Forecasting 2019-20 State Aid

We won't know what Phil Murphy's state aid numbers are until March 7th, and those numbers will be subject to amendment by the legislature anyway, but I wanted to attempt to make a forecast for 2019-20 state aid now and demonstrate the continuing necessity of redistributing Adjustment Aid.

Background:
The 2018-19 Deficit:

For 2018-19 Phil Murphy and the legislature increased K-12 funding by $351.4 million and redistributed $32.1 million of Adjustment Aid, for a grand total increase of $381 million for the underaided districts.

Despite this $381 million increase, the deficit for the 370 underaided districts of New Jersey only fell from $2 billion to $1.75 billion, a fall of $250 million.

The decline in the deficit being so small is due to the fact that SFRA recalculates state aid every year and the deficit grows annually due to the combination of inflation, tax base erosion in certain underaided districts, and enrollment increases in certain underaided districts.

I cannot forecast how much increase will be due to enrollment increases and tax base erosion, but just to keep up with inflation alone, state aid for 2019-20 would have to increase by 2.9% of the $6.24 billion that underaided districts got in 2018-19, or $180 million.

The 2019-20 Revenue Growth Estimate:

K-12 opex  state is is overwhelmingly funded from income taxes, ie, the "Property Tax Relief Fund," but with a small assist from .5� of the sales tax.

The NJ Lottery is now owned by the pension funds too (including TPAF) and the lottery money flowing into the pension funds reduces the amount of money that NJ has to contribute to TPAF.

For FY2019, the Treasury's projection was that the income tax would bring in $16 billion, which is a 5.4% increase or $824 million increase over FY2018.

That 5.4% or $824 million increase includes $280 million from increasing the income tax to 10.75% for incomes over $5 million.  Without the top bracket income tax increase to 10.75%, NJ's revenue increase would only be $544 million.

Overall, it would not be reasonable to expect a 5.4% gain in the income tax for FY2020 unless there is another income tax increase.  

Through December 2018 New Jersey's revenue badly lagged projections anyway, but assuming that collections rally in the second half of FY2019 and we do pull in $16 billion anyway (unlikely), we can make the following estimates for what New Jersey's new income tax revenue would be.

FY 2020, NJ Income Tax Growth Scenarios
If the increase is 3%...(this is unlikely)	+ $480 million
If the increase is 4%...	+ $640 million
If the increase is 5%...	+ $800 million
If the increase is 6%...(this is unlikely)	+ $960 million

New Jersey is a Debtors Prison:

As I've said a million times on this blog, the real reason opex state aid is underfunded in New Jersey is because we are disastrously indebted and the bulk of revenue growth must go into the severely underfunded Teachers Pension and Annuity Fund (TPAF), plus other streams of education-related spending which are not K-12 opex aid, such as Post-Retirement Medical Care, Whitman-era Pension Obligation Bond debt servicing, school construction debt servicing, and Teachers Social Security.

For FY2019 New Jersey increased funding for the debt streams by the following amounts:

• Teachers Pension and Annuity Fund  +$392.5 million
• Post Retirement Medical +$51.8 million
• Pension Obligation Bonds +$17.6 million
• School Construction Debt Servicing +$148.3 million
• Teachers Social Security +$16.3 million

Grand Total of Increases for Above Items: $626.5 million

The increases for FY2018 were similar, except there was a much smaller increase for School Construction Debt service that year and modestly larger increases for TPAF and Post-Retirement Medical.

Anyway, as you can see, assuming that New Jersey increases by $600 million the above spending streams and NJ's revenue grows by ~5% there will be very little left over for K-12 opex aid (unless the state also passes additional tax hikes).

Other Discretionary Expenditures of the "Property Tax Relief Fund"

The Property Tax Relief Fund also funds Extraordinary Aid, school construction debt service, direct tax rebates, municipal aid, community college funding, and PreK.

We have no idea what Phil Murphy will want to do budgetarily with those expenditures, but if Murphy does increase their funding, it will reduce the amount of money available for K-12 opex aid since New Jersey's budget is zero-sum.

For FY2019 Phil Murphy increased PreK by $57.6 million and he talks about PreK often, so we should expect another sizable increase for PreK funding.

