New Jersey and Its Neighbors's Job Growth, County by County

If you care enough about public policy to read this blog, you already know that New Jersey's job growth has lagged the national average for two decades.

This post will look at New Jersey's private-sector job picture on the county level, for a more granular look that reveals more of the complexity of our economy and the economy of our "economic neighborhood" of Delaware, eastern Pennsylvania, downstate New York, and southwest Connecticut.

When the media and political organizations discuss job growth in New Jersey, the analysis and argument almost always focuses on the state of

This graph from the New Jersey Policy Perspective
 is too blunt to be helpful,
nor is it even 100% accurate
that NJ lags PA. See below for a more nuanced
take.
Source.

 New Jersey as a whole, with sometimes some analysis of our employment rate, job gains in absolute numbers, income, or whatever sectors of our economy are shrinking or growing.

That state-level analysis has its place, but state-level analysis conceals that large portions of an apparently stagnant state are actually thriving and vice versa, ie, that large portions of a state whose growth is strong are actually stagnant or in decline.

In my opinion, the state-level comparisons that the New Jersey Policy Perspective uses obscure more than they reveal and their real purpose is to diminish Chris Christie, not shed light on NJ and local economic conditions.  The success of New York State in the last 7-8 years has nothing to do with Andrew Cuomo but everything to do with New York City already being the country's economic and cultural capital, and a huge tourist attraction to boot.

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The source of my data is the Bureau of Labor Statistics's "Quarterly Census of Employment and Wages."  Look under "County High-Level" if you want to verify anything here.  

My comparison is Q1 of 2010 to March of 2017.  I used Q1 of 2010 because that is when Chris Christie became governor and is near the bottom of the Great Recession.

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Job Gains/Losses, Absolute Numbers

As you can see, New York (Manhattan), Kings (Brooklyn), and Queens are significantly ahead of all other counties.

Combined, those three counties alone have enjoyed more than half of the New Jersey & Neighborhood job growth.

In fact, Manhattan's job growth of 335,000 is 100,000 more than all of New Jersey combined.  

• New York State Job Growth is Really New York City Job Growth
  New York State's job growth is extremely concentrated in New York City as well, with 73% of New York State's new private sector jobs being created in the Five Boroughs, even though they only have 43% of New York State's population.  40% of new jobs are in Manhattan alone, even though Manhattan has only 8% of New York State's population.
• Hudson is the Strongest in New Jersey, but is not Dominant like Manhattan/NYC
  Although Hudson County is the only New Jersey county to outperform the country, with 15.9% job growth, New Jersey's job growth is not as concentrated in Hudson as New York State's is in New York City or Manhattan.
  
  Hudson County has 7.5% of New Jersey's population, but only gained 13.6% of New Jersey's new private sector jobs.  This is impressive, but it is also less than Brooklyn's share of new NYS jobs, which is 17%.
  

  

  Please notice the national average (in orange), is now included.

  
  

• Reports of Exurban Death are Greatly Exaggerated
  Although we hear a lot about how the suburbs are less appealing to people and businesses, several outer-suburban, automobile-dependent counties in New Jersey actually did ok. Somerset gained 12.8%.  Middlesex gained 12.7%.  Morris gained 7.3%.  Ocean gained 10.9%, and Mercer gained 9.9%.  Gloucester gained 9.3%.
  
  Those gains are nothing to write home about, but it's better than what happened with New Jersey's denser, inner suburban counties. Essex gained only 2.2%, Bergen gained 4.4%.  Union lost -1.4%.  Passaic lost 1.2%.
  
  They aren't dense, inner suburbs, but Hunterdon County only gained 3.6% and Warren County lost 4.3%.
• Although train-line suburbs like Glen Ridge, Millburn, Montclair, South Orange, and Maplewood, have New Jersey's hottest real estate markets, their local job pictures are in the doldrums.  Strong train-line real estate markets are not powered by New Jersey-employed buyers.  

Although we hear quite a bit about an American Urban Renaissance a look at Philadelphia adds a critical nuance.

• The Urban Boom is Missing the City of Brotherly Love
  Philadelphia County, while it was in fourth place for total jobs gained, actually has underperformed the

  

  Philly: Doing Ok, but Not Booming

  nation.  Although Philadelphia's 44,000 new private sector jobs is impressive in light of Philadelphia's previous four decades, it is only a job growth rate of 8.5%, a figure significantly below the national average of 13.4%.
  
  On the other hand, Philadelphia's recent gain is better than or the same as its own collar counties. Bucks County only gained 5.7%.  Montgomery only gained 6.4%.  Camden, over in NJ, only gained 6.7%.  Delaware County only did slightly better than Philly, at an 8.9% gain.   

The American Urban Renaissance isn't hype, but it's heavily concentrated in only a few superstar cities and Philadelphia isn't really one of them.

The New Jersey consequence of Philadelphia having modest economic growth is that proximity to Philadelphia isn't an asset like proximity to New York City is.

• New York's Suburban Counties Underperformed the Country, but Outperformed Other Suburbs  Suburban New York is lagging the nation, but holding its own.  Suffolk (+8.4%), Nassau (+7.8%), and Westchester (+7.0%) lagged the nation, but as developed, mature economies you would expect that.  Rockland actually slightly beat the national average with 13.6% jobs gain. Orange County isn't really suburban, but, for what it's worth, it had a strong 12.2% job growth too.  Putnam County (not graphed and not really suburban either), only gained 6%.
  
