Adjustment Aid Restorations for 2023-24

In April 2023, the NJ legislature almost unanimously passed and Phil Murphy quickly signed a bill that would give $102 million to districts who had just lost Adjustment Aid in the 2023-24 school year. The $102,991,919 is equivalent to 66% of the money these districts were originally slated to lose, and was given without any sensitivity to a district being above or below Adequacy, strong in tax base or weak in tax base.

The re-appropriation of $102 million to these 160 school districts brings NJ's state aid surplus/deficit to a surplus of $266 million for the overaided districts, while continuing the underaided districts' deficit at -$277 million.

As usual, I have posted all the data online:

The $102 million was a mathematically simple 66% restoration of money lost according to S2, funded out of New Jersey's expected $10 billion surplus for FY2024, but it was accompanied by signals from some legislators, like Sens. Paul Sarlo and Andrew Zwicker, that more comprehensive changes would occur, including to the tax cap. As Sen. Sarlo said:  

Many of the school districts that you're seeing here today that are getting additional money have seen an increase in their ratable base - a large increase in their ratable base. - and some of them have seen a decrease in their overall enrollment. Part of the problem is the cap. We're going to need to look at that in the future. because they [ie, aid losing districts] can't take advantage of the additional ratable base... this is a one time extraordinary appropriation." Sen. Sarlo also challenged Sen. O'Scanlon for lamenting the budgetary impact of state aid cuts, while opposing tax cap liberalization.

See 23:00 mark)

In any case, this is a look at the aid restorations, in terms of how overaided the recipient districts are and how much districts are getting per student.

Of the $102,991,919, just four districts, Jersey City, Toms River, Asbury Park, and Freehold Regional are getting half, with Jersey City's $33,701,019 being by far the biggest appropriation.  

The $102 million averages out to $385 per student, with a MASSIVE variation in what districts are getting per student.  In dollars per student, the following districts are getting the most:

Mantoloking, whose students attend Point Pleasant Beach through a Send-Receive relationship, is getting $168,202 for only eight students, or $21,025 per student!

Cape May Point is getting $2,730 for a single student!

Mantoloking's haul is extreme, but Asbury Park, Pembeton Boro, and Cape May Point are getting more than $2,000 per pupil. Wildwood City, Ocean Gate, Branchville, Jersey City, and Somers Point are getting over $1,000 per pupil.

Another thirty-three districts got between $500 and $1,000 per student.

At the other hand, 24 districts are getting less than $50 per student.  For Point Pleasant Beach, Buena Regional, Harmony Township, Oceanport Boro, and Margate City the amounts are less than $10 per student.

Most of the money is not going to wealthy districts, but some of it is ending up in districts that are so rich that they have no need for state aid at all.  Mantoloking, whose Local Fair Share is $15 million for those eight students, or $1.9 million per student.  

Most of the Shore districts have very high tax bases per student.

Cape May Point = $4,808,299 in Local Fair Share pp.  (officially, Cape May Point is estimated to have only a single student next year)

Here are more Shore districts and their Local Fair Shares per pupil:

• Margate City has $136,609 in Local Fair Share per student.
• Brigantine City has $105,627 per student.
• Ventnor City has $41,813 per student.
• Cape May City has $169,157 per student.
• Lower Cape May Regional has $30,158 per student.
• North Wildwood City has $167,725 per student.
• Sea Isle City has $687,318 per student.

And of course Hoboken was a gainer too, with +$142,215 (+$43 pp), despite its massive $233 million Local Fair Share for 3,292 students ($70,798 pp).

Jersey City is still not a rich district exactly, but it has a Local Fair Share of $574 million for 29,439 students, or $19,499 per student, which is the same as affluent suburbs like Closter, Parsippany, Saddle Brook, and Cranford.

The state aid restorations also reorders the ranking of the most overaided districts.  Originally the most overaided district was going to be East Orange with a surplus of $3,169 per student, but Asbury Park's additional $5.7 million is $2,943 per student, which when added to its original surplus, means Asbury Park is back at #1 for most overaided, at $4,351 per student.