Since Extraordinary Aid got a $0 increase in FY2019 and municipal aid only got a minuscule $12 million increase, I'd be surprised if we saw such tiny increases again.

New Jersey Must Redistribute Adjustment Aid 

Based on S-2, 13% of 2017-18 Adjustment Aid is supposed to be redistributed.  Since some districts' Adjustment Aid is protected, the amount will be 13% of $600 million, or about $80 million.

Since New Jersey cannot fully fund the underaided districts through new revenue alone due to slow revenue growth and rapid debt-servicing growth, it is critically important that redistribution be implemented or else the underaided districts will get never get near full funding.

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• "New Jersey = Debtors' Prison: The 2017-18 Budget"
•  New Jersey Underfunds Higher Education
• "Tentative Reaction to Murphy FY2019 Budget Proposal"

In Five Years Jersey City Will Be Ineligible for Equalization Aid

Over the last 10-15 years, the only part of New Jersey that has outperformed the national economy has been Hudson County, especially Jersey City.

Jersey City's growth is impressive by whatever metric you want to use, from overall jobs to population growth to income growth to real estate valuation.

When Steve Fulop calls Jersey City New Jersey's "economic powerhouse" he isn't exaggerating.

Jersey City and Adjustment Aid:

Jersey City was already overaided by $111 million in 2008 when the School Funding Reform Act became law, but since then Jersey City's wealth growth has made already substantial overaiding enormous, to the point where despite cuts to Adjustment Aid in 2012-13, 2017-18, and 2018-19, Jersey City's Adjustment Aid grew to $170 million.

This growth in wealth created an embarrassment of riches for Jersey City and eventually led to the passage of S2, which intends to phase-out all of Jersey City's Adjustment Aid at the 2018-19 level.

The Jersey City political establishment originally fought very hard against phasing-out Adjustment Aid by hiring lobbyists, getting Vincent Prieto to block reform, getting the Education Law Center to write a disgracefully out-of-context report about Jersey City's Adjustment Aid, and blatantly playing the Race Card, but eventually Jersey City yielded.  One of Jersey City's State Senators, Sandra Cunningham was actually constructive in the passage of S2 and even was listed briefly as a co-sponsor. For their parts, the other Jersey City reps were passive.

In April 2017 Steve Fulop declared that in the future Jersey City will share PILOT revenue with the school district.  In November 2018 Jersey City City Council passed a 1% payroll tax that is expected to provide $70 million to the Jersey City Public Schools.

Jersey City and Equalization Aid:

Amidst the battle over Jersey City's Adjustment Aid, something that has not been commented on is that Jersey City's tax base growth is strong enough that it is on its way to not even qualifying for Equalization Aid. Jersey City media and political class seem to understand that Jersey City is going to lose Adjustment Aid in five years, but there is no recognition that beyond that Jersey City is going to eventually lose another $191 million.

The reason for this looming loss is that Equalization Aid is a dynamic stream of aid that brings a district's spending up to whatever its Adequacy Budget is under the simple formula:

Adequacy Budget - Local Fair Share = Equalization Aid 

So, if a district's Adequacy Budget grows due to enrollment growth, Equalization Aid grows.  If a district's tax base decreases, then Equalization Aid grows too.

Conversely, if a district's Local Fair Share becomes larger than its Adequacy Budget, its Equalization Aid becomes $0.  260 districts in NJ are already ineligible for Equalization Aid.

For Jersey City, the 2018-19 Equalization Aid arithmetic is:

$590,163,255 - $398,895,043 = $191,268,212 

What these numbers mean is that when Jersey City's Local Fair Share equals $590,163,255, its Equalization Aid becomes $0.

For 2018-19, Jersey City's Adjustment Aid is $170 million.  S2 already establishes a phase-out of this. Assuming Jersey City's tax base grows, Jersey City will have to raise its tax levy by another $191 million after that.

The $191 million in Equalization Aid is down from $277.6 million in 2008-09.   Due to the constant growth of Jersey City's Local Fair Share, this Equalization Aid will soon go to $0.

How Quickly is Jersey City's Local Fair Share Growing?

Local Fair Share is determined by the following formula:

0.7% of Equalized Valuation + 2.3% of Aggregate Income

(note, the multipliers are tweaked annually)

As you can see below, both components of Local Fair Share are showing rapid growth in Jersey City, especially in the last few years.

