Thursday, February 9, 2017

Solving NJ's school funding problem now

Parents, taxpayers, and school leaders! Demand legislative action to fix school funding now!

The twin problems of underfunding and inequitable distribution of state aid to schools have plagued the state of New Jersey for more than forty years.  These issues have become more widely discussed over the past year than they have since the passage of the School Funding Reform Act of 2008 (SFRA). Competing proposals and legislative hearings have been put forth by our political leaders to seek changes to the status quo.  The time for action is now!

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Recently, the Education Law Center published its sixth annual national report entitled, "Is School Funding Fair?"  In this analysis, New Jersey is referred to as a "progressive" state. We are given "A's" for funding distribution and effort, and judged to be the only state in the nation positioned well on all four of the identified fairness indicators.

And yet, New Jersey is only funding 85% of its SFRA formula. Assessing the State on its success in funding and distributing aid equitably based on its nationally-lauded and constitutionally-approved formula using a traditional school grading system tells a different story.

GradePercentage of uncapped SFRA aid received in FY17Number of Districts
F< 70%239
Subtotal at or below 100%379

Using this assessment, the State should receive an "A" for distributing between 93 and 100% of SFRA aid to 34 of its 591 school districts. Unfortunately, the State also gets an "F" for its treatment of 239 other districts, which receive less than 70% of the aid they are due.

But that's only part of the story.  212 NJ school districts get what we might call "unearned extra credit"; that is, they receive more than 100% of the state aid they are due.  In fact, 138 districts receive more than 130% of their calculated aid.

Grade    Percentage of uncapped SFRA aid received in FY17Number of Districts
A+++++> 130%138
Subtotal above 100%212

Clearly, there is wide variation in the distribution of state aid to schools.  It isn't clustered around 100%, or even the 85% that is funded, which might make some sense.

In truth, there is no reasonable explanation for a state aid system that provides A+ or better funding to 36% of its school districts, while utterly failing to provide sufficient funding to another 40% of its districts. 

These grades are affirmed by Education Week's 2016 Quality Counts report, which ranks New Jersey 7th in the nation on overall education spending, but only 32nd on equitable distribution.

Some would prefer to divert attention from this central problem by telling us that the former Abbott districts are all over-aided by the current formula.  Yet, a deeper look shows that 17 of the 31 former Abbotts, including some of our largest urban school districts, actually receive less than 100% of the SFRA aid they are due.

GradePercentage of uncapped SFRA aid received in FY17Number of DistrictsFormer Abbott districts
A93-100%34Harrison, Irvington, Passaic, Perth Amboy
B85-92%30Garfield, Newark, Orange, Paterson, Trenton
C77-84%45Bridgeton, Elizabeth, Long Branch, Plainfield, Union City, West New York 
D70-76%31New Brunswick
F< 70%239Neptune
Subtotal at or below 100%379

And of the 14 other former Abbotts, only 5 are at the most extreme grade of A++++ receiving more than 130% of their formula aid.

GradePercentage of uncapped SFRA aid received in FY17Number of DistrictsFormer Abbott districts
A+++++> 130%138Asbury Park, Hoboken, Jersey City, Keansburg, Pemberton 
A++108-115%15East Orange, Gloucester City, Salem City
A+100-107%23Burlington City, Camden, Millville, Phillipsburg, Pleasantville, Vineland
Subtotal above 100%212

The reality is that underfunding occurs in all regions of the state across rich and poor communities and all sizes of school districts.


The time for a solution is now!  State leaders can address both the underfunding problem and the inequitable distribution problem by implementing four actions immediately that would lead us to 100% full and fair funding in a short period of time.

Action #1: Agree to a reasonable timeline for action that begins now
We did not get into this problem overnight, and we will not get out of it right away either.  However, that cannot be an excuse for inaction now. Political leaders must set an appropriate phase-in period to begin incentivizing districts to adjust to new realities in state aid distribution equity, sufficient local tax effort, and budget adequacy. This needs to begin in Fiscal Year 2018 (FY18).

Action #2: Fully fund SFRA
SFRA is a nationally recognized model for funding fairness that has been constitutionally approved by our Supreme Court, but it has not been properly implemented or fully funded.

Make no mistake: the State has the ability to fully fund SFRA.  As noted above, this will not happen all at once. Yet, its success is simply a matter of priorities.

For example, the proposed FY16 state budget of $33.8 billion grew to $34.8 billion in FY17.  Direct state aid to schools was (and remains) nearly $8 billion in FY16, or 23.7% of the budget.  If the State had committed 23.7% of the additional $1 billion to schools in FY17, there would have been an injection of $237 million into SFRA this year.  Maintaining that kind of priority on educating our children would solve the underfunding problem in a relatively short period of time.

Action #3: Redistribute Adjustment Aid
The legislatively-added "hold harmless" provision known as Adjustment Aid has been the primary reason that more than one-third of NJ's school districts are being overfunded by more than $600 million annually.

Percentage of uncapped SFRA aid received in FY17Number of DistrictsTotal overfunding
A+++++> 130%138-$496,404,295
Subtotal above 100%212-$618,115,809

Equity would be served by redistributing these dollars to the most underfunded school districts.  Bringing the 239 districts currently receiving "F" level funding up to 70% would require $540 million of that total.  To be fair to all districts and provide time for true "adjustment", this redistribution should be planned to happen at the same time as the phase-in of full SFRA funding discussed in #2 above.

And let's be clear: loose talk about "winners and losers" due to redistribution is a diversion.  No district receiving 100% of its state aid can be considered a loser.  A misplaced focus on budget adequacy misses the point too. In many of our school districts, budget inadequacy is caused by insufficient local tax effort.  Overfunding by the State has actually created a perverse, ongoing disincentive that allows low tax districts to put off providing their local fair share to schools.  This can be addressed by implementing #4 below.  

Action #4: Create a tax levy cap waiver for districts that lose Adjustment Aid
The State has allowed waivers from the 2% tax cap for school districts that experience unexpected increases in areas like student enrollment, health care premiums, and out-of-district special education tuitions.  It can create another one for school districts that: (a) lose Adjustment Aid; (b) have a tax levy lower than their local fair share; and (c) continue to have an inadequate budget.  Such a waiver would allow districts with insufficient local tax contributions to replace state overfunding by increasing their contribution up to their full local fair share.

Parents, taxpayers, and school leaders! Demand legislative action to fix school funding now!

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