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It's frustrating to me that the legislature and governor have acted to defer state aid equality for another year and even more frustrating that the reappropriations were made without sensitivity to a district's existing spending or tax base, but several of these districts faced unacceptable budget cuts.  It is encouraging that the legislature will try again to adjust the tax cap so that these districts can tap their tax bases 

Senator Sarlo said several things at the hearing which showed confidence in S2 and awareness of state aid facts which I rarely hear from elected officials.

After Sen. Declan O'Scanlon objected to any cuts, saying "we're going to kill these districts," and argued for an additional $52 million to bring all these districts up to their 2022-23 state aid levels, Senator Sarlo said "Before we go down that route... If we go town by town here, a lot of these towns have had increased ratable bases and loss of enrollment, that has to be considered."

To which O'Scanlon responded, "throw in the fact that you have the tax cap, which is a blunt instrument"

Sarlo 

"Which we're gonna do."

O'Scanlon then presented body language showing opposition to changing the tax cap, Senator Sarlo said,  "There you go, you don't want to touch it right?" which to me shows Sarlo's determination to change the tax cap.  

Senator Sarlo also had a good exchange with Supt J. Kenyon Kummings of Wildwood, where Sarlo said:

"Wildwood is unique, some of your Shore communities are unique because there large ratable base with people with Shore homes but your student body is from a smaller population and from a different demographic base, " which I appreciated because it  shows that Sarlo understands that a district with poor students doesn't necessarily have a poor tax base, and Shore districts frequently have poor students and enormous tax bases.  (See "Help for the Needless: NJ's Richest Districts and Their State Aid")

The historical problem here is that S2 did not provide any tax cap relief for non-Abbotts and Phil Murphy vetoed tax cap relief in 2020. Most of these districts made truly unnecessary cuts in the last few years that should have been prevented.  (See "More Information on Steve Sweeney's Proposal to Amend the Tax Cap")

In conclusion, the necessity of state aid restorations and the shape of them is disappointing, but since Murphy vetoed tax cap relief they are justified now.  I am glad to see the legislature is ready to try again to amend the tax cap.

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• New Jersey's 2022-23 State Aid
• 2021-22 Brings $1.7 Billion to Education, More State Aid Equity
• 2020-21 State Aid Closer to Equality
• 2019-20 State Aid Gets Fairer, but the Deficit Grows
• 2018-19 Disparities Narrow, but Remain Stark
• Updated State Aid Disparities for 2017-18

More information on Steve Sweeney's proposal to amend the tax cap.

Steve Sweeney's office has released more details of what districts would get an adjustment to the tax cap law under his proposal, "S-4289" to amend the tax cap law (aka "Chapter 44") for aid-losing districts.

Although ~180 districts are slated to lose Adjustment Aid, Steve Sweeney's proposal is only to amend the tax cap for 28 aid-losing districts who are also below Adequacy due to insufficient local tax levies.

The reason tax cap reform is necessary is for some low-taxing and low-spending Adjustment Aid districts is that a 2% tax increase is less than their state aid loss and they will be forced to make cuts from a position of sub-Adequacy spending.

Brick and Toms River provide an example of why some tax cap adjustment is necessary.

	2018-19 Local Tax Levy	2018-19 Local Fair Share	2018-19 Excess Aid	2% Tax Increase based on 2018-19 Tax Levy	2019-20 Adjustment Aid Loss
Brick	$107,261,323	$129,909,386	$21,331,456	$2,145,226	$2,741,894
Toms River	$155,329,012	$197,787,405	$17,581,822	$3,106,580	$2,781,498

So indeed, for districts like Brick and Toms River, S2 represents budget cuts that they cannot legally tax their ways out of.  

Steve Sweeney's bill is actually quite a limited loosening of the tax cap.  It would only allow sub-Adequacy Adjustment Aid districts to increase their taxes by 

Lost Adjustment Aid + 2% of Pre-budget year tax levy 

So this bill only offers budgetary stability to aid-losing districts.  It is not enough to bring these districts to their full Local Fair Shares and Adequacy Budgets.  

