken's formula is is $202 per student, which is more than North Bergen's $113 per capita, Bayonne's $131 per capita, and West New York's $126 per capita.
  • Lakewood has over 101,000 people now, but only gets $5.1 million, which is $50 per capita, the lowest amount of any town with more than 30,000 people.
  • Camden gets $1,356 per capita, the most per capita of any town I found -- $101,086,963 for 74,532 people.  Of course it's unsurprising to see Camden getting the most municipal formula aid, but New Jersey's other poorest towns get nowhere near as much.  Bridgeton only gets $180 per capita. East Newark gets $215 per person. Woodlynne, which is next to Camden, only gets $64 per capita. 

Although there might be a rational justification for why one wealthy town gets a large amount of aid, like if it has a large number of visitors pass through or it hosts a lot of non-profit property, the distribution of municipal aid seems to be frozen in the 20th century, and is probably influenced by historic earmarks by powerful legislators.

I've calculated the 2018 per capita formula aid for every municipality with over 30,000 people in New Jersey and correlated it with 2018 per capita Equalized Valuation.

And the data for the towns with more than 30,000 residents is:

in 2017[3]
Formula Aid 2018Equalized Valuation 2018EV Per PersonFormula Aid Per Person
SomersetBridgewater Township45,414$5,904,2619,172,488,302$201,975$130
MiddlesexMonroe Township45,3322,263,5038,738,217,626$192,760$50
MonmouthMarlboro Township40,306$2,268,9497,637,736,943$189,494$56
MonmouthFreehold Township35,0537,436,3156,510,731,901$185,740$212
MiddlesexSouth Brunswick46,561$5,191,6798,637,447,577$185,508$112
BergenFort Lee37,9071,771,1926,593,348,346$173,935$47
MonmouthManalapan Township40,0133,868,6536,692,366,754$167,255$97
OceanToms River93,017$8,492,80715,418,546,251$165,761$91
MonmouthMiddletown Township65,603$6,052,68810,849,905,617$165,387$92
MorrisParsippany-Troy Hills53,201$4,550,2018,585,234,952$161,374$86
SomersetHillsborough Township40,0033,265,6646,391,695,740$159,780$82
MonmouthLong Branch30,7624,288,1334,863,635,857$158,105$139
BurlingtonMount Laurel41,662$2,825,5616,403,291,250$153,696$68
MiddlesexEast Brunswick48,840$4,174,1647,503,988,327$153,644$85
SomersetFranklin Township66,734$4,655,39710,105,285,323$151,426$70
BergenFair Lawn33,7103,744,5334,993,490,589$148,131$111
MercerLawrence Township33,1613,982,5654,848,134,160$146,200$120
OceanBrick Township75,516$5,387,06410,689,515,762$141,553$71
MonmouthHowell Township52,476$7,918,3577,130,335,655$135,878$151
OceanJackson Township57,073$3,408,4397,432,945,960$130,236$60
OceanBerkeley Township41,747$4,256,4655,419,664,792$129,822$102
EssexWest Orange48,435$4,696,4696,225,475,780$128,533$97
MiddlesexOld Bridge Township67,032$6,270,8578,124,624,063$121,205$94
BurlingtonEvesham Township45,381$3,164,6935,418,983,217$119,411$70
CamdenCherry Hill71,479$8,775,8448,340,254,303$116,681$123
UnionUnion Township59,327$6,137,8686,358,633,219$107,179$103
MiddlesexWoodbridge Township101,965$23,234,06910,839,569,983$106,307$228
MiddlesexNorth Brunswick42,641$4,491,6224,509,484,150$105,755$105
HudsonJersey City270,753$63,860,52228,418,886,079$104,962$236
MercerHamilton Township89,078$19,166,8308,768,832,490$98,440$215
OceanLakewood Township102,682$5,157,60710,097,357,987$98,336$50
GloucesterWashington Tnsp (Glou)47,848$3,201,4294,598,354,561$96,103$67
HudsonNorth Bergen63,659$7,185,5976,114,481,195$96,051$113
AtlanticEgg Harbor Township$43,296$6,039,065$4,048,933,033$93,517$139
OceanManchester Tnsp (Ocean)$43,395$3,217,467$3,799,697,135$87,561$74
GloucesterDeptford Township$30,582$2,218,616$2,654,651,348$86,804$73
MercerEwing Township$36,549$9,766,271$2,783,683,198$76,163$267
AtlanticGalloway Township$36,563$2,581,284$2,751,969,555$75,267$71
AtlanticAtlantic City$38,429$41,260,714$2,799,270,870$72,843$1,074
GloucesterMonroe Township$36,920$4,035,796$2,654,651,348$71,903$109
CamdenGloucester Tnsp (Camden)$64,159$5,106,459$4,368,651,580$68,091$80
CamdenWinslow Township$39,041$6,050,378$2,636,113,169$67,522$155
MiddlesexNew Brunswick$57,073$13,539,388$3,403,044,155$59,626$237
MiddlesexPerth Amboy$52,823$9,237,369$3,119,426,356$59,054$175
BurlingtonWillingboro Township$32,062$3,684,275$1,830,544,426$57,094$115
HudsonUnion City$70,387$24,450,162$3,852,537,098$54,734$347
HudsonWest New York$54,227$6,810,379$2,790,306,470$51,456$126
EssexCity of Orange$30,813$8,372,797$1,560,394,477$50,641$272
EssexEast Orange$65,378$22,117,676$2,994,115,531$45,797$338

Unfortunately, municipal aid has gotten no increases in over a decade, as the Property Tax Relief Fund has been increasingly dedicated to education spending.  In the 1990s, municipal aid averages 30% of education spending, but for FY2021 it is 9% ($1.5 billion compared to $16.3 billion.

Since flat-funding is really a cut due to inflation, and flat-funding of municipal aid is a deeper cut due to population growth, I believe that the neglect of municipal aid must be addressed and equity demands forging a fair distribution even if it means cutting municipal aid for certain towns.

Lest anyone think this neglect is only a problem for middle-class towns, I need to point out that it's also affected NJ's high-poverty, low tax-base towns.

Municipal Formula Aid 2007Municipal Formula Aid 2018


See Also: