Estimating Local Fair Share for 2017-18

Update: Local Fair Share, Capped Aid, and Uncapped Aid are now available. 

The following is moot.

After the Department of Education came out with 2017-18 state aid proposals I made an OPRA request of the Department of Education for 2017-18 Uncapped Aid and Local Fair Share.

I wanted Uncapped Aid so I could see what the total deficit is for the underaided districts, see what districts are the most underaided, see the total surplus for the overaided districts, and see what districts are the most overaided.

I wanted Local Fair Share so I could see whose taxes are the heaviest, whose taxes are the lightest, and what the median district in New Jersey pays.

I did not request Adequacy Budgets because spending relative to Adequacy is also determined by local tax effort and a focus on whose spending is above and below Adequacy can distract from state aid fairness.  Also, Adequacy Budgets are embedded into the calculation of Uncapped Aid anyway.

To my disappointment, the Department of Education said it did not calculate Local Fair Share and Uncapped Aid for 2017-18.  They did not give a reason, but my conjecture is that it was Christie who made the final decision not to bother with even the hypothetical operation of SFRA.

Nevertheless, the Department of Education did send me the components of Local Fair Share, which are Equalized Valuation (from the previous fiscal year, so 2016) and Aggregate Income (from three  years previous, so 2014).

The formula for Local Fair Share changes year to year, but by plugging in Equalized Valuation and Aggregate Income figures into the 2016-17 formula, I can ESTIMATE 2017-18 Local Fair Share and compare district tax bases.

This is the (first) formula for Local Fair Share used in 2016-17:

(Equalized Valuation x 0.013156218 + Aggregate Income x 0.046185507)/2

To see more about changes in Equalized Valuation between FY2016 and FY2017, please see this post of mine.

As usual, I've put the data online here.  2016-17 data, to which I make comparisons, is available here.

Yet again, these amounts are ESTIMATES - especially the year to year comparisons - since I have no idea what the multipliers should be in the 2017-18.

On the other hand, the relational comparisons between different towns should be very solid, since I am applying the same multipliers to every district for 2017-18.  If these calculations show that Hoboken's Local Fair Share is New Jersey's third highest at $195 million, I'd be surprised if the DOE's calculations give any different ranking, even if the exact Local Fair Share turns out to be something other than $195 million.

Hopefully the legislature will pressure Department of Education to simply run the formula so that the public may have a more informed conversation about state aid.

Anyway here goes:

• Jersey City's Local Fair Share would increase by another $20 million to $353 million.  This is powered by a $4 billion increase in the Equalized Valuation  (to $25.7 bil) and a $502 million increase in the Aggregate Income (to $8 bil).
  
  Jersey City's Local Fair Share appears to be now 76% larger than the next largest district's, which is Edison at $200 million.  For 2016-17 Jersey City's Local Fair Share was "only" 60% larger than Edison's.

• Hoboken's gained $1.8 billion in Equalized Valuation and $357 million in Aggregate Income.  Whatever the exact  Local Fair Share formula ends up being, Hoboken's Local Fair Share would likely be around  $195 million and be the third largest in New Jersey, after Jersey City and slightly behind Edison.  This year Hoboken's Local Fair Share surpasses Toms River's.
  
  Hoboken's 2016-17 tax levy was only $42 million, so for 2017-18 Hoboken's taxes will be barely a fifth of Local Fair Share
  
  For the last year pro-reformers in the legislature have pushed to eliminate Adjustment Aid, but there are certain low-student population districts such as Hoboken, some wealthy enclaves like Alpine and Harding, and many Jersey Shore resort towns who have no need for any state aid whatsoever.  

• There is also increases in other Hudson County towns, powered by non-Hoboken/non-Jersey City Hudson County's $5 billion increase in Equalized Valuation.  West New York's would be $4 million larger, driven by 10% increases in Equalized Valuation and Aggregate Income.
  
  Union City, Bayonne, North Bergen, Harrison, Kearny, and others would have small increases (the small increases might be smoothed away if the DOE actually ran the formula)

• Asbury Park's Local Fair Share would actually shrank (by a tiny amount). That's outrageous, since Asbury Park is undergoing a building boom. Asbury Park is just as much an example of the exploitation of the PILOT law as Jersey City is.  