Unfortunately Aggregate Income is not released publicly. I've gotten Aggregate Income for the 2016-17 to 2018-19 School Years via OPRA requests.
Also, note that a district's Equalized Valuation is from the previous year and Aggregate Income is from two
previous years.  The Local Fair Share for 2018-19 is based on
EV calculations done in 2016-2017 and Tax Year's 2015 Aggregate Income

As you can see, there has been an acceleration of Local Fair Share growth in Jersey City.  From 2008-09 to 2016-17, Jersey City's Local Fair Share only grew from $196 million to $336 million, but in 2017-18 it rocketed to $370 million and in 2018-19 $399 million.

However, growth continues to accelerate.  In the last year Jersey City gained $5.6 billion in Equalized Valuation ($28,418,886,079 to $34,014,551,210).  That $5.6 billion in growth will translate into an an increase of $39 million in Jersey City's Local Fair Share, plus whatever increases comes from growth in Aggregate Income.

Even conservatively projected, Jersey City's Equalized Valuation will reach $50 billion in a few

99 Hudson Street alone may add $1 billion to
Jersey City's Equalized Valuation and $10-$20
million to the Local Fair Share.

years, even disregarding the expiration of PILOTs.

If Jersey City continues to gain an average of $2.7 billion per year in Equalized Valuation and $655 million a year in Aggregate Income, it will translate into a growth of $34 million annually in Local Fair Share, since $2.7 billion in Equalized Valuation equals $19 million in additional Local Fair Share and $655 million equals $15 million a year in additional Local Fair Share.

Combined, that's $34 million a year in additional Local Fair Share, which would be a 5-6 year phase-out of Jersey City's Equalization Aid.

Assuming that there is at least a $20 million gain from the growth of Aggregate Income, Jersey City might be looking at a 3-4 year elimination of its Equalization Aid.

Since Jersey City's 2018-19 Equalization Aid is $190 million and the Adequacy Budget is unlikely to grow faster than inflation (from 2017-18 to 2018-19 Jersey City's only Adequacy Budget grew from $584,758,085 to only to $590,163,255, it will probably take 5 years for the Local Fair Share to equal the Adequacy Budget and for Equalization Aid to be $0.  (See note after the conclusion about the definition of "Adequacy Budget.")

At that point, Jersey City will be in the same club as New Jersey's middle-class & affluent suburbs, as well as Secaucus, Hoboken, and Weehawken.  

The distribution of wealth in the 1980s, where the suburbs were affluent and the cities poor, will be inverted as far as Hudson County goes.

Although the upcoming tax increases will cause Jersey City people some anxiety, the underlying cause is Jersey City's success.  Although Jersey City's tax levy will have to quintuple, the assumption behind these calculations is that Jersey City's Equalized Valuation will soon reach $50-$55 billion.

Once Jersey City's Equalization Aid is $0, there are no further state aid cuts that will occur, and any growth in the Equalized Valuation will  just cause the tax rate to fall further.

When Jersey City's Local Fair Share reaches about $600 million, on a $50-$55 billion Equalized Valuation, it will be a school tax rate of 1.2%-1.1%, which is below NJ's average.

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Note on Adequacy Budget Definition:

In the context of SFRA, an Adequacy Budget is the amount of money a school district is supposed to have in order to deliver a "thorough and efficient education."

A district's Adequacy Budget depends on its enrollment, the number of FRL eligible students it has, the number of ESL-students it has, and the average costs of its county.

What is confusing is that SFRA actually has two concepts known as an "Adequacy Budget."

The first concept is the "Adequacy Budget for Equalization Aid," which is used in conjunction with Local Fair Share to determine if a district gets Equalization Aid and then how much.

For 2018-19 Jersey City's Adequacy Budget for Equalization Aid is $590 million.

The second concept is "Adequacy Budget for Cap Comparison," which has now become obsolete, but was used in the pre-S2 version of SFRA to determine if an underaided district was eligible for a 10% aid increase or a 20% aid increase.

The "Adequacy Budget for Cap Comparison" includes some spending categories that are not included in the "Adequacy Budget for Equalization Aid."  It is usually 7% higher than the "Adequacy Budget for Equalization Aid."