From the OLS analysis:

This bill provides a tax levy cap adjustment for school districts that are spending below adequacy and are subject to a reduction in adjustment aid between the prebudget and budget years. The adjustment will be effective for the 2020-2021 through 2024-2025 school years. The amount of the allowable adjustment will equal the difference between the amount of adjustment aid received by the school district in the prebudget year and the amount of adjustment aid received by the school district in the budget year. However, the amount of the allowable adjustment may not exceed the amount that brings the school district’s spending to adequacy.

Thus, low-spending Adjustment Aid districts like Hillsborough, Brick, Belmar, and Toms River will get tax cap liberalization, but high-spending Adjustment Aid districts, like Roosevelt ($24,737 in Total Spending Per Pupil), Weymouth ($27,112 pp), Hopatcong ($26,815 pp). Hoboken ($26,814 pp). Asbury Park ($42,382 pp). Dennis Township ($27,956). Pemberton ($27,900) will not.

Although Jersey City is listed here as district that will get $27 million in tax cap adjustment due to Jersey City being $140 million below Adequacy, S2 already exempted Jersey City and all the other Abbotts, so its inclusion on the list is misleading.  

Also, S2 completely eliminated the tax cap for sub-Adequacy Abbotts up to their full Local Fair Shares, which goes farther S-4289.

Many people might argue that all aid-losing district should get tax cap liberalization, including the above Adequacy districts, but Steve Sweeney's bill is written from a more conservative place and will require those high-spending districts to make cuts.  While this might be criticized as a violation of home rule, it is in the state's interest to restrict the spending of high-wealth districts since their high-spending creates inequity and pressures middle-wealth and low-wealth districts to overburden their taxpayers to equal them in spending.   

Also, since the state pays districts' FICA taxes and TPAF, state taxpayers themselves are on the hook for districts' high-spending, so it is in the state's interest to restrict school budgets.

Kim Guadagno's Circuit Breaker: Positives and Negatives

Kim Guadagno is making a property tax relief proposal she calls a "circuit breaker" the centerpiece of her campaign for governor.

Guadagno's proposal is that all New Jersey residents have the school portion of their property taxes capped at 5% of income, with taxes due in

excess of that now assumed by the state.

As Guadagno's campaign explains it:

This innovative program would cap the school portion of a homeowner’s property tax bill to 5% of their household income, ensuring no New Jersey family would have to leave our state due to untenable property taxes. For instance, if a household makes $100,000 in income annually, they would not pay more than 5%, or $5,000, towards the school portion of their property tax. Any amount owed in excess of the 5% circuit breaker threshold will be applied directly to the homeowner’s property tax bill as a credit. So if the same family making $100,000 a year has a school property tax bill of $6,000 annually, they would receive a $1,000 credit. The school districts would then receive increased state aid to cover the cost of the credit so no school districts lose funding. 

Under this program, a family making New Jersey’s median household income of $72,000 will save an average of $895 on their property taxes annually. This proposal will apply to primary residences only and be capped at $3,000 annually. While the Homestead and Senior Freeze programs will remain in effect. homeowners will only be able to qualify for one program at a time and be able to choose the relief program that best meets their needs.

The state reimbursement would be capped at $3,000, so it is possible that certain households who have high property:income ratios would still pay over 5% of income in school taxes, but for most non-renters, taxes would be capped at 5%.

Overall, Guadagno's proposal would make NJ school funding more income-tax based than property-tax based, since the "Property Tax Relief Fund" comes from income taxes, and so make school taxation more progressive.

Guadagno's own staff estimates the cost at $1.5 billion, which Guadagno says could come from "auditing Trenton," eliminating existing property-tax rebates, and economic growth.

Since Guadagno came out with her circuit-breaker in April 2017 most of the criticism of it has been that Guadagno has underexplained where the state money would come from, since Guadagno rules out any tax increases (although that criticism applies to Phil Murphy and his agenda.)

Anyway, this is a look at some of the positives and negatives of Guadagno's proposal that I feel haven't gotten any attention.

