2018-19 State Aid Disparities Narrow, But Remain Stark

Thanks to the determination of Senate President Steve Sweeney, his legislative allies, and grassroots

support from parents in underfunded districts, Gov. Phil Murphy agreed to allow a limited redistribution of K-12 state aid to take place and to focus new state aid on NJ's most underaided districts.

The redistribution of $32.1 million of Adjustment Aid combined with the input of $351.4 million in new aid brings NJ $381 million closer to state aid justice, but as we are about to see in this blog post, 100% funding for every district in seven years is likely unachievable.

As usual, I've put all the state aid data referred to here online.

The Outline:

The median district is underaided by $417 per student and receives only 85% of its Uncapped Aid.

The Overaided:
Yet, there are 190 districts receiving over 100% of what the School Funding Reform Act says they actually need.

Their total excess state aid is $651,944,818, which is larger than the $637,776,892 surplus for 2017-18.

The reason that excess grew for 2018-19 despite the legislature's $32.1 million cut to Adjustment Aid is because the overaided districts tend to have further enrollment loss and/or tax base growth.  Jersey City alone will be overaided by $20 million more in 2018-19 than in 2017-18, despite its loss of $3.5 million in Adjustment Aid.

There are 76 districts who are overaided by $2,000 per student or more and 19 districts who are overaided by $4,000 per student more. Asbury Park, as in years past, has the largest excess in NJ, at $10,869 per student. Asbury Park's excess is an outlier, since the second most overaided district, Weymouth Township, only has an excess of $8,690 per student.

In terms of percentages, there are 54 districts getting 200% or more of their recommended aid.  Washington Township in Burlington County is the most overaided in percentage terms, getting 521% of its real aid target. 

In terms of percentages, there are 54 districts getting 200% or more of their recommended aid.

The 100%ers:

There are 17 districts getting exactly 100% of what is recommended, the largest of which are Lakewood and Freehold Township.

The Underaided:

There are 370 districts getting less than 100% of what SFRA says they need.

Their total deficit is -$1,747,896,430.  There are 109 districts who are underaided by $2,000 per student or more and 35 who are underaided by $4,000 per student or more.  There were 118 districts with the $2,000 per student deficit for 2017-18.

Atlantic City is the most underaided district in NJ, with a deficit of -$7,378 per student, even including its $32 million in Commercial Valuation Stabilization Aid. Atlantic City's deficit remains enormous, but it is significantly less than the most underaided district for 2017-18, which was Bound Brook with a -$9,546 per student deficit.

The $1.748 billion deficit for 2018-19 is only $217 million less than the $1,965,333,325 deficit for 2017-18, despite the infusion of $381 million in new and redistributed state aid.

The reason that the deficit shrank by substantially less than the input of new+redistributed aid is because the true deficit increases every year due to weighted enrollment growth, tax base erosion, and inflation.  (see below)

Sweeney's state aid proposed was designed to give the biggest increases to districts with the worst percentage underfunding with the goal of a 58% threshold, so there are only eight districts getting less than 50% of their Uncapped Aid.  Woodbridge is now the most underaided in percentage terms, getting only 42% of what it is supposed to get. 

Chesterfield, which only got 10% of its recommended aid in 2016-17 and 20% of its recommended aid in 2017-18 will now receive 58% of its Uncapped Aid. From 2016-17 to 2018-19 Chesterfield's state aid has grown from $419,983 to $2,403,780, a 473% increase (with more to come).

Steve Sweeney often said that he was bringing every district up to 58% of its Uncapped Aid, but this is not accurate, since Sweeney and his allies were forced to cap aid limits for large underaided districts such as Woodbridge and even some small districts who were exceptionally underaided, such as Fairview.  As you can see inm the table below, there are 16 districts who remain below 58%, with Woodbridge being the state's most underaided in percentage terms.  

KEARNY	57.73%
ROBBINSVILLE TWP	56.09%
BLOOMFIELD TWP	55.44%
ATLANTIC CITY (see note)	55.07%
LINDEN	55.00%
PASSAIC COUNTY VOCATIONAL	54.08%
BOUND BROOK	51.75%
FAIRVIEW BORO	51.47%
CLIFTON CITY	47.31%
HACKENSACK CITY	47.24%
WEST ORANGE	47.06%
ELMWOOD PARK	44.46%
ATLANTIC CO VOCATIONAL	43.93%
EDISON TWP	43.04%
NORTH BRUNSWICK TWP	42.08%
WOODBRIDGE TWP	41.72%

Overall, 117 districts are now exactly at the 58% threshold.

