Legendary Hip Hop Rapper “Treach” at West Side High School
February 13, 2025
Wake Up, NJ Parents: Even in Montclair, One-Third of Fifth Graders Can’t Pass Math
February 17, 2025Are NJ Schools Fully Funded? The Outdated Data Problem
Evan Scott is a lifelong New Jersey resident, a veteran, and a retired military service member. He holds a bachelor’s degree in education and was elected to his hometown’s Board of Education in 1988. Now living in Evesham Township, NJ, he continues to advocate for fair and transparent school funding.
New Jersey’s school funding debate often circles back to one assertion: “Our schools are fully funded.” But is that really true? If you take a closer look at the data being used to calculate school funding, you’ll find an inconvenient truth—our funding formula relies on outdated numbers that fail to reflect the actual costs of educating students today.
The Problem: Outdated Cost Calculations
At the core of New Jersey’s school funding formula is the Consumer Price Index for Urban Consumers (CPI-U), which is supposed to ensure that funding keeps pace with inflation. However, the most recent Governor’s Educational Adequacy Report (EAR) from 2023 uses CPI data from 2021—meaning that in the 2024-2025 school year, our schools are still being funded based on pre-pandemic economic conditions.
This is a serious issue. Inflation in New Jersey has been significantly higher in recent years, yet school budgets are not adjusted accordingly. When the state’s courts upheld the School Funding Reform Act (SFRA), they did so with the understanding that a review mechanism would be in place to keep school funding accurate and adequate. The EAR, issued every three years, was meant to serve this purpose. However, CPI data should be reviewed annually, not every three years. Without this update, schools are being shortchanged, forced to stretch budgets that don’t account for real-time cost increases.
The Geographic Cost Adjustment (GCA) is another critical cost factor used in the SFRA formula. This measure adjusts funding based on regional cost differences, including salaries and other expenses. The problem? It hasn’t been updated since 2014 despite the requirement to be updated every 5 years. That’s a decade of economic shifts, wage increases, and regional disparities that are simply ignored when determining school funding.
A Secret Formula That Hinders Planning
Beyond outdated data, another major issue plaguing NJ school funding is the lack of transparency. The funding formula remains proprietary and inaccessible to the public—even though taxpayer dollars fund it. This secrecy prevents districts from accurately forecasting their budgets, making it impossible to plan long-term.
School administrators should be able to estimate their funding with a reasonable level of accuracy. Instead, they are forced to operate in the dark, waiting for state allocations that may or may not align with actual needs. If SFRA is to function as intended, the formula must be made public.
Aggregate vs. Median Income: A Fairer Approach
Currently, New Jersey calculates the Local Fair Share (LFS) using aggregate income, which distorts a community’s true ability to pay. A few high-income earners can make a district appear wealthier than it actually is, leading to a heavier tax burden on middle- and low-income residents.
A more accurate measure would be to use median income, which reflects what typical families can afford. Adopting median income would provide a fairer picture of local economic capacity and prevent districts from being overburdened.
PILOT Agreements: A Blind Spot in Local Fair Share Calculations
Another overlooked issue is PILOT (Payment in Lieu of Taxes) agreements. These agreements allow developers to make direct payments to municipalities instead of paying property taxes that would otherwise contribute to school funding. While these deals can spur economic development, they also create a massive blind spot in determining a district’s true wealth.
PILOT properties are still considered ratables when calculating a municipality’s wealth for school funding purposes, meaning they inflate a district’s Local Fair Share calculation without contributing to the tax levy that funds schools. This is particularly problematic when developments, such as apartment complexes, increase student enrollment while generating no direct school tax revenue.
To fix this issue, legislation must be enacted to require that either a portion of PILOT funds be shared with school districts or PILOT properties be excluded from Local Fair Share calculations. Without this correction, school districts will continue to bear the financial burden of new development without receiving the revenue necessary to educate additional/current students.
Updating Aid Calculations for Transportation, Security, and Preschool
New Jersey’s transportation and security aid calculations remain outdated, failing to account for rising costs. The current transportation funding method is based on the pre-SFRA CEIFA formula from before 2008, which no longer reflects modern expenses. Security funding also relies on old models that don’t account for cybersecurity threats and evolving physical safety concerns.
Additionally, preschool funding is not developed using the same methodology as K-12 education and is instead based on past expenditures rather than actual cost studies. A full preschool cost study is needed to ensure adequate funding for early childhood education.
The Call to Action
Fixing NJ’s school funding system doesn’t require reinventing the wheel—it requires updating and enforcing the rules already in place. Here’s what needs to happen:
- Annual CPI Reviews – The NJ Department of Education must update CPI calculations yearly to reflect real-time inflation and prevent school budgets from falling behind.