• Atlantic City's Local Fair Share fell by another $13 million, from $65 million to $52 million.  This is due to the loss of another $2 billion in Equalized Valuation and $8 million in Aggregate Income.
  
  Atlantic City's school tax levy for 2016-17 was $82 million, so Atlatic City's taxes may be 157% of Local Fair Share.


• Manchester Regional's taxes are likely the state's highest again.  My estimate is that Manchester Regional's Local Fair Share is only $4.9 million, so the $10.9 million (which falls disproportionately on Prospect Park and Haledon due to Manchester Regional's unique tax-apportionment scheme) is absolutely brutal.
 

• Newark's Local Fair Share may have grown slightly, by $6 million, from $161 million to $167 million. (Newark's actual tax levy is $123 million)

• Paterson's Local Fair Share may have grown slightly too, by $3 million, from $85 million to $88 million (Paterson's actual tax levy is only $41.5 million)

Again, the above figures are only ESTIMATES, but I hope this post generates discussion, particularly regarding Hoboken and Jersey City's state aid and the acute tax crisis in Atlantic City.

Please ask your legislators to demand that the Department of Education do these calculations for real.

At the very least, we have to know  what the total deficit is for the underaided districts.  For 2016-17 it was $1.93 billion, which is far beyond any realistic tax increase.  This deficit number is a critical point in the argument for why redistribution is necessary.

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See Also:

• Help for the Needless: New Jersey's Richest Districts and their State Aid
• Beyond the Point of Fairness: The Most Overtaxed Districts in New Jersey
• The Robbers and the Robbed: State Aid Disparities for 2016-17

Paterson in Budget Crisis Over Prescription Drugs

Pain Cream = Layoffs for Paterson

Paterson is reporting that may have to lay off over 500 staff members next year due to skyrocketing prescription drug costs.

Paterson's employee prescription drug costs will double next year to $38.8 million and Paterson cannot find an insurer who will insure that kind of cost increase.

state-appointed superintendent Donnie Evans said in his memo that the district cannot afford the “skyrocketing” increases in prescription costs and would have to make staff reductions to offset the expense.
Evans said projections put next year’s uncovered prescription drug cost at $38.8 million, which he said would amount to about 517 jobs. The district has about 4,500 employees.
“But this money is not in our budget,” Evans wrote, “and without a settlement with PEA, the District must make cuts elsewhere – which would certainly impact our ability to provide the children of Paterson with the quality education they deserve.”
At issue are compound drugs, combinations of medications created by some pharmacists to meet patients’ individual needs. Compound drugs use ingredients approved by the federal Food and Drug Administration, but are not FDA-approved themselves, officials said.
In his memo, Evans said Paterson Public Schools had $187,900 in prescription claims for compound drugs in 2012-2013. But he said that number rose to $2.8 million last year and projections are that the total cost will jump to $18.6 million for the current year.
To date, the district has been able to limit the expense of the compound drugs by having an excess insurance policy that covered those costs, officials said. But district officials said they cannot find an insurance company willing to take on the policy for next year.
As a result, all costs for compound drugs would have to be covered by the district, officials said.

According to the Paterson school district, 85% of the compound prescription costs are for pain creams.

The Paterson Education Association says that the threats to eliminate 500 jobs unless prescription coverage is changed is "blackmail."

UPDATE:

Paterson's teachers have compromised on compound prescription drug coverage.

Paterson Supt Proposes a 27.2% Tax Increase, Opponents of Tax Increase Demand More State Aid

Paterson has been under increasing fiscal stress over the last few years, as the state has been unwilling and unable to give Paterson much in the way of additional state aid and Paterson has kept its own tax levy flat for seven years.

Last year, facing $497.8 million in expenses and just $472 million in revenue, Paterson considered raising taxes by 13% (or $5 million), but the Paterson BOE decided to make deeper budget cuts rather than increase taxes at all.