Although the need to cap aid increases for 2018-19 is disappointing, in 2019-20 and beyond, these districts will have the largest increases proportionally, since (if Murphy signs S2), new aid will be based on each district's deficit, not its existing aid.

Per Pupil Gains and Losses from 2017-18

The legislature's increase for 2018-19 was structured onto Phil Murphy's SFRA-literalist proposal, in which state aid was determined by inflating a district's existing aid by (usually) 5%, so districts already getting 80-90% of their Uncapped Aid got the largest gains.  Hence Trenton gained +$793 per pupil and Newark gained +$729 per pupil, even though those districts were only underaided by about $2800 per student, which not even close to NJ's largest deficits.

Under Murphy SFRA-literalist approach, 13 districts (all Abbotts) gained 48% of all new state aid.

Aid increases in dollars per student are available here.

Sweeney and his allies kept Phil Murphy's original distribution for all underaided districts, but then

Bound Brook had been NJ's most underaided district in

dollars per student (-$9,546 pp for 2017-18). 

Although Sweney used percentage underaidin,
it gained the most in dollars per student (+$2289).

strove to bring every district up to 58% of its Uncapped Aid.  Under this plan, Newark and Trenton didn't gain additional aid, but they didn't lose any state aid either.  Because of the focus on the 58% threshold, severely underaided districts who were at or above that level did not gain any additional state aid under the Sweeney plan.  EG, Belleville is underaided by $4252 pp, but it gained nothing over it had originally been supposed to get under Murphy's plan because Belleville was already at 60% of its Uncapped Aid and the Sweeney team used percentage underaiding. 

  

In any case, these districts are the ones who are gaining the most in dollars-per-student.

District	Gain in $/PP	District	Gain in $/PP
BOUND BROOK	$2,289	UNION COUNTY VOCATIONAL	$1,606
ATLANTIC CO VOCATIONAL	$2,213	ABSECON CITY	$1,515
MANVILLE	$2,163	DUNELLEN	$1,446
CUMBERLAND CO VOCATIONAL	$2,100	RED BANK BORO	$1,399
CHESTERFIELD	$2,055	ELMWOOD PARK	$1,398
FAIRVIEW BORO	$1,951	GUTTENBERG	$1,337
FREEHOLD BORO	$1,890	PASSAIC COUNTY VOCATIONAL	$1,302
MANCHESTER REG	$1,830	MERCHANTVILLE	$1,274
LITTLE FERRY	$1,787	ROCKAWAY BORO	$1,246
RIDGEFIELD PARK	$1,764	KENILWORTH	$1,225

What is also important to note is that the majority of NJ's severely underaided districts gained more state aid in the Sweeney model than the Murphy-Repollet SFRA-literalist model, although not always.

The reduction of Adjustment Aid was done through a more complex method that sometimes depended on spending relative to Adequacy and municipal overburden. Vo-techs were also exempted from any cuts.

The following districts lost the most:

District	Loss in $/PP	District	Loss in $/PP
OGDENSBURG	($212)	PEMBERTON TWP	($317)
LOWER CAPE MAY REGIONAL	($218)	ALLENHURST	($321)
LAKEWOOD	($221)	OCEAN TWP	($325)
CORBIN CITY	($223)	HAMPTON BORO	($330)
DELAWARE VALLEY REGIONAL	($223)	ALEXANDRIA TWP	($361)
KNOWLTON TWP	($243)	DENNIS TWP	($373)
CLINTON TWP	($261)	WEYMOUTH TWP	($470)
SPRINGFIELD TWP	($268)	ASBURY PARK	($591)
MONTAGUE TWP	($277)	WASHINGTON TWP	($801)
HOPATCONG	($288)	GLASSBORO	($948)

Although the media focused on Jersey City being the "biggest loser" for losing $3.5 million and that being the most in total dollars, that loss is only $114 per student.

By contrast, Glassboro lost $1,816,764, which, divided by Glassboro's 1916 students, is $948 per student.

Sweeney's Plan is Good Policy, But It Won't Bring Every District to 100% of State Aid

Toms River, Brick, Freehold Regional, Manalapan-Englishtown, Jersey City, and Ocean City have been at the forefront of opposition to state aid reform, saying that it would "decimate" their districts if they receive only 100% of their state aid.

However, these districts should be aware of their continuing advantage, since even in seven years, today's underaided districts will still not be at 100% funding, so the overaided districts who are losing state aid now will still be advantaged.