If you see that JErsey City's Adequacy Budget is $630 million, that is Jersey City's Adequacy Budget for Cap Comparison.

In the context of calculating Equalization Aid, only the Adequacy Budget for Equalization Aid" is relevant.

Brick, Toms River, and their State Aid

Since the beginning of Steve Sweeney's efforts to redistribute Adjustment Aid, Toms River and Brick have been two of the most vocal opponents of reform.

The two districts have launched petitions for their Adjustment Aid, initiated lobbying, and now commenced a lawsuit, for which Brick's BOE has already authorized $10,000 and Toms River has authorized $5,000.

Brick and Toms River have depicted the prospect of "only" being funded at 100% as "decimating"

The day of reckoning we have been describing for the last four years is here," [Toms River] Superintendent David M. Healy said. "This year�s state aid losses as well as the future projections will unequivocally devastate this school district in terms of programs, services, staff, class sizes, property taxes, facilities and our ability to provide a thorough and efficient education to our children."

And:

"[Loss of Adjustment Aid] will certainly start decimating our district, starting now."

Brick's Democratic mayor, John Ducey, has just endorsed Chris Christie's already-dead equal funding proposal:

"Why is a kid in another district worth more than a kid here in Brick Township?" Brick Mayor John G. Ducey said Tuesday. "They're not. Every kid should be equally funded. It's just a total abomination of our constitution here in New Jersey."

This blog post will look at Brick and Toms Rivers' tax capacity, loss of enrollment, and then pivot to agreeing with Brick that SFRA itself is not fair to middle-income districts in New Jersey.

Background: 

Despite the aid cuts of 2018-19, Brick and Toms River are substantially advantaged by the state aid status quo.

Whereas the median district is underaided by $417 per student, Brick is overaided by $2,525 per student and Toms River by $1,157 per student.

Brick's 2018-19 state aid surplus is $21,331,456. Toms Rivers' surplus is $17,581,822.

The deficit for the underaided districts is $1.75 billion.

In 2017-18 and before, Brick and Toms River were more advantaged than in 2018-19. Brick's surplus was $2,703 per student and Toms Rivers' was $1,376 per student.

Brick and Toms River Have Low School Taxes

First, Brick and Toms River both have school tax rates that are much lower than the state average.

Whereas New Jersey's average school tax rate is 1.2, Brick and Toms River have tax rates that are approximately 1%, 1.0666% for Brick and 0.9244% for Toms River.

For Brick, the 2018-19 school tax levy is 82.6% of its Local Fair Share. For Toms River, the 2018-19 school tax levy is 78.5% of its Local Fair Share.

The median district in NJ pays 98.5% of its Local Fair Share.

	2018-19 Local Fair Share	2018-19 Local Tax Levy	Tax Deficit	2018-19 Adjustment Aid
Brick	$129,909,386	$107,261,323	($22,648,063)	$21,331,456
Toms River	$197,787,405	$155,329,012	($42,458,393)	$17,581,822

Again, the amount of state aid that Brick and Toms River are projected to lose over the next six years is not even equal to the deficit in each district's tax capacity.

Counting municipal and county taxes, neither Brick nor Toms River has high all-in taxes.  Brick's all-in tax rate is 2.058%.  Toms Rivers' is 1.895%.  The state average all-in property tax rate is 2.4%.

Although Brick and Toms River would be rightly concerned about the tax cap, based on the experience of other towns in NJ who exist with higher school taxes, Brick and Toms River are able to pay for a larger percentage of their local schools than they currently do.

Loss of Enrollment, Loss of Equalized Valuation

Both Brick and Toms River have had substantial enrollment loss in last 15-20 years, losing 24% and 15% of their enrollments, respectively.  Although Hurricane Sandy was an enrollment-loss inflection point, the enrollment loss began several years before Hurricane Sandy and is mirrored in other towns in non-metropolitan New Jersey who are not affected by Hurricane Sandy.

Brick's enrollment peaked in 2003-04, at 11,450. Toms River's enrollment also peaked in 2003-04, at 18,192.5.

By contrast, the state's enrollment is only down by 1% since its 2005-2006 peak.