The Good Things

It hasn't been independently verified that the circuit breaker would cost $1.5 billion per year, but assuming that amount is indeed the cost and assuming that Guadagno actually could find that $1.5 billion, this proposal would deliver real tax relief to the most overburdened taxpayers in New Jersey.

If a governor poured another $1.5 billion into SFRA the tax relief would probably be extremely limited, since Boards of Education would spend a large portion of their new money and/or teacher contracts would gradually consume whatever new revenue exists too.  If the money actually were directly given to households, people would end up with more money in their pockets.

The Bad Things

The Circuit Breaker's Not Looking Good,
Even if Guadagno Could Fund It

Since, under Guadagno's proposal, the state pays taxes in excess of 5% of income, Boards of Education would likely lose restraint in tax levy increases, since now their most overtaxed non-renters are protected by the state.

Very few Board of Education members are economically conservative, but they are aware that their communities have residents who can barely afford their homes and weigh that fact in determining what the tax levy increase should be.

Under a state-funded circuit breaker, Boards of Education now have a blank check to be cashed on the state's bank account and that restraint is gone.

Although NJ has a tax cap, tax increases are still not limited to 2% due to health care and enrollment adjustments and an electorate can vote to increase taxes to whatever amount it wants.

This means that the costs of the circuit breaker would increase fairly rapidly from the initial $1.5 billion.

What if there is a recession?

If the state started to put at least $1.5 billion into this tax rebate program it would have less money available to fund school districts, as well as other obligations.  Guadagno does support reducing Adjustment Aid and making cost-savings reforms to PreK and Abbott construction, but still, New Jersey's 369 underaided school districts have a deficit of $2.1 billion for 2017-18, so redistribution alone is not enough to create budgetary adequacy.

Moreover, New Jersey will eventually face another recession and have a revenue crash.

Every state loses revenue in a recession, but New Jersey's revenue fall is always more than the average state's since our income distribution is so unequal and our income tax structure is so progressive.  In the Great Recession NJ's revenue fell by 19%, whereas the average state's only fell by 12%.

The permanence of New Jersey's ongoing debt crisis plus the inevitability of another recession means that sustaining the "circuit breaker" is an iffy proposition for the bankrupt Garden State.


Kim Guadagno deserves credit for coming up with an idea that actually would lower property taxes for many people, but it may be the Right Plan for the Wrong State, since New Jersey is broke anyway and New Jersey's Boards of Ed are likely to lose what little fiscal restraint they possess.

Sweeney State Aid Bill: A Preliminary Analysis

I've now gotten to see a copy of Steve Sweeney's state aid reform bill and can present a preliminary analysis of it.  

The text of the bill appears to differ in some key respects from what has been reported and what its own authors have said in public.  There are also provisions in the bill affecting the tax cap and PILOTing which are important and yet I hadn't seen discussed yet.

http://assets.njspotlight.com/assets/16/0609/2307

9/15/2016 Update:  This post was accurate when it was written.  The final text of the Sweeney -Ruiz bill is much improved from the original.  This post is mostly not accurate anymore.  

http://www.njleg.state.nj.us/2016/Bills/SCR/119_I1.PDF

Bringing All Districts to Adequacy, Not Necessarily 100% Funding

First, this bill is not a bill to bring every district up to 100% funding.  Using ballpark figures, 100% funding for every district would cost $2 billion without redistribution and with redistribution would cost $1.5 billion.  

What the Sweeney bill appears to be is redistribution plus new spending in order to bring every under Adequacy district up to 100% of Adequacy.    This differs from how Sweeney has described the bill in public and I'm confused as to what the actual intent is.  