  Northeast New Jersey's economic performance is terrible.  As mentioned before, Essex gained only 2.2%, Bergen gained 4.4%. Union lost 1.4%.  Passaic lost 1.2%.  Sussex lost 0.6%.  More distant counties in NJ like Middlesex and Somerset did better, but they are not really in NYC's orbit in the same way.
  
  Although NJ's suburbs did the worst, suburban Philadelphia and suburban Connecticut didn't do well either.  As mentioned above, Bucks County and Montgomery County in PA only gained 5.7% and 6.4%, respectively.  Connecticut did worse than that, with Fairfield County and New Haven County only gaining 4.9% and 5.2%, respectively.  

I don't have a confident idea why suburban New York did better than the other suburbs locations. it could be related to the lack of a fiscal crisis.

It's also curious that Rockland and Orange County's job growth are so much better than suburban counties on the New Jersey Long Island, and Westchester.  The New Jersey Policy Perspective likes to attribute New Jersey's problems to an underinvestment in public transportation, as if contemporary and future NJTransit problems could have caused a statewide economic stagnation that began in 1997, but Rockland and Orange County get rail transit from... New Jersey Transit.

Could the growth be from Rockland and Orange counties's demographics?

Is there a Haredi Effect?
Ok, I'm going out on a limb here, so this is tentative, but does the growth of Haredi communities improve jobs growth?

Mostly the causality is economy growth causes population growth, but it's not a one-way causation and there is a countereffect in which population growth itself can drive economic growth and jobs.

• Ocean County is home to Lakewood, New Jersey's fastest growing town.  Ocean County's job

  

  Job Bringers?

  growth is 10.9%, and is fourth best in New Jersey, after Hudson, Somerset, and Middlesex and significantly better than its neighbors.  Monmouth is only at 6.9% growth. Burlington is only at 7.8%.  Atlantic was at a 11.4% loss.  
  
  Lakewood has gained over 26,000 people since the bottom of the recession.  Presumably most of the new population is children, but Ocean County's job gain is actually only 13,000.  It's likely a large portion of that growth is in Lakewood or from Lakewood consumers.

An similar effect seems to exist with Rockland and Orange counties. Rockland is home to the Township of Ramapo and Orange is home to Kiryas Joel.  Most of Rockand and Orange counties's population growth is from their Hassidic communities.

As this 2015 report from the Urban Action Agenda on the Hudson Valley documented:

The greatest numerical increase in the Hudson Valley over the 13-year period was in the Town of Ramapo (Rockland County), with a 19,431 person increase. Ramapo's total population in 2013 - 128,336 - includes the population of the villages within its boundary, including New Square, Kaser and Spring Valley. Thus their rapid growth contributes to Ramapo's booming population. Of the five municipalities that saw 45% or more population growth, three (Kiryas Joel, New Square and Kaser) are almost entirely Hasidic or Jewish Orthodox communities.

To demonstrate the influence of these villages on overall county growth, if Kiryas Joel were factored out during the 2000-2013 period, Orange County's growth rate would drop from 9.5% to 7.6%. Kiryas Joel accounted for 23% of the county's total population growth during the time period. In Rockland County, if Kaser and New Square's growth were factored out over the 2000-2013 time period, the county's growth rate would drop from 9.9% to 8.7%. 

• Atlantic City's Implosion Has Hurt, but without It, New Jersey's Growth Would Still LagAtlantic County lost 11.4% of its private sector jobs, but Atlantic County is small, so that 11.4% loss is only 12,782 private sector jobs.
  
  From Q1 2010 to 2017, New Jersey only gained 220,000 private sector jobs, so even in a hypothetical scenario where Atlantic City didn't lose any private sector jobs or gained 12,782 jobs, New Jersey's economic performance would still lag the nation.  If, hypothetically, Atlantic County gained 12,782 jobs, NJ's private sector job growth would only be 7.2% instead of 7.0%.
  
  The same effect of smallness goes for Cape May County.  Cape May lost 19.6% of its private sector jobs, but that's only 6,127 jobs.

This is a Better Look at NJ's Comparative Job Growth

"South Jersey" is Atlantic, Burlington, Camden, Cumberland,
Cape May, Gloucester, Monmouth, Ocean, and Salem.

I disaggregated North and South Jersey here, but if they were combined, it would be clearer that NJ is ahead of Pennsylvania since most of NJ's population is in North Jersey.

New Jersey's job performance is often ranked below Pennsylvania's (like the NJPP's example in the top of this post), but that is only when you compare from the bottom of each state's respective jobs nadir.

When you compare from most common points of time, like I did by using Q1 of 2010, New Jersey's job performance is actually better.

Excluding New York City, New Jersey actually outperformed the rest of New York State.

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Can New Jersey Be Saved?

The tremendous job growth in New York City might lead people to dream that New Jersey's salvation is to build that Gateway Tunnel so that New Jerseyans can get to jobs in New York; or, New Yorkers can move to New Jersey.

Phil Murphy says this sort of thing, but I'll use a quote from Justin Fox, my favorite econ writer, who suggests the key to saving to NJ is to build a tunnel:

I have no idea what combination of roads and trains and bike lanes and hyperloops postsuburban New Jersey will need to thrive, but I'm guessing that good connections to resurgent New York City will be really important. So it can't have helped that two of the signature actions of Chris Christie's governorship -- killing a plan to dig a new rail tunnel to Manhattan in 2010 and causing a horrific traffic jam at the George Washington Bridge in 2013 -- have involved cutting his state off from the city. Blame him for that, definitely.