Although the 2018-19 state aid distribution takes New Jersey $217 million closer to having every district at 100% funding, 100% funding will remain out of reach in 2024-25.

The major reason for the improbability of bringing every district to 100% is that the deficit for 2018-19 will be $1,747,896,430, so even the full redistribution of $651,944,818 will still leave New Jersey with a $1.1 billion net deficit.

The major reason NJ is unlikely to be able to fully fund the underaided districts is that the true deficit increases by $100-$200 million per year, so, even conservatively estimated, in 2024-25, the underaided districts could require another $1 billion on top of the $1.747 billion they would need to be fully funded in 2018-19.

Although Adjustment Aid will probably grow over the next seven years, not all of that $651,944,818 in 2018-19's Adjustment Aid will be available to be redistributed because several tens of millions of it goes to districts who are being protected from aid cuts by the carve-outs for being below Adequacy, having "municipal overburden," or being vo-techs.

I do not have the exact amount of "protected Adjustment Aid," but East Orange alone has $24.4 in excess aid, Keansburg has $7.6 million, Vineland has $5.4 million, Gloucester City has $1.2 million. Monmouth County Vo-Tech has $6 million in excess aid, Ocean County Vo-Tech has $4.3 million. Between those districts and other protected districts, there is probably $50 million in "protected Adjustment Aid."

On the other hand, unless there is a recession, the State of New Jersey will experience annual revenue growth, but the amount of money left over for K-12 aid after expenses for TPAF (+$392.5 mil for FY19) and post-retirement medical (+$51.8 mil) will not equal the $284 million it was for 2018-19 since the 2018-19 budget was powered by increasing income tax rates, the transfer of the state lottery, fiscal gimmicks, flat-funding Extraordinary Aid, flat-funding municipal aid, plus stronger income tax revenue growth.

So, future new money for K-12 aid will be much less than the $284 million it was for 2018-19.

There are two factors in NJ's budgetary favor.  

• In 2022-23 NJ is projected to reach 100% of its pension funding, so starting in 2023-24 NJ should have much more new money available for K-12 aid (or other Property Tax Relief Fund spending).  
• The Debt Servicing costs for construction debt should start to fall, (unless there is another round of Abbott construction bonding).

Reaching 100% of state aid for all districts will also depend on what decisions the governor and legislature make regarding other expenses that are paid out of the Property Tax Relief Fund, ie, municipal aid, direct property tax rebates, community college, and PreK.

Given the state's extreme budget pressures for debt streams like TPAF and post-retirement medical, plus the appropriateness of funding municipal aid and direct tax rebates, and the likelihood of increases for PreK, the need to redistribute Adjustment Aid will become no less acute in the future.

----

See Also:

• "Updated State Aid Disparities for 2017-18"
• "Looking at 2018-19 Disparities"  (based on the original Murphy proposal)

Sweeney Releases State Aid Reform Plan

Added: Now that I've seen the bill, I have an analysis here:



For months, Steve Sweeney has been working with Sen. Jennifer Beck on a state aid reform bill that would, presumably, reduce or eliminate Adjustment Aid and redistribute it to needy districts.

The bill was delayed and delayed and it became apparent that Sweeney and Beck were not on the same page.  Sweeney usually talked about eliminating all Adjustment Aid whereas Beck usually talked about just eliminating Adjustment Aid for districts who were above Adequacy (which would severely reduce the amount of aid that could be redistributed.).  Sweeney evidently wants an increase in aid as well as redistribution and we have no idea how Beck felt about that.

Finally, after months of waiting we have a proposal, but it isn't a bill per se and Sen. Jennifer Beck is absent, although the Democratic Assemblymembers from her district, Joann Downey and Assemblyman Eric Houghtaling, were present and on the record for reform.

Sweeney has proposed a bill to create a commission that would be empowered to write a proposal on state aid that the legislature could then vote up or down, with no possibility of amendment.  (like federal base closings bills).

More commentary below:

SWEENEY, RUIZ, DOWNEY & HOUGHTALING UNVEIL INITIATIVE TO FULLY FUND NJ SCHOOLS

Commission Will Develop Five-Year Reform Plan To Close

Gap That Now Leaves 80 Percent of Districts Underfunded
TRENTON – Citing the state's continued underfunding of 80 percent of New Jersey's school districts, Senate President Steve Sweeney, Assemblywoman Joann Downey and Assemblyman Eric Houghtaling today unveiled legislation to create a special commission to develop a school funding reform plan to bring all districts to full funding within five years. Senator M. Teresa Ruiz, chairwoman of the Senate Education Committee, is a cosponsor of the bill.