This is the relevant statutory text: 

2. a. It shall be the duty of the commission to study: (1) the adjustment aid and State aid growth limit provisions of the “School Funding Reform Act of 2008” (SFRA), P.L.2007, c.260 (C.18A:7F-43 et al.), to determine recommendations for revising those provisions in order to bring all school districts to their adequacy budgets as calculated pursuant to section 9 of that act over a period of five school years;  

So affluent underaided districts who tax themselves above their Local Fair Shares and therefore spend Above Adequacy, would apparently not benefit from this bill.  Very wealthy districts like Princeton and Millburn wouldn't gain, which is ok, but neither would diverse districts like West Orange, Teaneck, Wayne, East Brunswick, Fair Lawn, South Orange-Maplewood, Mount Olive, and Cherry Hill. (source for Adequacy Figures, the Fair Funding Database)

However, NJ's most severely underaided districts (who are all below Adequacy) would gain and there are hundreds of districts in this category.  

However, there is no risk to underaided/above Adequacy districts in this bill since the commission is charged with looking at Adjustment Aid and, by definition, these districts receive no Adjustment Aid.  So, this is a redistribution conditioned on state aid relative to uncapped aid, not residential wealth, which I believe is how redistribution should be handled.   

Since the text of the bill differs from how its authors have described it, there could be a pure mistake here. SFRA spells out Adequacy Budget in Section 9, Local Fair Share in Section 10, and the calculation of Equalization Aid in Section 11. If the bill read "calculated persuant to Sections 9-11 of that act" it would square much better with how Steve Sweeney has presented it in public.

Correcting this possible mistake or changing what is a bad idea is needed is for the commission to be able to differentiate between districts that are above or below Adequacy because of their own tax effort, not just state aid.

For instance many underaided districts are also below their Local Fair Share, so if they were to be brought up to Adequacy without a requirement that they tax at their LFS, they would become overaided. 

A few of the Abbotts are prominent districts in this category, like Trenton, Newark, and Paterson. Paterson is underaided by $36 million for 2016-17, but under its Local Fair Share by $46 million.  If Paterson were to be brought up to Adequacy it would get about $82 million.  (these are ballpark figures, the DOE has been confusing this year as to what exact Adequacy budgets are)

Conversely, there are underaided districts who are below Adequacy and tax massively above their LFS. Manchester Regional's taxes are more than twice what they should be.  

So, if a district is $10 million below Adequacy, but taxes $4 million above Local Fair Share, would it only get $6 million?  If so, the district is still underaided and the taxpayers overburdened.  

To avoid perverse tax incentives, the goal of the law should be to bring districts up to 100% of SFRA aid, not 100% of Adequacy.  This would also free up some more state money that could go to overAdequacy/overtaxed districts.

I accept that districts like Paterson, Newark, and Trenton cannot pay their full 100% Local Fair Shares because their residents are poor and their municipal taxes are very high, but the solution should be to change the formula for Local Fair Share should that it is calculated differently for poor districts than for wealthy districts.

Without a systematic change to the LFS formula or the language of the bill, there is a risk that the state will make up the tax deficit and districts will be, in effect, penalized for not paying their full Local Fair Share. So, if one district taxes at 100% of LFS and another district taxes at 50% of LFS, they would both get whatever the state aid needed is to bring them up to Adequacy and the district with taxes at 100% of LFS will be punished for that.  

A sensible change should be to task the commission with reforming the formula for Local Fair Share for poor districts.  If the formula were changed to "Aggregate Income -$10,000 per adult" the drop in a low-income town's Local Fair Share would be significant and Equalization Aid would increase, but the drop in a high-income town's LFS would be small.

Reforming the calculation of LFS may already be allowable under the existing text, but it's ambiguous.

Those of us in the fair aid community will have to constantly point out that a district's tax levy affects is spending relative to Adequacy, not just state aid.  

Reforming the Tax Cap

(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;

Reforming the tax cap is necessary for aid redistribution because even though an overaided district might be below Local Fair Share, it cannot tap its tax base if it is only allowed to increase taxes by 2% a year anyway.  

For Jersey City to increase school taxes by $20 million a year would be economically manageable, but it is illegal since Jersey City's tax levy is only $114 million.

This proposal to reevaluate the tax cap law is also a big deal even absent redistribution since overaided/low tax levy districts are scheduled to be flat-funded forever.  Since these districts have tax levies that are proportionally small in relation to their budgets, a 2% tax levy increase for them would bring in minute increases in the overall budget.  For instance, Jersey City's tax levy is 19% of its budget.  2% of 19% is nothing.