Hurricane Sandy

There's no denying that Brick and Toms River have lost tax base over the last few years, in part by Hurricane Sandy.   From 2008 to 2018, Brick lost 17% of its Equalized Valuation and Toms River lost 10%, compared to the state's average loss of only 6.6%.

HOWEVER, SFRA compensates Brick and Toms River for the loss of tax base, since as a district's Equalized Valuation and Aggregate Income shrink, so does its Local Fair Share.  As Local Fair Share decreases, Equalization Aid increases.

Brick and Toms Rivers' boards of education may decide that their communities do not need to handle paying the state's 1.3% average tax rate, but they have the option of cutting costs.

I do not think that consolidating schools is easy, but it is a prospect in large swathes of New Jersey and at some point it becomes a necessity.

Here Brick and Toms River are actually advantaged because they are very large school districts with 12 and 18 schools, respectively.

Brick is Right About One Big Thing about SFRA

Although I strongly support the redistribution of Adjustment Aid and I believe that Brick and Toms River are in denial about their ability to pay higher local taxes and even consolidate schools, I am in agreement with Brick that SFRA sees Brick as a "wealthy district" when in actuality it is merely middle-income.

"Under the formula, Brick Township is considered a wealthy district."

Without Adjustment Aid, Brick would only receive $12,811,141 for its 8,449 students, which is $1,516 per student.

If you compare Brick's state aid target to the targets of extremely wealthy districts, you can see that Brick is essentially treated as a wealthy district too:

	State Aid Target Per Student	Local Fair Share Per Student
BRICK	$1,516	$15,376
PRINCETON	$1,193	$31,619
RUMSON-FAIR HAVEN REG	$1,204	$27,539
PARAMUS	$1,214	$27,706
HOBOKEN	$1,207	$79,106
SPRING LAKE BORO	$1,411	$166,397
AVALON	$2,041	$1,935,039
OCEAN CITY	$1,127	$65,703
FLORHAM PARK	$1,126	$32,272
MILLBURN	$1,125	$35,462

I'll compare Brick to Princeton, since Brick has complained about Princeton gaining state aid while it

Avalon is NJ's Richest District in Tax Base Per Student, so
Why on Earth does Avalon, NJ Need $2041 Per Student
in State Aid?

loses state aid, although Princeton is not even close to being NJ's wealthiest district (which is Avalon).

Brick's median household income is $70,655. Princeton's median household income is $118,467.

Although Brick's $1,516 state aid target might be 27% higher than Princeton's in percentage terms, it is only dollars per student that is budgetarily meaningful. 

Brick's $323 superior state funding per student relative to Princeton is very little additional state support in terms of the overall budget.  

To put it another way, Princeton is supposed to fund 92.4% of its Adequacy Budget with local taxes; Brick is supposed to fund 90.6%. 

To put it another way mathematically, SFRA expects Princeton to tax itself at $14,478 per student. It expects Brick to tax itself as $14,692 per student, even though Brick has nowhere near Princeton's wealth. In actuality, Princeton taxes itself at $19,825 per student because it wants to have higher spending.  (and that amount is nowhere near Princeton's Local Fair Share.)

What Brick is complaining about is a statewide problem. For 2018-19, 44% of NJ districts are not supposed to receive Equalization Aid. All in, there are 269/588 districts in NJ are that are supposed to receive less than $2,000 per student.

The reason we haven't heard about how inadequate SFRA's target is for middle-class districts is because most NJ's middle-class districts are underaided compared to their SFRA target anyway, and so for them to get even $1525 per student like Brick is supposed to get would be an improvement.

I will write a future post on making NJ school funding fairer to middle-class districts.

The Bottom Line is that NJ Can't Afford Adjustment Aid

Brick and Toms River aren't wealthy enough to just shrug off the loss of Adjustment Aid, but the bottom line is that they can afford to pay the same tax rates that other non-wealthy towns pay.  I acknowledge that it will be damaging to pay more in taxes, but Brick and Toms Rivers' taxes are artificially low due to the involuntary generosity of taxpayers in the rest of New Jersey.  It would be nice if NJ had a state aid law that helped middle-income districts, but given that we don't, it's inherently unfair to treat some middle-class districts differently than other middle-class districts.