"The School Funding Reform Act was a major accomplishment that promised to provide full funding for all schoolchildren by ensuring that money would follow the child," said Senator Sweeney. "State aid was to be distributed fairly and equitably based on a formula that took into account each town's property tax base, its ability to pay, increases and decreases in enrollment and the special needs of the children. The goals and objectives of the formula are on target, but the promise has not been kept."

"The state has failed to fund the formula and keep up with the needs of the school districts," said Senator Sweeney. "As a result, the school funding formula has grown less fair and less adequate, with the fastest-growing districts being shortchanged, compromising the quality of education and putting upward pressure on property taxes. It is time to restore equity to the system and to fully fund our schools."

The commission will put the plan into legislation that will have to be approved or rejected in its existing form with up-or-down votes by the Legislature.

"We will closely examine the proposal to ensure it meets our goals to provide sufficient aid to districts that are underfunded but also to allow others the ability to adjust to the formula funding as it is intended under the law," said Senator Ruiz. "We know the transition must be done in a deliberative manner, but that by fully funding the formula we will ensure that the resources necessary for the education of each student are preserved. We believe this is the first responsible approach to meeting the mission of the school funding formula that aid follows the child, and to bringing districts to full funding in a fair and meaningful way."

Senator Sweeney said he expected the plan to include increased state funding over the five-year timeframe.

Under the proposed legislation, a four-member "State School Funding Fairness Commission" would be established and given one year to develop a plan that would bring every school district in the state to "adequacy funding" within five years. The Governor would appoint two commissioners and the Senate President and Assembly Speaker would choose one each, according to the bill.

Assemblywoman Downey and Assemblyman Houghtaling said the state needs to address the growing disparities in school funding throughout the state.

"Our school funding formula is nowhere near being fully-funded, nor has it been updated to keep up with the day-to-day realities our educators and administrators face," said Assemblywoman Downey. "It has caused a massive disconnect between how schools are functioning and how they are funded. "This is an issue that affects all children, and all taxpayers, throughout our state and something we need to take seriously. We can no longer cherry-pick solutions."

"School districts like Freehold Borough and Red Bank, with rapidly growing school populations, have essentially seen their aid frozen, putting students and taxpayers at a tremendous disadvantage," said Assemblyman Houghtaling. "Many more are being failed by a funding system that overlooks the day-to-day realities of their classrooms. Our communities and schools need to finally have the fairness and certainty that our school funding law promised them."

Senator Sweeney said meetings he and other legislators have had with city and school officials in different communities have underscored the problems with the school funding formula.

"This is not an urban-suburban issue," Senator Sweeney said. "There are disparities all over the state, including within my own legislative district where some school districts are overfunded and some are underfunded. We can no longer allow some districts to be subsidizing others under this formula. We need to be responsible in making the reforms to ensure that no students are negatively impacted. It is a matter of fairness for all students."

----

Usually a commission is a way of killing a reform idea, but if a commission is empowered to send legislation directly to the floor for a vote I think it's a sensible idea. I think what Sweeney is conceding by promoting a commission is that the legislative process would not work for redistributing state aid. 

I don't have any insight into what really happened here, but maybe Sweeney tested other Senators and found out that he didn't have 21 votes for the reform he was originally hoping to pass?

Rather than an attempt to bury reform, I think this is an attempt to get a very serious reform. Since the bill cannot be amended, it makes it slightly easier politically for legislators to vote for it.  Under normal legislative proceedings, legislators will work aggressively to protect their own constituents at the expense of the state as a whole.

This happened in 1990 when the Quality Education Act was pushed through the legislature.  The QEA which would have slashed aid for suburban districts to give more money to poor and middle-income ones, but Sen. Matthew Feldman of Bergen County got special transportation aid for his Bergen County constituents.  Montclair's legislators also pulled in some special privileges.

Unfortunately Sweeney's approach delays reform by at least another year.

It looks like Sen. Jennifer Beck dropped out of state aid reform. My guess is that she didn't want to redistribute as much aid as Sweeney did and she may have opposed increasing school aid by $500 million.

However, getting the commission's ideas into law is Step 2.  Step 1 is getting the bill creating the commission through the legislature.  

I've got to assume that Sweeney is confident about the Senate, but who knows about the Assembly.  Vincent Prieto is conspicuous by his absence and has made almost no comments on state aid in all his years in the Assembly.  

