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