NJ does not have a budgetary choice but to redistribute state aid.  For 2018-19, the state aid deficit for the 370 underaided districts was $1.74 billion and that continually grows.

Although 2018-19 Adjustment Aid was technically $652 million, at least $50 million of that is already roped off from redistribution because it goes to vo-techs or districts with very high municipal taxes.

Given NJ's intensifying needs to fund teacher pensions, post-retirement medical, and other debts, the state cannot create equity in K-12 school funding by increasing state aid alone and redistribution has to be part of the solution.

Redistributing state aid does mean some districts must lose state aid, but these districts will only be reduced to 100% of their recommended funding.  When NJ has 370 districts who are currently given less than 100% funding, I have a hard time seeing the unfairness of that.

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See Also:

• Falsehoods from Toms River

2018-19 State Aid Disparities Narrow, But Remain Stark

Thanks to the determination of Senate President Steve Sweeney, his legislative allies, and grassroots

support from parents in underfunded districts, Gov. Phil Murphy agreed to allow a limited redistribution of K-12 state aid to take place and to focus new state aid on NJ's most underaided districts.

The redistribution of $32.1 million of Adjustment Aid combined with the input of $351.4 million in new aid brings NJ $381 million closer to state aid justice, but as we are about to see in this blog post, 100% funding for every district in seven years is likely unachievable.

As usual, I've put all the state aid data referred to here online.

The Outline:

The median district is underaided by $417 per student and receives only 85% of its Uncapped Aid.

The Overaided:
Yet, there are 190 districts receiving over 100% of what the School Funding Reform Act says they actually need.

Their total excess state aid is $651,944,818, which is larger than the $637,776,892 surplus for 2017-18.

The reason that excess grew for 2018-19 despite the legislature's $32.1 million cut to Adjustment Aid is because the overaided districts tend to have further enrollment loss and/or tax base growth.  Jersey City alone will be overaided by $20 million more in 2018-19 than in 2017-18, despite its loss of $3.5 million in Adjustment Aid.

There are 76 districts who are overaided by $2,000 per student or more and 19 districts who are overaided by $4,000 per student more. Asbury Park, as in years past, has the largest excess in NJ, at $10,869 per student. Asbury Park's excess is an outlier, since the second most overaided district, Weymouth Township, only has an excess of $8,690 per student.

In terms of percentages, there are 54 districts getting 200% or more of their recommended aid.  Washington Township in Burlington County is the most overaided in percentage terms, getting 521% of its real aid target. 

In terms of percentages, there are 54 districts getting 200% or more of their recommended aid.

The 100%ers:

There are 17 districts getting exactly 100% of what is recommended, the largest of which are Lakewood and Freehold Township.

The Underaided:

There are 370 districts getting less than 100% of what SFRA says they need.

Their total deficit is -$1,747,896,430.  There are 109 districts who are underaided by $2,000 per student or more and 35 who are underaided by $4,000 per student or more.  There were 118 districts with the $2,000 per student deficit for 2017-18.

Atlantic City is the most underaided district in NJ, with a deficit of -$7,378 per student, even including its $32 million in Commercial Valuation Stabilization Aid. Atlantic City's deficit remains enormous, but it is significantly less than the most underaided district for 2017-18, which was Bound Brook with a -$9,546 per student deficit.

The $1.748 billion deficit for 2018-19 is only $217 million less than the $1,965,333,325 deficit for 2017-18, despite the infusion of $381 million in new and redistributed state aid.

The reason that the deficit shrank by substantially less than the input of new+redistributed aid is because the true deficit increases every year due to weighted enrollment growth, tax base erosion, and inflation.  (see below)

Sweeney's state aid proposed was designed to give the biggest increases to districts with the worst percentage underfunding with the goal of a 58% threshold, so there are only eight districts getting less than 50% of their Uncapped Aid.  Woodbridge is now the most underaided in percentage terms, getting only 42% of what it is supposed to get. 

Chesterfield, which only got 10% of its recommended aid in 2016-17 and 20% of its recommended aid in 2017-18 will now receive 58% of its Uncapped Aid. From 2016-17 to 2018-19 Chesterfield's state aid has grown from $419,983 to $2,403,780, a 473% increase (with more to come).