Prieto voted for SFRA back in 2008, but on state aid is an unknown.

Our Fair Share Launches Petition for State Aid Fairness

Our Fair Share, an activist group founded in Delran for fair school funding, has launched a petition for state aid fairness.

The heart of the petition is this call for Adjustment Aid to be redistributed:

We demand that $575 million in “adjustment aid” be reallocated. This was support that was originally intended to "hold harmless" districts that saw aid reductions as a result of the new formula signed into law in 2008. This process has been recommended to take place over five years, however no money has been reallocated in the past 8 years. We believe 8 years is enough advance notice for districts to realize they should not be receiving any more adjustment aid.

We ask that until SFRA can be fully funded, all districts be funded fairly, and share the sacrifice that so many districts have been making since 2008. If the formula can only be funded at 85%, then fund ALL school districts throughout the state with the formula at 85%. Students, taxpayers, and school districts from all over the state have been the innocent victims of the State's inefficient and unlawful distribution of school funds.

Please sign and forward!

https://www.change.org/p/chris-christie-nj-students-deserve-fair-school-funding

State Aid Dominates Senate Budget Hearing

"They're bursting at the seams. We've got kids being taught in the hallway, on stages, wherever they can find room, and they can't do it anymore. We have to redistribute the state aid."

Senator Jennifer Beck on Freehold Boro:

Finally, the New Jersey State Senate is addressing the savage inequalities that entrap tens of thousands of New Jersey school children in schools nowhere near adequately staffed or equipped and tens of thousands of taxpayers shouldering tax burdens that are beyond the point of fairness.

At a Senate hearing, in front of over 50 community members from Red Bank Boro and Freehold Boro, the Senate Budget committee discussed ways to address the desperate need of some of New Jersey's neediest school districts.

According to the reporting I've read, Senator Jennifer Beck (Red Bank Boro's and Freehold Boro's Senator) was the leading spirit in pushing for a fairer distribution of school aid.

Beck said when [SFRA] first passed, districts poised to lose aid were held harmless and allowed to keep funding that would have otherwise been lost. That aid, meant as a short-term concession, continues even though other districts remain cash-strapped. 

Beck said 111 school districts are considered "over-adequacy" and still receive about $175 million in “hold harmless” aid. Her proposal aims to redistribute these dollars to the districts that need it.

Although it appears that the state will keep Adjustment Aid in overaided districts that are below Adequacy and thus leave over $300 million in excess aid untouched, even $175 million going to the neediest districts in New Jersey is a huge boost compared to what they have gotten in the last five years.  

Senator Paul Sarlo (D, Bergen) spoke in favor of redistribution as a concept. "I don’t think there’s a Republican or a Democrat who disagrees. We have to find some fairness here on this particular issue,” Importantly, Senator Jeff Van Drew (D, Cape May, Cumberland, Atlantic) spoke of redistribution in a balanced way and warned of anger among his constituents, "there are many folks, many constituents, many parents of children, who are going to say that they’re losing out now because there’s been a change obviously. And you know there’s going to be a lot of gnashing of teeth and crying," but stopped short of saying that he would oppose redistribution.

Commissioner of Education David Hespe indicated that this is something he was open to:

Once the formula stops running, districts that rely on the formula for increased enrollments or increases in the special populations funded in the formula, are treated unfairly... They cannot provide the quality education these other districts can without putting their local taxpayers into an almost impossible situation.”

However, not everyone at the meeting was sympathetic or willing to look at the statewide picture.  Senator Paul Oroho (R, Sussex) talked about "fairness" for districts that had lost enrollment.

We need a new funding formula that would be significantly fairer and more accountable for those specific areas where you have declining enrollment.

Also, if the Christie administration is open to redistribution, why is it waiting for legislation?  The Christie Administration did not wait for legislation to create PARCC Readiness Aid, Student Growth Aid, Professional Community Aid, or, the worst, "Additional Adjustment Aid."  The governor already has the de facto power to ignore SFRA and yet it has preserved the aid packages of overaided districts.

Apparently the aid of under Adequacy/overaided districts will be left in place for the time being, but Jersey City, the poster child for a district that undertaxes so much that it is under Adequacy despite being overaided by $4,272 per student.

Something I was pleased to see is that Senator Beck gets it that some districts are above Adequacy just because they pay high taxes:

One complication is that the amount a district spends is based on both local school tax collections and state aid. Beck and other officials said they want to be careful not to penalize districts that use local taxes, rather than state monies, to fund their schools at close to or higher than the state recommendation. 