OK, providing reliable access to New York City is a good way to keep New Jersey's workforce employed, but unfortunately it's no way to keep New Jersey's Treasury filled, since anyone who works in New York State pays income taxes to Albany, even if he lives in another state.

Indeed.  New Jerseyans pay more than $3.1 billion a year in New York State taxes, versus only $616 million that New York residents pay to Trenton.

The New Jersey share of New York's total personal income taxes stands out even in the context of the larger state's enormous tax base: for example, the income taxes paid by New Jersey commuters equaled the total income tax owed by 1.3 million workers and small-business owners in the 17-county Western New York region, including metropolitan Buffalo-Niagara Falls and Rochester. 

New Jersey generated more New York State income tax than the 1.1 million filers living in Brooklyn -- more, for that matter, than any New York City borough except Manhattan.

New Jersey could build the Gateway Tunnel and double capacity to New York City for commuters, but it would do little directly for New Jersey's Treasury and funding for our neglected public services and pensions.

I worry that policy-makers are too quick to write off suburbia and exurbia, but a pathway forward for New Jersey might be to invest in strengthening Hudson County's role as New York City's "Sixth Boro."  This might have to include offering tax incentives to businesses willing to come to Hudson County in order to build up a denser mass of business activity.

Ironically, the state, under Phil Murphy, may be about to embark on a multi-billion dollar tunnel project that, in fact, only takes people under Hudson County on their way to Manhattan, not to New Jersey at all.

Regardless of the path forward for New Jersey, I don't think Christie deserves all of the blame for our problems.  As shown above, the job growth in our part of the country is heavily concentrated in New York City alone.  Philadelphia, its suburbs, all of downstate New York, and all of Connecticut have also lagged the nation.

Although Christie has made many mistakes, New Jersey is up against powerful macroeconomic forces that are not his making.

Let's keep that in context.

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• Biggest Real Estate Gains, Losses in NJ
• Divergent Fates of NJ's Big Cities
• NJ Lags the Nation in (Almost) Every Economic Category

Sussex County Consolidation?

A recurring proposal to mitigate New Jersey's crushing property taxes is school district (and municipal) consolidation.

The argument seemingly has some merit.  Starting from the fact that New Jersey has 590 school districts, proponents say that if New Jersey had fewer school districts we would need fewer superintendents, fewer assistant superintendents, fewer business administrators, fewer assistant business administrators, etc and then save money.  The most informed advocates for consolidation might use Maryland as an example, which has only 24 county-size districts and much lower spending than New Jersey, with a 1.1 average property tax rate versus New Jersey's 2.4 average tax rate), while seemingly getting equivalent results.

The latest advocate for consolidation is Mayor Wayne Levante of Newton. Levante, a former teacher in Paterson, says that if all 25 of Sussex County's districts consolidated into a single countywide district it would save $6-$9 million.

Why even consider such a thing?

The major reason for consolidation: To save money. 

Per-pupil costs are rising in the county despite decreasingly enrollment, resulting in higher property taxes, according to the Newton resolution. 

Levante said a consolidated district would reduce school administrative costs in Sussex County by anywhere from $6 million to $9 million annually. 

Some school buildings might close as a result, Levante said.
He added that local school boards could still exist, with board presidents perhaps serving on an advisory committee for the county superintendent.

How it would work
The Newton resolution calls for having one county superintendent, one county business office, and all schools within the county overseen by the county office.

Levante, a former teacher in Paterson, drew a parallel to the set-up in New Jersey's third-largest city.

"I worked in Paterson ... It's like 50-something schools. You have one superintendent," Levante said.

Although I'm going to throw cold water on Mayor Levante's proposal, if any county in New Jersey merged into a countywide district, Sussex would be a good candidate.

• Sussex County has a 2.94 all-in tax rate (with a 1.75 for the schools alone), compared to New Jersey's 2.4 all-in average.  Since Sussex County's taxes are so high, the need to do anything to save money is more acute.
• Sussex County's districts are very small, with an average size of 805 students, compared to a statewide average of 2250.
• Existing tax rates do vary, but not by as much as in other counties.
• Sussex County towns are less unequal than towns in other counties. Sussex County has no districts in DFGs A or B or in DFG J. 
• Sussex County's school taxes actually have the lowest Standard Deviation of any NJ county and the municipal taxes are the sixth lowest, meaning there would be less difficulty in equalizing school taxes and then municipal tax encumbrance.  
• Sussex County is losing student population and its 21 overaided districts are overaided by $41 million.  If Adjustment Aid is cut, Sussex County districts will face budget cuts that could more easily be managed by a larger district.

Despite the relative practicality and need of consolidating Sussex, large, probably insurmountable, political difficulties would remain.

Saving $6-9 million is better than nothing, but it would be wrong to assume that every Sussex County taxpayer would benefit, since right now Sussex County contains 25 school districts with 25 tax rates, ranging from 2.365 in Hampton Boro to 1.435 in Branchville.  Consolidation would also require shifts in taxation, depending on how school taxes in a Sussex County superdistrict were apportioned.

If a town does not have a K-12 district, school tax rates reflect combined districts.
Source:
http://www.state.nj.us/dca/divisions/dlgs/resources/property_tax.html#1

One way taxes could be apportioned is the way county taxes already are, where the percentage of school taxes paid equals a town's percentage of the county's total Equalized Valuation.   Under this setup, if a district has 10% of the county's total Equalized Valuation, it would pay 10% of the school taxes.