Steve Sweeney often said that he was bringing every district up to 58% of its Uncapped Aid, but this is not accurate, since Sweeney and his allies were forced to cap aid limits for large underaided districts such as Woodbridge and even some small districts who were exceptionally underaided, such as Fairview.  As you can see inm the table below, there are 16 districts who remain below 58%, with Woodbridge being the state's most underaided in percentage terms.  

KEARNY	57.73%
ROBBINSVILLE TWP	56.09%
BLOOMFIELD TWP	55.44%
ATLANTIC CITY (see note)	55.07%
LINDEN	55.00%
PASSAIC COUNTY VOCATIONAL	54.08%
BOUND BROOK	51.75%
FAIRVIEW BORO	51.47%
CLIFTON CITY	47.31%
HACKENSACK CITY	47.24%
WEST ORANGE	47.06%
ELMWOOD PARK	44.46%
ATLANTIC CO VOCATIONAL	43.93%
EDISON TWP	43.04%
NORTH BRUNSWICK TWP	42.08%
WOODBRIDGE TWP	41.72%

Overall, 117 districts are now exactly at the 58% threshold.

Although the need to cap aid increases for 2018-19 is disappointing, in 2019-20 and beyond, these districts will have the largest increases proportionally, since (if Murphy signs S2), new aid will be based on each district's deficit, not its existing aid.

Per Pupil Gains and Losses from 2017-18

The legislature's increase for 2018-19 was structured onto Phil Murphy's SFRA-literalist proposal, in which state aid was determined by inflating a district's existing aid by (usually) 5%, so districts already getting 80-90% of their Uncapped Aid got the largest gains.  Hence Trenton gained +$793 per pupil and Newark gained +$729 per pupil, even though those districts were only underaided by about $2800 per student, which not even close to NJ's largest deficits.

Under Murphy SFRA-literalist approach, 13 districts (all Abbotts) gained 48% of all new state aid.

Aid increases in dollars per student are available here.

Sweeney and his allies kept Phil Murphy's original distribution for all underaided districts, but then

Bound Brook had been NJ's most underaided district in

dollars per student (-$9,546 pp for 2017-18). 

Although Sweney used percentage underaidin,
it gained the most in dollars per student (+$2289).

strove to bring every district up to 58% of its Uncapped Aid.  Under this plan, Newark and Trenton didn't gain additional aid, but they didn't lose any state aid either.  Because of the focus on the 58% threshold, severely underaided districts who were at or above that level did not gain any additional state aid under the Sweeney plan.  EG, Belleville is underaided by $4252 pp, but it gained nothing over it had originally been supposed to get under Murphy's plan because Belleville was already at 60% of its Uncapped Aid and the Sweeney team used percentage underaiding. 

  

In any case, these districts are the ones who are gaining the most in dollars-per-student.

District	Gain in $/PP	District	Gain in $/PP
BOUND BROOK	$2,289	UNION COUNTY VOCATIONAL	$1,606
ATLANTIC CO VOCATIONAL	$2,213	ABSECON CITY	$1,515
MANVILLE	$2,163	DUNELLEN	$1,446
CUMBERLAND CO VOCATIONAL	$2,100	RED BANK BORO	$1,399
CHESTERFIELD	$2,055	ELMWOOD PARK	$1,398
FAIRVIEW BORO	$1,951	GUTTENBERG	$1,337
FREEHOLD BORO	$1,890	PASSAIC COUNTY VOCATIONAL	$1,302
MANCHESTER REG	$1,830	MERCHANTVILLE	$1,274
LITTLE FERRY	$1,787	ROCKAWAY BORO	$1,246
RIDGEFIELD PARK	$1,764	KENILWORTH	$1,225

What is also important to note is that the majority of NJ's severely underaided districts gained more state aid in the Sweeney model than the Murphy-Repollet SFRA-literalist model, although not always.

The reduction of Adjustment Aid was done through a more complex method that sometimes depended on spending relative to Adequacy and municipal overburden. Vo-techs were also exempted from any cuts.