Personally, I believe that property taxes are too high in most towns and that the tax cap gives districts leverage in bargaining with unions.  I hope that the tax cap is only amended for districts whose taxes are below Local Fair Share.  

Reforming PILOTs

(4) the equalized valuation and income measures used to determine a school district’s local share of its adequacy budget as calculated pursuant to section 10 of P.L.2007, c.260 (C.18A:7F-52), and the impact of property tax abatements on that local share

PILOT reform would only have an impact on a few districts that receive Equalization Aid and grant many PILOTs, such as Jersey City and to a lesser extent Asbury Park and Harrison.   However, since Jersey City is the state's second biggest district, anything affecting it has a large impact on school finance and this is a case of a reform that would affect a small number of districts but have a big financial impact.    

Hoboken is another heavy PILOT user, but it does not receive Equalization Aid so PILOTs do not distort Hoboken's Local Fair Share in a relevant way since Hoboken's LFS is quadruple its Adequacy budget anyway.  

However, the list of overaided/heavy PILOT districts could expand in the future, so it's good that the bill addresses PILOTing now.

Overall, I have a lot of respect for Steve Sweeney and think his proposal is a very good one, but I hope that certain changes are made between now and passage or that the appointed commission takes the local tax levy into consideration in making it above or below Adequacy.  

The Effects and Non-Effects of NJ's Tax Cap Law

On July 13, 2010, Chris Christie signed a law that capped municipal and school tax increases at 2%.

The law in a sense expands and restricts a Board of Education's ability to increase taxes.

The expansion is a BOE new power to increase taxes by 2% (or more) without getting a vote from its electorate.  On the other hand, the tax cap is a restriction of a BOE's ability to raise taxes because now if a BOE needs to go above a 2% increase it needs to get an affirmative vote from its public (or Board of School Estimate) the following November, when there is a larger, more representative electorate.*

The tax cap law contains several adjustments that give a Board of Education the automatic power to increase taxes above 2.0%.  So "2% isn't always 2%."

These adjustments are:

• Health benefits
• Emergencies
• Debt service
• Enrollment Growth

There is also an adjustment for pension benefits, but that applies to counties and municipal governments.

If a district does not use its tax cap adjustments in one year, the adjustments can be saved for three years as "Banked Cap," ie, saved additional taxing authority.  The possibility of saving tax authority as "Banked Cap" means that several years of 2.0% increases might be followed by a larger increase as a BOE then uses its "banked cap" taxing authority.

There are some major upsides and downsides of the tax cap law.

The tax cap law, combined with the recession, has indeed restricted property tax increases in New Jersey.

According to a 2015 Star-Ledger analysis:

NJ Advance Media analyzed municipal tax figures going back 15 years and found that, when adjusted for inflation, the impact of property tax relief relief measures enacted during Gov. Chris Christie's first term — including strict caps on local spending and public worker arbitration rewards — is clear.

Property taxes rose 1 percent when adjusted for inflation from 2010 to 2015 after soaring 35 percent, after inflation was taken into account, from 2000 to 2010, the analysis found....

Michael Darcy, executive director of the New Jersey League of Municipalities said the 2 percent spending cap enacted by Christie helped, but reforms to public worker benefits and the arbitration cap made it possible for local officials to rein in some costs. 

"I think it is safe to say that overall the escalation of property taxes has been significantly curtailed compared to historic trends," said Darcy.

The downside of the tax cap is that lower tax increases translate into budget cuts for school districts, since most school districts have structural increases above 2% that are outside the law's automatic adjustments, such as increases in teacher salaries and Out of District tuition for children with special needs.

The tax cap law does save taxpayers money, but it is blatantly flawed from the perspective of aid-dependent districts.  In passing such a badly designed law, the legislature must have been under the belief that state aid would always increase.

The Theoretical Problem for Aid-Dependent Districts

Let's say there is a low-income district with a $100 million budget, $80 million of which is state aid and $20 million of which is local taxes.