Under apportionment by Equalized Valuation, Sussex County's swings in taxation wouldn't be as large as the swings in more diverse counties', but there would still be complaints.  If Equalized Valuation were used, Vernon's tax increase would be the largest.  Vernon right now taxes at 12% of Sussex County's total school tax levy ($37.9 million out of $295.5 million for 2016-17), but Vernon has 14% of Sussex County's total Equalized Valuation ($2.35 billion out of $16.85 billion).  So, if the total school tax bill stayed at $295.5 million, Vernon's taxes would rise to 14% of that, or $41.4 million.

Apportioning by Equalized Valuation isn't the only model.  A Sussex superdistrict could also apportion taxes based on what percentage of the total student body comes from the town, so if a town contributes 10% of the students, it pays 10% of the taxes, regardless of what its tax base is.

If tax apportionment is based on student body, tax rates would vary between towns.

Since tax rates would vary by town, the consolidated Sussex BOE's tax increases would hit some towns much harder than they would others.

Newton's taxpayers might pay the highest tax rate in Sussex County under a per student apportionment, since Newton has 5.2% of Sussex County's student population, but only 3.7% of the tax base.  If Newton had to pay 5.2% of Sussex County's school taxes, I estimate the school rate would become 2.5 alone.  (on top of municipal and county taxes)

(Math for calculation.  5.2% of $296 million = $15.4 million; $15.4 mil divided by Newton EV of $621 mil = 2.5%.  I cannot estimate whose tax rate would become the lowest, since not all Sussex districts are K12s.)

New regional districts in New Jersey, like Pittsgrove-Elmer and South-Hunterdon, use per pupil apportionment, but these new regional districts are created between towns that have similar tax bases and similar student populations.  The towns "look before they leap" and learn what their new tax rates will be. For South Hunterdon the variation is small, going from 1.2269 for Lambertville to 1.5710 West Amwell.

A hybrid tax apportionment, between Equalized Valuation and a per student apportionment, is also possible.

Manchester Regional in Passaic County has a hybrid system, where apportionment is based 50% on Equalized Valuation and 50% on pupil contribution.  This exists because North Haledon wants to exit the regional district entirely, but the NJ Supreme Court has not allowed it. The 50:50 apportionment deal is a compromise.

While the Manchester Regional model is defensible in the abstract, since Manchester Regional's component districts differ greatly in wealth, there are thus large differences in tax rate.

Thus, North Haledon has a tax rate of only 0.1866, but Prospect Park has a tax rate of 1.3346.

The problem is not Manchester Regional's tax apportionment formula itself; the problem is that Manchester Regional's component districts differ greatly in wealth.  If Manchester Regional's taxes were apportioned solely on pupil enrollment, like Pittsgrove-Elmer and South-Hunterdon, the differences in Manchester Regional's tax rates would be even greater.

In any case, if Sussex County used a per student tax apportionment plan, there would be large differences in tax rate.

See "Manchester Regional: NJ's Most Underaided and Most Divided District"))

Also problematic is that there would have to be a convergence of spending too. Right now Hamburg Boro is Sussex County's highest spender, with a Total Budgetary Cost Per Pupil of $25,092 per student. That high spending is mostly driven by over $2,027 per student in excess aid, but Hamburg also has extremely high school taxes, with a 2.132 tax rate.

Hardystown Township is Sussex County's lowest spender, at $13,873 per student. Hardystown is also overaided, but by only $1,353 per student, but it has chosen to be an undertaxer, with a 0.9 tax rate.

Source:
User Friendly Budgets,
http://www.nj.gov/education/finance/fp/ufb/2016/37.html

Unless higher spending is justified by more challenging demographics, what are now Sussex County's highest spending districts would have to make cuts after they become mere schools within the larger Sussex County superdistrict.

That Being Said, Sussex County Taxes are Less Unequal Than Most Other Counties

The Reference to Essex is because this graph is used in my Essex post as well.

Source, http://www.state.nj.us/dca/divisions/dlgs/resources/property_tax.html#1
Excel Calcuation of SD
The Reference to Essex is because this graph is used in my Essex post as well.

Sussex County's Taxes Would Still be Among the Nation's Worst

Assuming that the $6-$9 million in savings is correct, how much of a tax reduction is that for Sussex County really?

Sussex County's all-in tax levy was $490 million for 2016.  ($91,924,069 for county taxes, $295,631,557, for school district taxes, $103,186,926 for municipal taxes)  (see "Property Tax Information")

Sussex County's all-in tax rate is 2.9, which is much higher than the state average of 2.4 and 240% of the national average of 1.19.

So, even saving $9 million (the upper-bound estimate) would only equal 1.8% of the all-in tax burden, or 3% of the school tax burden.

The lower bound estimate, $6 million, would only be 1.2% of the all-in tax burden, or 2% of the school tax burden.

Even if there were complete municipal consolidation too and the savings were of the same order, Sussex County's taxes would still be at 2.8, which is still way about New Jersey's average, let alone the national average.

The truth is that governmental fragmentation doesn't lead to that much more administrative spending in New Jersey.

If school district consolidation allowed the closings of schools and a reduction of the teaching force, then yes, it would produce bigger savings.

If living in a big, countywide district led voters to be less tolerant of school tax increases than they are for increases for their own town, then that would produce large savings too.

Can Sussex County Afford Not to Consolidate?

Here is where state aid comes in.

21 of Sussex's districts are overaided with a total surplus of $42 million. (not counting Interdistrict Choice money. Three Sussex districts are underaided (Green, Lenape Valley Regional, and Newton), but with a deficit of only $5.8 million, most of which is Newton's.

