With much hoopla, the New Jersey State Legislature passed a bill this week, which Gov. Phil Murphy signed into law, that allocates $44.7 million for the 140 school districts that are losing state aid in Fiscal Year 2024-2025 due to phasing out of a line item called Adjustment Aid that held districts harmless for aid reductions. The bill also allows districts facing cuts to override the 2% tax increase cap for one year and go as high as 9.9% over last year’s tax increase.

The problem is that, in the context of next year’s $12 billion allocation for schools, the $44 million is a drop in the bucket,  even with the one-year tax cap liberalization .Why?  Because districts have been underfunding their schools for years. 

Let’s take Toms River, which says it will have to lay off 268 staff members, or 20% of its teaching force, in order to close a $26.5 million budget gap, and eliminate advanced placement classes, sports and extracurricular activities. When New Jersey calculates state aid through the School Funding Reform Act formula, it assumes that school districts are taxing residents close to their “Local Fair Share,” which takes into account rises or falls in enrollment and student demographics. However, districts aren’t required to tax residents that much and many have not done so because of that handy Adjustment Aid. As the Murphy Administration—wisely!—finishes phasing out Adjustment Aid, school year 2024-25 will be the first year that districts don’t have that extra money that they weren’t supposed to have in the first place.

And now they’re stuck.

How much more could Toms River be taxing local residents? According to Jeff Bennett, Toms River’s Local Fair Share in FY24-25 comes to $278,449,55 but last year the district required residents to chip in only $175,797,217, over $100 million below its Fair Share. Even if Toms River takes the one-time offer to increase taxes above the 2% cap without voter approval, that would only raise an additional $17 million. 

(Here is the district’s 2023-2024 budget. On page 2, under the line item “Total State Revenues,” you can see that over the last three years Toms River’s state aid has dropped by $27 million.)

As if Toms River didn’t have enough budgetary problems, its in-district enrollment is dropping at the same time as the district boundaries form part of the overflow area for Lakewood (along with Brick, Howell, Jackson, etc.). This means the district will be responsible for transportation and special education services for eligible non-public school students who will attend Jewish day schools. From 2022 to 2023, Toms River’s tuition costs went up by a million dollars. [Ed. Note: See Stateaidguy’s comments below, which point out that Toms River and Brick’s out-of-district tuition and transportation increases are entirely normal.]

And there really is no fat to cut: Cost per student last year was $15,167, the lowest in the state for a district with  more than 3,500 students. 

Does the school funding formula work for Toms River? It would only work if for the last decade the district had been adequately taxing residents. Now it is stuck, and the extra million or so the state throws in with the new bill won’t bail it out, especially as K-12 public school enrollment continues to drop across the state. 

Speaking of Lakewood, the long-running litigation with the state over how to support a district where there are six times as many non-public school students as public ones might lose some steam. Why? Because other districts will find themselves in less dire yet similar situations. Last year in Brick, tuition to non-public schools for students with disabilities was up one million dollars over the previous year and transportation cost went up to over $10 million.  Next door, Jackson is losing $4.5 million in state aid and says it will have to increase class size to 40 students without a loan from the state.

State loans are how Lakewood has been getting by. For next year Lakewood says it can only balance its budget with a $109 million check. Historically the state has complied. If other districts find themselves in the same boat, will the State Department of Education be as generous? 

Time for a new school funding formula—or at least permanent cap liberalization so districts can start making up some of the difference between how much they have been taxing residents and how much they should be taxing residents. .