The following districts lost the most:

District	Loss in $/PP	District	Loss in $/PP
OGDENSBURG	($212)	PEMBERTON TWP	($317)
LOWER CAPE MAY REGIONAL	($218)	ALLENHURST	($321)
LAKEWOOD	($221)	OCEAN TWP	($325)
CORBIN CITY	($223)	HAMPTON BORO	($330)
DELAWARE VALLEY REGIONAL	($223)	ALEXANDRIA TWP	($361)
KNOWLTON TWP	($243)	DENNIS TWP	($373)
CLINTON TWP	($261)	WEYMOUTH TWP	($470)
SPRINGFIELD TWP	($268)	ASBURY PARK	($591)
MONTAGUE TWP	($277)	WASHINGTON TWP	($801)
HOPATCONG	($288)	GLASSBORO	($948)

Although the media focused on Jersey City being the "biggest loser" for losing $3.5 million and that being the most in total dollars, that loss is only $114 per student.

By contrast, Glassboro lost $1,816,764, which, divided by Glassboro's 1916 students, is $948 per student.

Sweeney's Plan is Good Policy, But It Won't Bring Every District to 100% of State Aid

Toms River, Brick, Freehold Regional, Manalapan-Englishtown, Jersey City, and Ocean City have been at the forefront of opposition to state aid reform, saying that it would "decimate" their districts if they receive only 100% of their state aid.

However, these districts should be aware of their continuing advantage, since even in seven years, today's underaided districts will still not be at 100% funding, so the overaided districts who are losing state aid now will still be advantaged.

Although the 2018-19 state aid distribution takes New Jersey $217 million closer to having every district at 100% funding, 100% funding will remain out of reach in 2024-25.

The major reason for the improbability of bringing every district to 100% is that the deficit for 2018-19 will be $1,747,896,430, so even the full redistribution of $651,944,818 will still leave New Jersey with a $1.1 billion net deficit.

The major reason NJ is unlikely to be able to fully fund the underaided districts is that the true deficit increases by $100-$200 million per year, so, even conservatively estimated, in 2024-25, the underaided districts could require another $1 billion on top of the $1.747 billion they would need to be fully funded in 2018-19.

Although Adjustment Aid will probably grow over the next seven years, not all of that $651,944,818 in 2018-19's Adjustment Aid will be available to be redistributed because several tens of millions of it goes to districts who are being protected from aid cuts by the carve-outs for being below Adequacy, having "municipal overburden," or being vo-techs.

I do not have the exact amount of "protected Adjustment Aid," but East Orange alone has $24.4 in excess aid, Keansburg has $7.6 million, Vineland has $5.4 million, Gloucester City has $1.2 million. Monmouth County Vo-Tech has $6 million in excess aid, Ocean County Vo-Tech has $4.3 million. Between those districts and other protected districts, there is probably $50 million in "protected Adjustment Aid."

On the other hand, unless there is a recession, the State of New Jersey will experience annual revenue growth, but the amount of money left over for K-12 aid after expenses for TPAF (+$392.5 mil for FY19) and post-retirement medical (+$51.8 mil) will not equal the $284 million it was for 2018-19 since the 2018-19 budget was powered by increasing income tax rates, the transfer of the state lottery, fiscal gimmicks, flat-funding Extraordinary Aid, flat-funding municipal aid, plus stronger income tax revenue growth.

So, future new money for K-12 aid will be much less than the $284 million it was for 2018-19.

There are two factors in NJ's budgetary favor.  

• In 2022-23 NJ is projected to reach 100% of its pension funding, so starting in 2023-24 NJ should have much more new money available for K-12 aid (or other Property Tax Relief Fund spending).  
• The Debt Servicing costs for construction debt should start to fall, (unless there is another round of Abbott construction bonding).

Reaching 100% of state aid for all districts will also depend on what decisions the governor and legislature make regarding other expenses that are paid out of the Property Tax Relief Fund, ie, municipal aid, direct property tax rebates, community college, and PreK.

Given the state's extreme budget pressures for debt streams like TPAF and post-retirement medical, plus the appropriateness of funding municipal aid and direct tax rebates, and the likelihood of increases for PreK, the need to redistribute Adjustment Aid will become no less acute in the future.

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See Also:

• "Updated State Aid Disparities for 2017-18"
• "Looking at 2018-19 Disparities"  (based on the original Murphy proposal)