Right now the distribution of state aid in Sussex County makes zero sense. Hopatcong is overaided by $9,126,016, or $5,888 per student, whereas Newton is underaided by -$4,205,916, or -$3,776 per student.

It's likely that Sussex County schools will lose state aid in the next few years, thereby creating budget stress. If a district only has a single school, managing those cuts is going to be very hard. if a district had multiple schools, managing the cuts is easier since an aging school could be closed.

Is this worth the fight?  

Although Sussex County could more easily consolidate than most other counties in New Jersey, the odds of consolidation happening are not high, with even Mayor Levante admitting "I know it's an uphill battle."

With that acknowledgement, I don't think a countywide consolidation is a fight worth fighting. Individual Sussex County districts could consolidate or create send-receive relationships, but creating a countywide district would be such a huge political lift that I think people who want lower taxes should fight on other fronts.

To be honest, district fragmentation and a proliferation of administrators isn't the real reason New Jersey has such high taxes.  The real reason is that New Jersey's teachers are the fifth best paid in the country and New Jersey has the third-lowest student:teacher ratio, and the same thing goes for other government employees.  The utopianism of Abbott, which diverts billions per year into Abbott districts in excess of what other states give their low-income districts, also forces extremely high taxes on non-Abbotts.  (See Education Spending and New Jersey Taxes)

Taken in a vacuum, county-wide districts have much to recommend them, but New Jersey has had home rule and governmental fragmentation for over a century.

As good looking in the abstract county districts are, and as functional as Maryland looks, when it comes to county-wide districts that ship sailed long ago.

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See Also:

• "New Jersey Doesn't Actually Have That Many Districts"
• "Dream First, Figure Out How to Pay for It Later: Essex County Consolidation"
• Why Cape May Needs Consolidation, Not Permanent Adjustment Aid!
• NJ District Consolidation and Tax Apportionment

Updated State Aid Disparities for 2017-18

Through the effort of Steve Sweeney, Paul Sarlo, Louis Greenfield, and their allies, the legislature was able to amend Chris Christie's original flat-funding state aid proposal in order to add $100 million to overall K-12 spending and redistribute $31 million from overaided districts to underaided districts.

This is an updated look at 2017-18 state aid disparities.

Sweeney's success reduces the disparities that existed in Christie's original proposal, but compared to 2016-17, the disparities are as large as ever, since underaided districts are the ones that are gaining student enrollment and/or losing tax base and thus their Uncapped Aid increased more than Sweeney was able to increase their state aid.

As always, my original data is from the Department of Education.  They sent me information on enrollment, tax levy, Actual Aid, and Uncapped Aid.  I used those amounts to calculate total deficits or surpluses, deficits or surpluses per student, and aid as a percentage of Uncapped Aid.

As always, I've put updated 2017-18 state aid data online.

The analysis is basically the same as other analyses I've done, but I exclude Interdistrict Choice aid from a district's aid and aid surplus or deficit.  Interdistrict Choice has its own, independent aid formula that is outside of SFRA.  Interdistrict Choice Aid is not subject to redistribution under the present debate, so it is wisest to exclude it from the SFRA aid that districts receive.

Here is a summary:

• The 377 underaided districts still have a deficit of -$1,965,333,325. This is almost exactly the same as the deficit for 2016-17, when our deficit was $1.93 billion.
• The 200 overaided districts still have a surplus of $637,776,892. 
• The net deficit for the state is thus $1.328 billion. 
• There are 70 districts who are still overaided by more than $2,000 per student. Asbury Park has the largest surplus, at +$10,943. (A $24,348,602 surplus for 2225 students) 
• There are 118 districts who are still underaided by more than $2,000 per student. Bound Brook's deficit remains the largest, at -$9,546 per student.(a -$17,153,743 deficit for 1796 students.)
• Hopatcong receives 546% of its Uncapped Aid.  ($11,170,937 out of $2,044,921)
• Chesterfield only receives 19% of its Uncapped Aid, the worst in New Jersey.  (Chesterfield only receives $821,188 out of $4,224,394 it should get.)
• Jersey City's surplus is the largest in total terms, at $151,554,542 (Jersey City gets $410 million when it should only receive $258 million). This surplus enables Jersey City to tax at only $116 million on a Local Fair Share of $370 million.

So, as welcome as the late budget changes were, New Jersey still has a long way to go towards fairness.

The above figures include vo-techs, but exclude non-operating districts.

For 2016-17 data, please see Dr. Ken Greene's analysis.

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See Also this Post on State Aid Disparities under the Governor's Original Proposal

• "State Aid Disparities Worsen 2017-18"

Falsehoods from Toms River

Since Steve Sweeney and Vincent Prieto agreed on a plan that would redistribute $31 million (originally $46 million) of the $670 million New Jersey has been giving out as "Hold Harmless Aid," the most vocal opposition has come from Toms River.

For background, Toms River receives $68.3 million in state aid, even though SFRA's core formulas say it only needs $47.2 million.  That $21.1 million excess is one of the ten largest in New Jersey in total dollars and works out to $1300 per student.

The $21 million in excess aid, plus Toms Rivers' own acceptance of very low student spending, allow Toms River to tax at only 75% of Local Fair Share, with a $151 million 2017-18 tax levy on a Local Fair Share of $197.6 million.

Despite having over $46 million in untapped Local Fair Share, and a knowledge that most New Jersey school districts tax above Local Fair Share, the Toms River Board of Education opposes any redistribution.