“We want to make sure the changes we make don’t have unintended consequences,” Beck said. “There are some districts that are over adequacy, but it very well may be because their local property taxpayers chose to provide additional funding to the district, not that the state is giving them too much money.”

However, if the Sweeney/Beck legislation only takes Adjustment Aid away from districts who are above Adequacy than the amount of money that could possibly be redistributed is nowhere near the $550 million amount that the state distributes in Adjustment Aid. Beck herself gives a figure of $175 million.

The $175 million figure appears to come from the (partly erroneous) Education Law Center Policy Brief on Adjustment Aid, but the ELC was not saying that Adjustment Aid districts were $175 million above Adequacy.  The ELC was saying that districts that were above Adequacy got $175 million in Adjustment Aid.  

This is significant because many Adjustment Aid districts that are above Adequacy still undertax and therefore their "Adequacy Surplus" is less than their Adjustment Aid. For instance, even though Pemberton gets $32 million in Adjustment Aid, it is only above Adequacy by $14 million and many more over-Adequacy Adjustment Aid districts are like Pemberton.

It looks like this round of redistribution will skip Jersey City because Jersey City is under Adequacy (due to undertaxing), but Jersey City did come up and Sen. Sandra Cunningham makes a specious argument in favor of sustaining JC's aid.

[Beck] said the state also needs to account for towns that do not contribute enough in local property-tax revenues to the schools, but still receive adjustment aid. The poster child for that phenomenon is Jersey City, which is “slightly” under adequacy, according to commissioner of education David Hespe. The district receives $114.5 million in adjustment aid, in addition to other education aid, but contributes $224 million less in local taxes than it should according to the state’s “fair share” calculation, Beck said.

“Jersey City has had enrollment growth, but I think some of us would argue that they’re locally not doing what they’re supposed to do to help fund the cost of that enrollment growth -- which is counter to a lot of our other school districts, like Freehold Borough,” she said.

 Jersey City is not contributing enough in part because of its frequent use of municipal tax abatements, which spur development but have the effect of shifting more of the burden for school funding to the state, Beck said.

To the suggestion that Jersey City wasn't paying enough in local school taxes, Senator Sandra Cunningham shot back:

“When we think of Jersey City we think of the tall buildings, the glass buildings, the Citi Bike and all the other crazy things that you see when you hear Jersey City,” she said. “What you don’t see in Jersey City is … most of these minority children who are growing up in crime-ridden areas, they’re growing up in drug-ridden areas, they’re growing up in areas in which some of their schools have been there since Abraham Lincoln. Let’s keep in perspective where the people really are that are really using this money, and it’s not downtown.”

Senator Cunningham was against SFRA in the first place in 2008, even though she also represents Bayonne.

Ok, we all know that JC's student population isn't representative of JC's population at large, but this is irrelevant in discussing Jersey City's aid.  There are parts of many towns, from Cherry Hill to West Orange, and even Summit which have very poor sections, but no one says that Cherry Hill, West Orange, and Summit should get massive amounts of aid.  The common sense reason for this is because it's the overall financial picture which matters.

Here we go again.

What is relevant for state aid is the (weighted) student enrollment compared to the tax base.

So, Jersey City's student population is 70% FRL eligible, but it's a proportionally small population.  Jersey City only has 34,000 students compared to an overall population of ~275,000.   Jersey City's population is almost the same size as Newark's now, but Newark has almost 20,000 more kids.  Jersey City has 120,000 more people than Paterson, but Jersey City only has about 6,000 more students and since Paterson's FRL-eligibility is higher, Paterson actually has more FRL-eligible kids.

More importantly, Jersey City's Equalized Valuation is $21.3 billion, which, combined with Jersey City's Aggregate Income, comes to $330 million in Local Fair Share.  JC's tax base would be at least $9 billion larger if its PILOTed property were included.  Divide that Local Fair Share by the number of students in Jersey City and you get $10,196 per student; an amount which is slightly below NJ's median, but above districts like Bloomfield ($9,366 per student) and almost double higher than what some poor non-Abbotts like Dover ($5,576)  and Manchester Regional ($5,226) have.

In fact, Jersey City's Equalized Valuation is increasing so rapidly that its Effective (aka "Equalized") Tax Rate is dropping:

So Sandra Cunningham's resistance to doing anything that would raise Jersey City's taxes is indefensible.