Let's conservatively say the district budget increases by 2%, or $2 million. There is no realistic way for the BOE to make up the money with local taxes.  2% of a $20 million tax levy is only $400,000.

2% of the budget would be $2 million, but a $2 million tax increase for a district whose tax levy is only $20 million is 10%!  A 10% tax increase is politically impossible increase for all districts and for most (not all) poor districts, an economically impossible amount too.

By contrast, a district that is 80% locally funded, 20% state aid funded is a little better off.  2% of 80% is 1.6%, or $1.6 million for our idealized $100 million budget district.  This better-off district will still have to make cuts, but the cuts will not be as deep.

The tax cap law's biggest flaw is that it gives no automatic adjustment if a district loses state aid.  In 2010 the legislature failed to foresee that this was a possibility, but subsequent budget history has shown that districts can lose state aid.  With David Hespe and Steven Sweeney finally talking about redistribution it appears that there will be a round of cuts for certain districts again.

By the end of six years, the wealthier district has a budget that is $2.1 million smaller than it would be otherwise if the budgetary costs increased by 2%, but the poorer district has a budget that is $8.3 million smaller than it would be otherwise.

However, this is just a theoretical problem since so many Boards of Education in New Jersey are not increasing taxes by the maximum amount allowed by the tax cap law anyway.

The Real Problem is that Many Districts Don't Increase the Tax Levy by 2% Anyway

These sub-maximum increases are more common in the poorest districts in New Jersey.  Even the Abbott districts, whose tax levies are almost always well below Local Fair Share, are very reluctant to increase taxes by even 2.0%.

• New Brunswick kept its tax levy at $27.3 million from 2009-10 to 2014-15 when it finally accepted at 2% increase.
• Paterson has kept its tax levy at $39 million since 2009-10.
• Passaic has kept its tax levy at $16.8 million since 2010-11.
• Perth Amboy has had a $21.7 million tax levy since 2010-11.
• Salem City has been at $2.4 million since 2009-10.
• Trenton kept its tax levy at $21.1 million.

The combination of frozen state aid and very small, even non-existent, tax increases, means that affluent districts that spent less money than the Abbotts in the prime of the Abbott Era (about 1997-2006) are now catching up to the Abbotts.  The "Parity Plus" Era is dead.  

The trend is clear: the structure of the tax cap law combined with flat state aid is undoing the Abbott decisions.

Even Jersey City, a booming city that is significantly below Local Fair Share, has refused to raise its taxes above 2.0%.

The Tax Cap is a Huge Obstacle to Redistribution

Given how weak NJ's economy is and how enormous our pension debts are, I see redistributing Adjustment Aid as the only hope for poor and severely underaided districts.

The problem with this is that even though  overaided districts are often well below their Local Fair Shares and have the economic capacity to make up for lost aid, the tax cap effectively prevents this.

Let's look at Hoboken, the district that is rightfully first in line for aid losses in any redistribution.

Hoboken has $146 million in unused Local Fair Share, so Hoboken could afford to lose state aid more easily than any other district in NJ.

However, Hoboken's BOE has no leeway to tap that excess taxing capacity due to the tax cap.  

Conclusion:

The tax cap is a gift to taxpayers and a problem for school district budgets.  If the tax cap were combined with increasing state aid it would mean that we would become less reliant on property taxes to fund local government and there would eventually be equity in the state aid distribution.

However, numerous districts in NJ are overaided as it is and therefore they are not supposed to gain money even if SFRA were followed.  Thus, the tax cap thus means automatic, unavoidable cuts for many districts.

When the legislature passed the tax cap it did not envision that NJ would have to cut aid again for any district.  Now that we are finally at the point where we are talking about redistribution and cutting aid for districts the tax cap is a problem since it will not allow an overaided district to make up for the loss.

I think the solution is simple: add a loss of state aid to the automatic adjustments to taxing authority.  If a district loses $5 million in state aid, give its BOE the authority to increase taxes by that amount without a vote from its electorate.

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*There are some school districts that still have non-November budget votes.