As part of their campaign in defense of their own aid hoarding, the Toms River Board of Education and its administrators have been writing op-eds arguing tha aid cuts are "unfair" for many reasons, the following of which are chief:

And how in good conscience can these legislators propose taking $3.3 million dollars from Toms River Regional when we are still reeling from the effects of Superstorm Sandy and have $600 million in ratables that have yet to be recovered? The topic of property tax assessments highlights another known critical flaw of the school aid formula- it allows for districts to have significantly understated property tax assessment totals in the aid calculation, which matters greatly because a district’s ‘wealth’ is the basis for a large portion of a district’s school aid. For example, the property wealth calculation does not include Payments in Lieu of Taxes (‘Pilots’) and tax abatement programs, which excludes millions of dollars in property ratables, which could be material to the calculation of a district’s school aid. The same legislators are also aware that large school aid increases, some in the millions, would be given to several districts whose towns have not had property assessment revaluations in over 25 years! Having an understated property ratable figure provides large aid dollars for several districts, and since the pot of school aid is limited, it takes away significant amounts of school aid that would be spread to the rest of the districts in the State.

Where to begin?
1.  A Lack of a Reval has No Effect on State Aid

It is true that there are towns in New Jersey (all in Hudson, Middlesex, and Union Counties) that have not done revals since the 1980s, but it is completely erroneous to say that a town's lack of a property reval in any way affects its state aid.

This is because state aid is based on Equalized Valuation, not the official assessment.

Equalized Valuation, which is also used to apportion county taxes, is calculated based on the ratio of sales prices to official valuation.

If, on average, sale prices are 115% of official assessment, then Equalized Valuation equals 115% of the town's total official assessment. If sale prices are, on average, 200% of official assessment, then Equalized Valuation equals 200% of the town's total official assessment.  Since Equalized Valuation is the product of official assessment times the sales ratio, a lack of a reval does not affect it.

Ironically, by insisting that the state maintain a frozen aid distribution, the Toms River BOE and administration are effectively say that the state not do a "state aid reval" of its own.

2.  Toms River was Overaided Before Sandy, Loss of Ratables is Factored into State Aid

Toms River (and Brick) have repeatedly said that it is unfair to take aid away from them because they have not recovered from Hurricane Sandy.

First of all, Toms River was overaided before Sandy occurred. In 2011-12 Toms River got $9.8 million in Adjustment Aid.  In SFRA's first year of 2008-09, Toms River got $18.5 million in Adjustment Aid.

Now, post-Sandy Toms River is more overaided than it was before Sandy, but the loss of tax base that Toms River brings up is already built-into the calculation of Toms Rivers' Local Fair Share state aid.

Since Toms Rivers now has an Equalized Valuation of $15,167,528,438 versus the $16,065,236,923 it had previous to Sandy, Toms Rivers' Local Fair Share is reduced by about $6 million, approximated based on

Equalized Valuation alone.  I do not have data on a loss of Aggregate Income, but if it is lower than it was pre-Sandy, that would reduce Toms Rivers' Local Fair Share as well.

What causes Toms River to lose state aid is that Toms Rivers' enrollment has also declined, partly due to Sandy and that enrollment decline causes Toms Rivers' Adequacy Budget to fall.  However, as enrollment declines, so does staffing needs, Out Of District tuition, and a few other budget items, so Toms Rivers' expenses are lower.

(See also:
"Jersey City's Property Reassessment Won't Change State Aid")

3.  PILOT Reform without Adjustment Aid Reform Does Nothing.

Toms River is correct that PILOTing is a distortion of state aid, since PILOTed property is "invisible" to the determination of Equalized Valuation and thereby Local Fair Share, but even if PILOTed property were included in the calculation of Local Fair Share, districts with a lot of PILOTed property (namely Jersey City) would not lose any state aid unless Adjustment Aid were also addressed.

If PILOTed property were included in the determination of Local Fair Share and no reform to Adjustment Aid were made, all that would happen is Jersey City's and Asbury Park would have some of their Equalization Aid converted into Adjustment Aid.

4.  Extra Aid for Low Spenders?

Toms River also makes an out-of-left field argument that it should be rewarded with extra state aid because it spends (and taxes) so little.

In terms of trying to justify their new aid proposal, can the same legislators explain how it is possible that aid increases would be given to districts who have total per pupil costs over $29,000 already (compared to $16,319 in Toms River Regional)? This highlights one of the critical flaws with the State Aid formula- it allows for unlimited per pupil costs, and gives no credit or consideration to districts with lower per pupil spending. The formula unjustly portrays lower-spending districts like Toms River Regional as not paying our ‘fair share’ in taxes when in fact we do pay our fair share. The reason we tax less is simple- we spend less! So before taking school aid from any district, per pupil costs should first be capped and no additional school aid should be given when that cap is exceeded.

What Toms River is doing here is attempting to redefine Local Fair Share to something other than the formula contained within SFRA.

Based on its Equalized Valuation and Aggregate Income, Toms Rivers's Local Fair Share at $197,593,919, compared to a 2017-18 tax levy of only $151,916,715.  This gives the Toms River schools an equalized school tax rate of only 0.9529 for 2017-18, which is significantly below New Jersey's 1.35 average.  

Given that Toms River has that $45.6 million in untapped Local Fair Share, it has the economic ability to compensate for the $21,140,413 in excess aid it might lose.  If Toms River made up for that lost $21 million in state aid its school tax rate would only become 1.08.

This is a twisted point to unpack:

So before taking school aid from any district, per pupil costs should first be capped and no additional school aid should be given when that cap is exceeded.