- Update the Geographic Cost Adjustment – The GCA should be revised immediately to reflect current salary and cost-of-living disparities across the state.
- Make the Funding Formula Public – Transparency is essential. The funding formula must be publicly available so that districts can forecast their budgets accurately.
- Use Median Income, Not Aggregate – The LFS calculation should be reformed to reflect what typical families can actually afford, not distorted by extreme high earners.
- Address PILOT Funding Gaps – Either require municipalities to share a fair portion of PILOT revenues with school districts or exclude PILOT properties from wealth calculations.
- Update Transportation, Security, and Preschool Aid Calculations – These funding models must be revised to reflect modern costs and educational priorities.
The bottom line? We cannot claim that NJ schools are fully funded when we are using decade-old data and ignoring major revenue sources. If we are serious about providing a thorough and efficient education for all students, we must demand accuracy, transparency, and fairness in school funding.
The solution isn’t complicated. It’s time for NJ to update its numbers and ensure every student gets the resources they deserve.
Dedication: I want to dedicate this op-ed to a close friend, Marshall Ogen, who recently passed away from an aggressive glioblastoma. Marshall was passionate about education, and he left behind a family that still has one child in the K-12 system. When we last spoke, I promised Marshall that I would continue to “heal the world”—and part of that promise is advocating for a school funding system that truly serves all children, including his own.
6 Comments
Thanks to Evan Scott for his useful analysis of NJ’s school funding system. At the center is the School Funding Reform Act of 2008 (SFRA). When the NJ Supreme Court ruled in 2010 that SFRA was “facially constitutional” (it had not yet gone into effect, but the court was persuaded that it could work adequately in practice if two explicit constitutional conditions were met–that it be fully funded and that it be periodically evaluated to see how it was working in practice for every district.)
From the vantage point of a legal case brought more than ten years ago on behalf of Lakewood’s public-school students (100% of whom are low-income and 95% of whom are Latino and black), I can tell you, as co-counsel for the students-petitioners, that the second condition has undeniably not been met. Just to keep the schoolhouse doors open, over the past 10 years the State has provided the district with almost $300 million in loans repayable out of the district’s dwindling future state aid. The administrative law judge in our case characterized those loans as a “Ponzi scheme” that has created an “unsustainable fiscal crisis” for the district.
Moreover, although the State claims that SFRA will be fully funded this year, it has not met that constitutional condition in prior years (except perhaps the first year of its operation). We also learned from a State legal brief recently filed in the Lakewood case that the SFRA formula was not even the basis for the distribution of state education aid for about half of SFRA’s 17-year life. Rather, education aid was decided by the annual state budgetary process and the appropriations legislation. That defies the longstanding state constitutional jurisprudence that requires education aid to be guaranteed, certain, non-discretionary and predictable so that school districts can engage in effective educational planning.
Our Lakewood case resulted in a definitive court ruling two years ago that the district’s public-school students were being denied their fundamental constitutional right to a “thorough and efficient” education. The remaining issue in the case–whether that denial was caused by the failures of SFRA–is awaiting decision by the state’s Appellate Division.
Thanks to Evan Scott for his analysis of NJ’s school funding system. From the vantage point of 55 years of engagement with these issues (through Robinson v. Cahill, Abbott v. Burke, and Alcantara v. Allen-McMillan [a school funding case involving the unique Lakewood school district]), I can add a few salient points:
First, the centerpiece of NJ’s education funding system for the past 17 years has been the School Funding
Reform Act of 2008 (SFRA). In 2010, the NJ Supreme Court ruled that SFRA was “facially constitutional” (it had not yet gone into effect, but the court was persuaded it could pass constitutional muster if it worked in practice as the State promised it would) if it met two explicit constitutional conditions–that it be fully funded and that it be periodically evaluated to assure that it was working as predicted for every district.
Second, the State is claiming that this school year for the first time SFRA will be fully funded (but, as Evan points out, that may be an overstatement). That means for all of SFRA’s prior life it did not satisfy the first constitutional condition. But it’s even worse than that–in a legal brief the State recently filed in the Lakewood case, it acknowledged that for about half of SFRA’s life state education aid was not even distributed in accordance with the SFRA formula. Rather it was distributed based on the State’s annual appropriations process and budge legislation. That means the state education funding did not meet the constitutional standards of being certain, predictable and non-discretionary, all necessary elements for efficient and effective educational planning by school districts.
Third, the Lakewood district is proof positive that the State also has failed to meet the constitutional condition of periodic evaluation and adjustment of the SFRA formula. For the past 10 years, the district’s schoolhouse doors have been kept open by dint of almost $300 million of state loans repayable out of future state education aid. Four years ago in our case, an administrative law judge characterized those loans as a “Ponzi scheme’ that had created an “unsustainable fiscal situation” for the district. She, and two years later the state’s Appellate Division, ruled definitively that, even with those loans, the public-school students were being denied their fundamental constitutional rights to a “through and efficient” education. We are awaiting a court ruling as to whether that denial is a function of SFRA’s failures.