Now, despite making over 330 layoffs last year (including 170 teachers), the Paterson Public Schools are facing a $45 million deficit for next year and getting only a proportionally tiny increase in state aid.  At this point Paterson's superintendent is suggesting that Paterson raise taxes by 27.2%.

A 27.2% tax increase would be enormous for most other districts, but Paterson's school levy is only $39 million, so that 27.2% tax levy increase only translates into an additional $10.2 million.  Since Paterson's budget for 2016-17 is projected at $483 million, the additional $10 million is barely even a band-aid.

Paterson's BOE and municipal elected officials are aghast at the prospect of any tax increase. "We just can’t afford to increase taxes at this time,” said board member Nakima Redmon."

Paterson City Council president William McCoy called the increase "outrageous" and then added “This is a horrible idea. It’s not workable.”

This opposition to the tax increase is due to the fact that municipal taxes are also increasing by 6% ($9 million) and because Paterson continues to suffer significant economic weakness.  As a symbol of that weakness, Paterson is continuing to lose Equalized Valuation even as the rest of New Jersey slowly grows.

Patersonians are venting fury at the state for not giving them more state aid:

Assemblyman Benjie Wimberly, who works for the school district as recreation coordinator, urged the protesters to take their fight to Trenton. “There’s a man by the name of Chris Christie who needs to hear loud and clear that the city of Paterson cares about their children and cares about their schools,” Wimberly said. 

The Rev. Kenneth Clayton, president of the Paterson Chapter of the NAACP, called the state’s lack of funding of Paterson’s schools a “plot and plan” by officials in Trenton against the city.

And:

“We can’t just sit back and accept this,” said Grant. “We have to push to get what we’re entitled to under the law.”

The people of Paterson have a valid argument about state aid, but only up to a point because two-thirds of NJ's districts do not get "what they're entitled to under the law." In fact, Paterson gets 91.8 % of its uncapped aid ($401 million of $437 million), compared to the state median of only 80%.

It would be nice to provide Paterson with more money, but Paterson's aid deficit is smaller than the aid deficits of some of its high-FRL neighbors no matter how you examine it.

Since it does so much better with state aid, Paterson's per pupil spending is higher despite having lower local taxes.

Although the people of Paterson are burdened, Paterson does not come close to paying its full Local Fair Share.

Paterson's taxes are especially low compared to its neighbors.

Paterson's schools also have some management and contractual problems.  For instance, prescription drug costs for Paterson employees increased at a 50% rate this year.

The budget situation in Paterson is serious and will surely become worse in the next few years, but the state and Paterson itself should keep a broader perspective and realize that they get substantially more aid than poor non-Abbotts AND state-funded Pre-K which relieves parents of a major personal expense.  A family in Prospect Park could be living three blocks from the Paterson border and have the same poverty, higher taxes, even less well-equipped and staffed schools, and have the large burden of paying for Pre-K itself (or doing without Pre-K at all).

Fairness in state aid should be for the most underaided, not districts who happen to be falling from what is comparatively a very high spending level.  As painful as it is, Paterson must be finally willing to accept some increase in its Local Tax Levy and that other districts are ahead of it in line for more state money.

UPDATE:  The tax increase proposal is now in the 12-15% range for Paterson.  

Paterson Demands More Money, Hespe Says There Isn't Any: Both Are Wrong

Commissioner of Education David Hespe just visited Paterson where he participated in a public forum on the Paterson schools. At the forum Hespe was asked about Paterson being underaided by millions of dollars a year.

New Jersey education commissioner David Hespe during a visit to the city on Monday afternoon admitted the city’s school district is underfunded when a speaker at the historic Bethel AME Church asked him about the formula the state follows to fund local schools.

Hespe said the formula the state uses to fund districts is the School Funding Reform Act of 2008. “That law, if fully funded would provide additional resources to places like Paterson; however, in New Jersey we have a habit of not to fund our funding formula,” he said.

The funding formula was followed only half-dozen times since a modern formula was instituted in 1975, said the commissioner. “We probably fully funded the formula around five or six times. That’s not very good track record for 40 years.”