There are only a handful of districts spending $29,000 in New Jersey and all of them are losing state aid or seeing flat aid.  Lebanon Boro and New Hanover are high-spending districts that are gaining trivial amounts of aid ( $670 total and $3,598 total, respectively), so I can't figure out what Toms River is talking about here other than they want to distract from the issue of Adjustment Aid.

There are some very affluent districts who are gaining aid, such as Millburn, Princeton, Mountain Lakes, and Livingston, but these districts don't have spending that is anywhere near $29,000 per student.  If Toms River believes that affluent districts shouldn't get state aid, then that is a separate issue, but they are making an argument that is actually contrary to the principles that Toms Rivers' Republicanism usually stands for.

If Toms Rivers' implied demand that districts actually get extra state aid because they spend very little were implemented then it would have the perverse effect of equalizing spending between districts that make very different local tax efforts,  since the low tax/low spending districts would get extra state aid.  On what planet does cutting aid from districts that choose to tax themselves make sense?

If Toms Rivers' demand were granted, there would be a rush by Boards of Ed to slash their tax levies, slash their budgets, and receive extra state aid.

It makes no sense except in that it supports Toms Rivers' self-interest.

Finally, what is really missing from Toms Rivers' argument is any acknowledgement of how indebted and fiscally screwed New Jersey has become.

As I have posted many times on this blog, all of New Jersey's new

revenue is absorbed by the "PHD" expenses of Pensions, Healthcare, and Debt, even though New Jersey is still underfunding its pensions by $2.5 billion.

The amount of money New Jersey can plausibly gain by increasing taxes is $1-$1.5 billion and it would be irresponsible and imprudent to put all of that money into K-12 education.

Without redistribution there is no realistic budgetary pathway to fairness for underaided districts.

Sadly, even with complete redistribution of Adjustment Aid and the injection of another $500 million today's underaided districts will still not be brought to 100%.

Toms River is acting in its own self-interest nothing else.

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.

Jennifer Beck: Take Politics Out of State Aid (Unless Monmouth County Benefits)

Senator Jennifer Beck has again released misleading statements on state aid in an incoherent,

analytically incomplete op-ed where she defends Adjustment Aid, criticizes attempts to redistribute it from most districts, and yet says that the state should help districts that have had surging enrollment.  

There aren’t a lot of details being provided on [Sweeney's] plan, but estimates suggest that it could end up costing Monmouth County schools over $100 million in state school aid. This plan, if estimates are true, isn’t a fair or equitable solution to our school funding crisis.\ 

In New Jersey, we are supposed to fund our schools in a way that gives all of our children an opportunity to succeed. We all know the problems that exist under the current school funding program: 

It’s led to municipalities like Jersey City, which has the tax base to support their local schools but underfunds them by $255 million — while pocketing more than $418 million a year in state aid. 

It’s led to New Jersey underfunding schools where student enrollment has exploded. In fact, state aid for our schools has remained essentially flat since the School Funding Reform Act (SFRA) was enacted in 2008, leaving property taxpayers on the hook to pay more. For example, Freehold Borough is 527 students over capacity and Red Bank’s enrollment has grown by 267 in the last five years. But the state has not pulled its weight.
It’s led to a system where 421 school districts throughout the state overpay in property taxes to fund their schools. Property taxpayers are paying more than they need to because the state has failed to live up to its end of the deal. In Ocean Township, local taxpayers are paying $8 million more in property taxes for their schools than they are required to by the state....

While I am grateful to see that some of our [meaning Monmouth County's] underfunded schools would be among those that get more funding (because they need it), I noted that his area seems to be getting quite a bit more than Monmouth County and other counties. Politics can’t play any part of such an important process that impacts both our property taxes and our children’s education.

What Beck is saying is that she doesn't want "politics" to impact property taxes and education unless Monmouth County benefits.

Admittedly, Beck is correct that Monmouth County would be a net loser in any likely aid redistribution.

FIRST, for 2017-18, Monmouth County has 26 districts with a grand total of $99.7 in excess aid, but Beck omits multiple key facts on that, Monmouth County also has 28 underaided districts with a total deficit of $51.9 million.  These underaided districts include poorer districts including Freehold Boro, Red Bank Boro, and Long Branch,  plus some middle-income and affluent districts including Rumson-Fair Haven, Holmdel, and Freehold Township.

SECOND, half of the $99.7 million in excess aid in Monmouth County only goes to two districts, Asbury Park and Freehold Regional, each of whom has $25 million in excess aid.

Asbury Park's state aid exceeds $24,000 per student, of which nearly $11,300 per student in excess of SFRA's target.  Asbury Park's grotesque state aid amount has led to to PILOT virtually all of its new development, for a grand total of perhaps $1 billion in hidden PILOTed wealth.

THIRD, many of the aid-losing districts in Monmouth County are resort towns on the Atlantic Ocean that have gigantic tax bases relative to their student populations.

Belmar has $29,571 in Local Fair Share per student. Lake Como has $23,424 per student. Deal has $98,708. Allenhurst has an astronomical $1,706,505 per student.

Several of the non-resort towns have large tax bases too.  Tinton Falls has $19,550 per student in Local Fair Share.  Henry Hudson Regional has $23,262 per student. Middletown has $16,405 per student.  

FOURTH, more than $2 million of that excess is in Interdistrict Choice money that is not subject to redistribution.  This Choice money mostly goes to Deal, which gets $1.8 million alone.  (Monmouth County's total Choice Aid is over $3 million, but some of that goes to districts who are still underaided despite that infusion).