Paul, I deeply appreciate your expertise and your commitment to advocating for New Jersey’s students. Your work has been invaluable in highlighting the failures of SFRA, and I couldn’t agree more that the formula has not been properly implemented or evaluated.
However, as a parent first and advocate second, I want to emphasize that this isn’t just about legal precedent—it’s about the immediate harm being done to students in districts like mine, Evesham Township. (although we are not alone)
Evesham has lost $38 million in state aid under S2, and we are now facing a $7 million budget deficit. We’re cutting teachers, increasing class sizes, outsourcing transportation, and eliminating elementary school extracurriculars—just to survive. Meanwhile, the state claims we are “fully funded.”
The reality is that SFRA isn’t functioning as intended. It’s not just that it wasn’t fully funded in the past—the state has actively deviated from the formula, as you pointed out. In our case, our Local Fair Share calculation continues to be distorted by outdated data, an unadjusted Geographic Cost Adjustment from 2014, and PILOT agreements that allow new developments to add students without contributing to the school tax base.
While legal battles like the Lakewood case are critical, legislative action is equally important. If SFRA is truly to be “fully funded,” then the funding formula must be public, the GCA must be updated, and aid must be based on real economic conditions, not outdated assumptions.
Thank you for all that you do as I know you are very busy, and I hope we can work together (if only in spirit) to push for real, lasting reforms to SFRA that actually support students and communities.
Mr. Scott, thank you for this extremely helpful guidance on how the funding formula can and should be built. You encapsulate state funding challenges and disparities faced by Evesham Township School District and many others, and signpost a better path forward for our state.
Evan, thanks for the kind words. Yes, let’s find a way to work together to achieve our common goal–improving the education of all NJ students. Unfortunately, for the five + decades I have been involved in this effort, the courts, with all their imperfections and delays, seem the only viable avenue to achieve that improvement. The executive and legislative branches seem incapable or unwilling to tackle this complex, but crucially important, challenge. Until we find a breakthrough, I fear that using the courts as leverage for change may be the only viable approach.
Thank you for this commentary on NJ’s state aid.
1) Using Aggregate Income is Worse than Scott Indicates
I appreciate that Evan Scott discussed the problem of using Aggregate Income to calculate Local Fair Share, but I would strenuously argue that that is WORSE than he indicates. Yes, it’s true that Aggregate Income is distorted by high-income outliers, but people don’t have to be that rich to have a net negative effect on their school district. Anyone whose income is 40x their school property taxes costs their district a greater amount of Equalization Aid than they pay in school taxes.
Aggregate Income also distorts Local Fair Share because non-residential property has no income attached to it. Thus, districts who are heavily residential have higher Local Fair Share tax rates than districts who have more non-residential property. A $1 million commercial property would raise Local Fair Share as much as a $500,000 house (assuming the owners make $150k a year).
People are also penalized for living in houses that are affordable relative to their incomes. This has a huge skew against the Philly suburbs. I would argue that the Local Fair Share skew against the Philly suburbs and many rural districts is a much bigger, and less justifiable, problem than the Geographic Cost Adjustments. (which I actually see as appropriate)
Evesham Township is a district that is hurt by NJ’s hybrid formula. Its 2024-25 Local Fair Share of $73,344,457 is a 1.53% tax rate, compared to a state average of 1.29%. That $73 million LFS is just slightly about its Adequacy Budget of $70,991,772, so its Equalization Aid is $0.
Using median income instead of Aggregate Income would nullify the disadvantages from having high-income outliers and the bias against heavily residential towns, but it would preserve the bias against towns where people live in relatively affordable housing. Perhaps that bias is acceptable if we want taxpayers in low-cost areas to pay more, but I would disagree.
Please note, another problem with using median income is that it would either be an estimate from the ACS or it would be real data from the NJ Department of Treasury, but at a three-year lag. If it were up to me, NJ would be like most other states and simply base Local Fair Share on tax base (ie, Equalized Valuation).
https://njeducationaid.blogspot.com/2019/09/is-sfra-fair-to-south-jersey-and-rural.html
2) Short-Term PILOTs _DO_ Contribute to Schools
This is frequently misunderstood, but it is only long-term PILOTs that have a 5:95 county:muni split. Short-term PILOTs pay into school districts in the same proportion that non-PILOTed property does.
Yes, I agree that long-term PILOTs should also pay into school districts, although ideally this would happen with a simultaneous increase in muni aid.
—
Please note, I’m writing SOLELY on my own behalf (and not using my real name anyway) and not on behalf of any board of education.