Hespe said the amount of money a district gets is determined by the governor and the legislature. “It’s been frozen now for four years,” he said of the funding. “If it was unfrozen I think additional resources would come to Paterson.”

Stan Matthews, a city business owner, asked the school funding formula question. “So we agree Paterson is underfunded?” asked Matthews.

“Absolutely if you look at the school funding formula — without a doubt,” responded Hespe.

The president of the Paterson Board of Education, Dr. Jonathan Hodges, has been pushing hard for Paterson to get more state aid, accusing the state of "illegally" underfunding Paterson.

City schools have been underfunded by $173.8 million over the past six years, according to the Education Law Center and the Paterson Education Fund. The school district faces a snowballing deficit of $186 million by 2019, according to an auditor report.

When a Paterson teacher informed the BOE that kids with special needs were not getting the help they needed Jonathan Hodges said:

“I imagine there is some truth to these assertions,” said Paterson Board of Education President Jonathan Hodges after reading Gould’s complaint. “It all seems to point to the shortage of personnel, which is a direct result of the illegal underfunding of the district by the state of New Jersey,”

Unlike all other districts, Paterson succeeded in getting the legislature to give it an additional $19.7 million outside of SFRA for 2015-16, a move that was line-item vetoed by Chris Christie.

Here's where Paterson and Hespe are right and wrong.

Paterson's school budget problems are serious.  Paterson is right that its schools are underaided.  If SFRA were fully funded, Paterson would get another $68.6 million, the second biggest increase in New Jersey after Newark.

However, Paterson is the third largest district in New Jersey and it is the per pupil underaiding that counts. In per pupil terms Paterson's deficit is $2,488, a very large figure, but not even remotely the largest aid gap in New Jersey.

Paterson cannot see itself in isolation. Yes, Paterson is underaided, but there are scores of districts that are even more underaided.

The following are districts with gaps of more than $4000 per student. All have gaps which dwarf Paterson's.

District	Aid Deficit per Pupil
MANCHESTER REGIONAL	-$10,737
BOUND BROOK	-$9,780
EAST NEWARK	-$8,906
FAIRVIEW BORO	-$8,746
FREEHOLD BORO	-$8,113
GUTTENBERG TOWN	-$6,341
MANVILLE BORO	-$6,211
LODI	-$6,179
NORTH PLAINFIELD	-$6,021
HALEDON BORO	-$6,001
ELMWOOD PARK	-$5,985
WOODLYNNE	-$5,982
PROSPECT PARK	-$5,896
LINDENWALD	-$5,885
RIDGEFIELD PARK (Bergen)	-$5,706
DOVER TOWN	-$5,484
BAYONNE	-$5,459
DUNELLEN	-$5,429
WHARTON	-$5,385
KEARNY TOWN	-$5,282
HI NELLA	-$5,263
HAMMONTON (B_	-$5,200
BELLEVILLE	-$5,162
CLAYTON (B)	-$5,027
NORTH BRUNSWICK	-$4,755
JAMESBURG	-$4,752
RED BANK BORO	-$4,665
CARTERET	-$4,591
HACKENSACK CITY	-$4,574
BLOOMFIELD	-$4,545
ATLANTIC CITY	-$4,526
LAUREL SPRINGS BORO	-$4,519
RIVERSIDE TOWNSHIP	-$4,475
NEWFIELD BORO	-$4,423
LITTLE FERRY BORO	-$4,414
CLIFTON	-$4,374
WALLINGTON BORO (B)	-$4,326
NETCONG BORO	-$4,258
CHESTERFIELD TOWNSHIP	-$4,246
PLAINFIELD CITY (A)	-$4,106
NEWTON TOWN	-$4,101
KINGSWAY REGIONAL	-$4,086
STERLING HIGH SCHOOL DISTRICT	-$4,077
SOUTH RIVER BORO	-$4,069
WOODBRIDGE TOWNSHIP	-$4,061
PENN'S GROVE	-$4,059
NEW BRUNSWICK (A)	-$4,056
HILLSIDE	-$4,036
BRIDGETON CITY (A)	-$4,033
ROSELLE BORO	-$4,012

A = Abbott. B = Bacon.