FIFTH, New Jersey is the country's most indebted state.  Thus, the state cannot increase K-12 aid very much and so budgeting is zero-sum.  The more aid hoarding that Jennifer Beck can preserve, the less new aid there is available to NJ's underaided districts, including Red Bank and Freehold Boros.

Beck also says she favors some redistribution, but says we should start with the statutorily overaided districts for whom the existing statute of SFRA allows aid reductions.  These are 46 districts who, despite Adjustment Aid, get more money than the SFRA dictates they should due to post-2008 enrollment loss.

Let’s start the reform with the 46 school districts that are overfunded in state dollars.

Ok, that's a good idea and is better than nothing, but barely.  These 46 districts only get $11 million total in extra aid.  

And silliest of all, Beck says at her conclusion what she had already said a few paragraphs previously:

Any school funding reform plan should be one where decisions aren’t based on politics, but rather on what is best for our students, parents, taxpayers and teachers.

Decisions aren't based on politics?

What on earth is Beck herself doing but appealing to the naked self-interest of Monmouth County itself?  

Although SFRA is complex, Sweeney's plan is quite simple: to give each district in New Jersey 100% of its recommended funding, no more, no less.  

That's not politics, that's justice according the old definition of equal treatment under law.  

---

See Also

• How Overaided Districts Would GAIN if SFRA isn't Changed

The 2017 Election: Optimism, Pessimism, and Hopelessness on State Aid

Well, the ballots have been counted and Phil Murphy and Kim Guadagno are the winners of their respective parties nominations.

Here are the reasons I'm optimistic about what the election means for state aid, the reasons why I'm pessimistic, and the reasons why I fundamentally have no long-term hope at all.

Phil Murphy:

The Good Stuff about Murphy:

He promises to "fully fund" SFRA and employs fully funding SFRA as a key means of restraining property tax increases.  Murphy said at a town hall event in Maplewood that he would "pull" $200-$300 million in Adjustment Aid and told the NJEA that SFRA need to be "tweaked and updated."


The Bad Stuff about Murphy:

Murphy repeatedly has given SFRA's deficit at only $1 billion a year, when the real deficit, against Uncapped Aid, is $2.1 billion for 2017-18 ($2 billion for 377 underaided districts after the June 2017 tweaks) and that amount grows annually by at least $100 million a year.  In 2008-09, the deficit was only $1 billion.

If Murphy feels the state can only put in an additional $1 billion into SFRA I accept it, but another $1 billion in isn't even close to enough to fully fund SFRA in real terms, so saying that another $1 billion = full funding is dishonest.

If Murphy keeps the State Aid Growth Limits intact, then the most severely underaided districts will gain very little.  (see "The Skews of Capped Aid")

Murphy also called himself a "barbell guy" at a town hall in Penn's Grove, meaning his priorities in education are PreK and higher ed.

Murphy's implied vow to eliminate tax incentives as a means to fully fund SFRA is not feasible.  The amount NJ pays out in tax incentives was only $347 million for 2016 (see A20), not the $1 or $2 billion it would take to fully fund SFRA.  Also, not every business is bluffing when it says it won't operate in NJ without tax incentives and if a business is not in NJ the Treasury cannot tax its employees anyway.  Many tax incentives go to renovation projects that have wide public support (eg, Bell Labs > Bell.Works, the Hahne's conversion in Newark).

Kim Guadagno:

The Good Stuff about Guadagno:

Kim Guadagno borrowed from Jack Ciattarelli's platform and thus actually has a comprehensive state aid reform package. Guadagno now realizes state aid is important and says "We need a new school funding formula and we need it now, too."

Guadagno supports redistributing Adjustment Aid, making the Abbotts pay for a percentage of their construction costs, and means-testing PreK.

If Guadagno had a means of paying for her "circuit breaker" (in which school taxes would be capped at 5% of income up to $3,000), it would mitigate taxes for lower income New Jerseyans.

The Bad Stuff about Guadagno:

Guadagno has ruled out any tax increases.  Assuming the Democrats control the legislature, no additional pension reforms will be allowed, so the state's fiscal crisis will worsen.

Guadagno has also been the lieutenant governor for eight years and she has done nothing to address school funding inequality.  Guadagno has even appeared at many ribbon cuttings for 100% state-funded Abbott construction projects, so I think Guadagno's conversion to state aid reform is unconvincing.

In a debate Guadagno cited kids in Phillipsburg learning algebra in trailers, when Phillipsburg is an Abbott and students there now have very luxurious facilities.

The Hopelessness:

New Jersey in 2027

No matter who wins, the structural budget forces that consume hundreds of millions more per year will still exist and still push out other spending.

This chart is based on the slower pathway to the full ARC that Chris Christie wanted. 

So if Phil Murphy were to raise taxes by $1.5 billion (as he told the Star-Ledger), within a few years that additional money would be consumed by new, structural spending increases.

It's not a recipe for fiscal sustainability, let alone fair and sufficient state aid.

Phil Murphy, like every other governor, has talked about accelerating economic growth, but a governor's control over an economy is limited, particularly in the short term. Connecticut, under Dannel Malloy, has passed all of the policies that Phil Murphy wants in NJ other than marijuana legalization and a state bank, and that has not rescued Connecticut's economy.  Connecticut's economy is actually worse-off than New Jersey's.

Given the certain continuation of New Jersey's fiscal crisis, the redistribution of state aid is more necessary than ever.