From Wretched Excess to Fiscal Apocalypse, School Finance Expert Weighs in on Murphy’s State Aid to Districts

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Jeff Bennett aka StateAidGuy, the smartest guy on school finance in the state of New Jersey, has a new piece up on Gov. Phil Murphy’s 2023-2024 state aid allocations to school districts. Overall he’s a big fan because districts that used to get far too much money (looking at you, Asbury Park) now are getting less, while those who have gotten stiffed by the state are getting more.

On the other hand, as he’s pointed out elsewhere, back in 2020 Murphy blew it in the fiscal equity department when he vetoed a bipartisan bill that would have loosened the cap on tax increases for over-aided and under-taxed districts; some now have big cash flow problems due to that error in judgement. For instance Toms River, without that loosening of cap restrictions, is unable to tax itself out of what its superintendent calls a “fiscal apocalypse.” “it was a mistake,” Bennett told me, [for Murphy] to veto the tax cap liberalization bill.”

Here are some of Bennett’s takeaways:

  • The big picture for school year 2023-2024 is that total state aid to K-12 schools will increase by $832 million, bringing the total state aid package to $10.75 billion.
  • According to the 2008 School Funding Reform Act, which has a formula for determining state aid based on income, ratables, and other factors, there are now only 192 districts that get more than they should (but less than they used to) and 401 districts that get less than they should. “This is a huge decrease from a few years ago” in the number of under-aided districts, says Bennett.
  • There are only 64 districts with deficits over $500 per student. The most underaided district is now LIndenwold, with a deficit of $3.4 million, or -$1096 per student, which is only a tenth of what Bound Brook’s deficit was in its worst year.
  • Then there are the districts which get more than they should. Remember, back in 1995 the New Jersey Supreme Court ruled in Abbott v. Burke that 31 low-income school districts required compensatory aid from the state because most districts relied on much of their funding from property taxes,  placing districts with low property values at a terrible disadvantage. But some of those 31 districts ended up with an embarrassment of riches: former Gov. Chris Christie correctly used Asbury Park as the poster child for school aid excess at $42K per child per year.
  •  While “Asbury Park’s academic performance is still very low,” says Bennett, it “won’t work as an example of excessive spending anymore.” The district’s state aid will be $20.7 million for 1,500 students (he uses an older enrollment figure).  That’s still the seventh biggest aid access but no  longer #1.
  • (Why did it take so long to get Asbury Park in balance? Part of SFRA was a line item called “Adjustment Aid,” which gave districts a “hold harmless” pass so they could take time to, well, adjust to reduced state aid. It’s only now, 15 years after SFRA passed, that we approach reality.)
  • Other over-aided districts include Jersey City, which is losing $51 million from the state ($1,730 per student). Bennett says they “should have to raise taxes by $70 million, which would bring their local levy up to $500 million, which is still only a 1% tax rate.” Next year Jersey City will lose lots more.
  • Regarding Hoboken, an erstwhile Abbott that now resembles tony Brooklyn Heights, “any aid excess was unacceptable.” Now it’s only over-aided by $21 per student.
  • Currently East Orange is the most over-aided district. SFRA says it should get $145 million from the state but it’s getting $175 million, a $30 million surplus. On the other hand, local taxes in East Orange are still “exceptionally high,” with a tax rate of 3.449, making Jersey City look like a slacker.
  • One of the reasons some South Jersey districts are foaming at the mouth about Murphy’s state aid allocations is they’re restricted by what they can get from local taxes by Murphy’s veto of that bill (detailed above) allowing previously over-aided districts with low tax rates to go beyond the 2% tax cap increase.

Once again let’s look at Toms River, which is looking at a $14.4 million loss in state aid. One of the reasons the drop is so severe is the way SFRA calculates “Local Fair Share” (the amount that districts need to raise through local taxes, which Bennett says is an unfair formula) increased by about $31 million. Here’s superintendent Michael Citta this week in the Asbury Park Press:

‘We are required to provide a thorough and efficient education,’ Citta said, ‘and $14.4 million in loss of aid does not enable us to do that. So when I talk about an apocalypse of all proportions, you can imagine a school district that has no extras, no frills, no additives and no preservatives and you could speculate on all those types of things.’

Ditto for Brick Township:

Finally, let’s look at one of NJER’s favorite districts, Lakewood:

Lakewood is a very complex district budgetarily due to its high [out-of-district tuition costs] and transportation spending. I agree that the SFRA formula does not work for Lakewood but Lakewood’s budget is also badly hurt by the rigidity of the tax cap.

If only Murphy had signed that Senate bill loosening cap restrictions for districts like Toms River and Lakewood. Maybe it’s time for a do-over?

Explainer: How Are Schools Funded in New Jersey, and Why Are My Property Taxes So High?

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