I see no reason why Paterson should be prioritized over these much more severely underaided districts, especially since almost all of above are all non-Abbotts and thus have to pay for their own construction costs and most residents have to pay for their own children's Pre-K.

Paterson's Board of Ed cannot demand that the state give Paterson more money when Paterson's Board of Ed keeps Paterson's taxes so low compared to its Local Fair Share.

Paterson's Local Fair Share is almost $50 million higher than its Local Tax Levy.






Paterson's school taxes have been flat for seven years.

Don't misunderstand me, Paterson's budget problems are serious - this summer 700 additional students registered for Paterson's schools - but everything is relative and Paterson should not be seen in isolation.

But David Hespe is wrong about something too.

“Appealing isn’t going to be helpful at this moment in time because there’s no money,” said Hespe. He said the annual appropriations for all New Jersey school districts was set by the governor and the legislature in June.

I don't know if Hespe means "there is no money for 2015-16 due to the budget calendar" or if he was taking a long view, thinking of the Pension Crisis, and saying "there is no money indefinitely," but the Department of Education could find additional money if it redistributed aid away from aid hoarders.

The 220 NJ districts that get more than 100% of their uncapped SFRA aid receive over $600 million in excess money. Take aid in excess of uncapped aid away from overaided districts like Asbury Park, Jersey City, Hoboken, Pemberton, and Toms River. Take all aid away from ultra-high resource districts at the Jersey Shore, Harding, Alpine, and Hoboken (again). Unlist Hoboken and Jersey City from the Abbott list, restrict Pre-K there to poor kids, and save a few tens of millions more.  Eliminate "Additional Adjustment Aid."  Bring some common sense to the Interdistrict Choice blank check.

NJ could raise taxes somewhat, although any new tax revenue would probably need to go the Pension Crisis.

Not everyone in Paterson sees the problems of the Paterson Public Schools as solely (or mostly) due to a lack of money. The pastor, Rev. Michael McDuffie, who invited David Hespe to Paterson said this:

While other education advocates in Paterson have argued that insufficient state funding has been at the core of the district’s problems, McDuffie see things differently. He pointed out that the district has an annual budget of about $550 million. “There’s enough money coming into this district already to take care of Paterson,” the pastor said.

--- See Also:

Paterson Supt Proposes a 27.2% Tax Increase (and why that won't be enough)

Paterson's Budget Problems, a $20 Million Appropriation, and Some Context

Paterson is one of many New Jersey school districts suffering severe budget stress. Faced with a $20 million shortfall, Paterson is going to lay off over 360 staff members, including 197 teachers.

By a 5-4 vote, the Board of Education on Monday night approved a $565 million schools budget that district officials say will result in the elimination of 363 jobs.

Despite the large number of jobs at stake, less than 30 people attended the budget meeting and only five people spoke during the public hearing.
Among the jobs being cut are 197 instructional positions, which include teachers, officials said. The job reductions will generate about $21 million in savings, according to state-appointed schools superintendent Donnie Evans. 

Several people who spoke during the hearing predicted that the cuts will increase class sizes in a district that where student test scores are among the lowest in the state. 

“I’m struggling to understand how this reduction is going to have minimal effect on the children,” said Rosie Grant, head of the Paterson Education Fund, an advocacy group. “It has to be that class sizes are going to go up and supplies are less.” 

“This is going to lead to frustrated kids, it will lead to discipline problems, and it’s going to lead to increased dropouts,” Grant added. “We’re going to feed the school-to-prison pipeline unless we find the resources they need.”

School board president Jonathan Hodges cast the deciding vote in favor of the budget. Under the system of state control of city schools, Evans could have implemented the budget even if the board had voted it down.
Joining Hodges in voting for the budget were Christopher Irving, Manny Martinez, Flavio Rivera and Kenneth Simmons. Voting against it were Chrystal Cleaves, Errol Kerr, Lilisa Mimms and Corey Teague. 