Sometimes I feel like I write too much about Jersey City on this blog, but its emblematic of the problems of school finance in New Jersey and if the legislature and Christie refuse to redistribute aid out of Jersey City the amount of aid to be transferred is going to be limited.

Again, I'm encouraged by what I've read of the Senate Budget Committee hearing, even though I worry about that the amount to be redistributed will be very limited.  Anyway, I look forward to the Assembly hearing which will take place on Wednesday, April 20th.

Sweeney, Beck Propose Help for NJ's Neediest Districts

Senators Stephen Sweeney and Jennifer Beck continue to work on legislation that would redistribute state aid away from overaided districts to districts that are underaided and truly needy.

In an article by Adam Clark that appeared on the cover of the Sunday, March 27th Star-Ledger, Beck and Sweeney explained:

"The hold harmless provision [Adjustment Aid] was meant to make sure there was no losers," state Senate President Stephen Sweeney said. "It absolutely created losers." [my emphasis]

Sweeney (D-Gloucester) and Sen. Jenifer Beck (R-Monmouth) are finalizing a plan that they say would make school funding more equitable. Beginning in 2017-18, the proposal would gradually phase out hold harmless aid [ie, Adjustment Aid] for districts that don't need it and reallocate that money to growing districts that are underfunded, Beck said.

Political Courage

This is truly a brave move on both senators' parts. Both Sweeney and Beck have some overaided districts among their constituents who may oppose any redistribution and this bill faces an uphill struggle through ignorance, selfishness, and parochialism of the legislature.  Remember, SFRA barely passed in 2008 and it was an aid increase (even overaided districts were supposed to gain 2%), not an aid redistribution.

Not to overpraise Sweeney (who I criticized here for talking Pre-K expansion without having a way to pay for it), but I see him as a truly bold politician.  Between being the primary Democratic backer of pension reform, supporting the consolidation of K-8s with their regional high schools, and now state aid reform, Sweeney is someone who is willing to take stances that offend interest groups and some of his own constituents if he believes they are correct.  A sincere bravo to him on this.

Conditioning Aid Distribution on Adequacy = Inadequate Redistribution

Sweeney and Beck haven't released any details of their plan yet, but there are hints that they will consider where districts are relative to their Adequacy budgets.

According to the Adam Clark Star Ledger article:

The districts that would receive less hold harmless money are already "above adequacy," meaning they spend more money per student than the state's funding formula says is needed for a thorough and efficient education, Beck said. Those districts should be able to adjust their budgets, especially if their enrollment has dropped, she said.

Any redistribution of Adjustment Aid is a good thing, but if New Jersey only takes Adjustment Aid away from districts that are above Adequacy the amount of Adjustment Aid that could be redistributed is greatly reduced because 71 Adjustment Aid districts undertax so significantly that they actually below Adequacy.  Important examples of Adjustment Aid districts that are below Adequacy are Jersey City, Brick, and Toms River.

According to the Education Law Center Policy Brief on Adjustment Aid, for 2015-16:

• The above Adequacy Adjustment Aid districts get $174,024,179 in Adjustment Aid.
• The below Adequacy Adjustment Aid districts get $381,745,553 in Adjustment Aid.

So, if Adequacy is considered then the potential amount of Adjustment Aid that could be redistributed is only $174 million, not the full $550 million that the state labels as "Adjustment Aid."
(NJ hasn't run the SFRA formula in several years and the amount of money that districts get that is labeled "Adjustment Aid" is divorced from the amount of Adjustment Aid they should get.  For instance, Newark and Atlantic City both get something called "Adjustment Aid," but both are underaided and the Adjustment Aid should be converted into Equalization Aid.  Conversely, since Jersey City increasingly becomes richer and its student population grows slowly, more of its Equalization Aid should be converted to Adjustment Aid.)

Also, the Adjustment Aid districts that are above Adequacy are often only slightly above Adequacy, meaning that because they undertax, their aid excesses are greater than their surpluses above Adequacy.

For instance, even though Pemberton gets $32 million in Adjustment Aid, it is only above Adequacy by $14 million.

• Asbury Park gets $24.2 million in Adjustment Aid, but is only $13.9 million above Adequacy.  
• Keansburg gets $8.6 million in Adjustment Aid, but is only $5.9 million above Adequacy.  
• Phillipsburg is gets $10 million in Adjustment Aid, but is only $125,000 above Adequacy.  

Adam Clark writes about this as a "bipartisan plan to change how that money — more than $500 million — is allocated" but if only Adjustment Aid districts that are above Adequacy lose aid, the amount that could be redistributed would be nowhere near $500 million.