Kerr called the district’s spending plan “the dumb the children down budget.” He asserted that the district does not have so much fat in its budget to withstand the $21 million in personnel cuts. Kerr also said the reductions would undermine the academic progress the district has made. “We are trying to destroy the entire thing,” Kerr said.

The budget stress is common across New Jersey, but what is unique about Paterson is that the New Jersey legislature tried to come to Paterson's aid with a $19.7 million appropriation for something the legislature called "Programmatic Stabilization Aid." Although many districts are also at risk of "destabilization" or were destabilized years ago, Paterson and Egg Harbor City (which was to get $300,000) were the only two districts that were going to get money from this off-formula aid stream.

Paterson, unlike Montclair (which almost got $1 million), is a truly needy district. 90% of Paterson students are FRL-eligible, the eighth highest percentage in New Jersey. Unlike many other Abbotts, Paterson does not receive Adjustment Aid and is thus not an aid hoarder. Paterson does receive $400 million in state operating aid for 28,139 students, or $14,200 a student, which is high, although not extraordinary considering what Paterson's needs are. Combined with its local and federal money, Paterson's school spending is $16,696, again, high, but not exorbitant compared to other Abbotts.


As Assemblyman Benjie Wimberly said of the money, “It saves a lot of jobs, it saves hundreds of jobs. We have to do what we have to do.”

As sympathetic as I am towards Paterson and any individual who might lose a job, the situation is complex.

The budgetary problem with Paterson (and many other Abbotts) is that it does not want to raise its own taxes. Since 2009 Paterson's Local Tax Levy has been the same $38,955,956. Its equalized tax rate is 0.5788, which is much lower than what a non-Abbott would pay and even lower than what many other Abbotts pay. Newark pays 0.8. Trenton pays 0.9175.




What makes Paterson's case more sympathetic is that it has had a loss of Equalized Valuation.   Indeed, the appropriation language cited this fact.

Programmatic Stabilization Aid shall be used by the Commissioner of Education to provde State aid to a school district, other than a school district that participates in Interdistrict public school choice program that 1)between October 2010 and October 2014, experienced an increase in its actual resident enrollment of at least 4.5% 2) between the 2013-2014 school year and the 2015-16 school year experienced a loss of Equalized Valuation of at least 21%.  

Giving the $19.7 million to Paterson is a very tough call, but people have to remember that as sad as it is for Paterson to have to lay people off that there are many similarly high-need districts that already receive much less than Paterson and have been hit similarly hard by the recession.

Paterson's spending, while not exceptional by Abbott standards, is higher than what other high-FRL districts spend. Woodlynne (93% FRL) spends only $12,241. Lakewood (86% FRL) spends $11,682. Red Bank Boro (89% FRL) spends $13,130. East Newark spends $9,980. Compared to its high-FRL peers Paterson is still doing ok.



Giving the $19.7 million to Paterson sounds nice, but is that a better use of money than expanding Pre-K in non-Abbotts? The $19.7 million for Paterson and $300,000 for Egg Harbor City could pay for Pre-K for 1,300 children.  Is it better than bringing desperately underaided and underfunded districts like the ones above closer to Adequacy?

If Paterson had gotten the $20 million it would have come out of NJ's pension contributions and cost the state more in the future or it would have come out of the budgets of other school districts and caused layoffs elsewhere. Raising state taxes by exactly $20 million just for Paterson and Egg Harbor City doesn't seem appropriate either. If the NJ legislature had proposed a tangible offset - reducing Adjustment Aid, Interdistrict Choice Aid, or categorical aid for ultra high-resource districts (eg, Hoboken, Ocean Twnship Cape May) - than I would be glad about the $20 million for Paterson and Egg Harbor City, but without an offset this wasn't a wise move.

$20 million in one year might not sound like a lot of money, but what about the year after and the year after that? The costs add up.

I also don't think that Paterson should be ahead of Woodlynne, Lakewood, Red Bank Boro, and East Newark for more aid. Even if the legislature took $20 million away from the Aid Hoarders I don't think that Paterson should be the first to get it. I wish Christie had proposed a spending offset somehow, but without the offset I think Christie made the right call with the line-item veto.