Population Change isn't the Only Factor in Overaiding and Underaiding

Another concern I have is that redistribution will be overly conditioned on population changes.  Although Sweeney and Beck haven't released any details yet, Jennifer Beck has talked often about aid being taken from districts that have lost population and giving it to districts that have gained population.

"The bottom line is that we as a state have not allowed our methodology for funding to keep up with what's actually happening at a district," Beck said. "If you've lost 100 students and the state of New Jersey is giving you the same state aid as you had five years ago... there should be some cost savings along the way."

And, in a statement at a recent Senate budget hearing Beck said:

"According to Beck, school funding needs to be redistributed throughout the state so that districts that have lost enrollment are not getting funding above the adequacy standard at the expense of schools where enrollment has increased. She said that that issue is not only central to the discussion in Paterson, but in a number of schools statewide including those in Asbury Park and Freehold, both of which fall in her district."

I'm a fan of Jennifer Beck, but I do not think she has it totally right about the causation of overaiding and underaiding.

Some districts in New Jersey have always been overaided or always been underaided, even before any recent population shifts.  For many districts, it is difficult to say why they have always been privileged or always been victimized, but it's not like NJ ever was "on formula" for a lot of districts who are now underaided.  

What logic was there ever in giving Marlboro twice as much aid per student as Bloomfield? What on earth justified giving Hillsborough more money than Belleville? Why did Randolph get more money than Hackensack?

Freehold Boro (then DFG CD), whose population growth has been often cited in its underaiding, only got $3,153 per student in 1998-1999, which is not significantly more than what Hillsborough got.

The aid distribution has been unjust for a very long time.  

I am worried that Beck neglects causes of overaiding and underaiding other than population change. Although Asbury Park and Pemberton's extraordinary overaiding are partly due to population loss and the zombie power the Abbott "Parity Plus" Doctrine, there are other districts that are overaided because they have had increases in wealth.

Hoboken and Jersey City represent two districts that are overaided despite gaining population.

Increase in wealth is difficult to quantify because historic Local Fair Share data is not available and even if it were available I would have to adjust it for inflation, but I can use Equalized Valuation (as a percentage of statewide EV) to show that Hoboken (an extreme, but illustrative example) has become overaided because of an increase in wealth, not because it has lost student population (on the contrary, it's slightly growing.)

Were I to go back even farther the effect would be more dramatic.  In the late 1990s Hoboken had only 0.3% of the state's total Equalized Valuation.   (see Divergent Fates of NJ's Big Cities.)

Likewise, some underaided districts haven't had much population change either.  Perhaps they were always underaided, or their population has stayed constant but become poorer.  They could also have seen a decline in ratables.

Atlantic City would be a prime (if extreme) example of a district who was once overaided (hence the Adjustment Aid artifact) and whose population has actually fallen, but has become deeply underaided (-$6,770 per student) because it has had an enormous decrease in wealth.

Will Anything Change?

Sweeney and Beck themselves have said that their proposal will be controversial, but the moral arguments for redistribution are so strong that I have some hope that this legislation will at least pass the State Senate.

The big question marks are the Education Law Center, Vincent Prieto, and Chris Christie.

The Education Law Center, led by lawyer David Sciarra, has opposed redistribution in the past and I consider it to be reactionary and economically blind, but in the fall of 2015 it softened its opposition to cutting Adjustment Aid for districts that were above Adequacy.  The ELC is influential among Democratic legislators and NJ's education activist community, so its support would help tip the scales in favor of justice.

As recently as 2012, Christie, through Chris Cerf's Education Funding Report, supported cutting Adjustment Aid too for districts that are above Adequacy.  Christie actually followed through on this for two years before setting into a flat-aid policy.  Christie, obviously, has become erratic and no one knows what he would think of redistribution.  He even created "Additional Adjustment Aid" to protect Interdistrict Choice districts from ever losing aid.

Prieto is a big unknown. All of Prieto's constituents - East Newark, Edgewater, Fairview, Guttenberg, Harrison, Kearny, North Bergen, Secaucus, and West New York - are underaided, but Prieto is also a close ally of Jersey City and Hoboken politicians whose districts are overaided.  Prieto is known to be a backer of Steve Fulop too and may not want to do Steve Sweeney any favors.

Anyway, I appreciate what Sweeney and Back are trying to do and look forward to learning more about their proposal.

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See Will Vincent Prieto Put Hudson County First?