State Education Spending in New Jersey's FY2020 Budget

After months of speculation, Phil Murphy released his proposal for FY2020 on Tuesday, March 5th.  This blog post will focus on education spending.

We won't have the district-by-district state aid numbers until Thursday, March 7th, nor Actual Aid vs Uncapped Aid until next week (at the earliest), but the FY2020 Budget in Brief provides some big picture views of where the state's education money is going.

Phil Murphy's FY2020 Budget Proposal is a $38.8 billion package, of which $15.4 billion will be for PreK-12 education, or 40% of the budget.  Education spending will comprise the same percentage of the budget as it did in FY2019, although the 40% figure is high in comparison to the early 2000s, when education spending was closer to 30% of the budget.

The increase in education spending is based on an assumption that income taxes will increase by $1.1 billion.  There will be an offset due to expanding the EITC, but there is projected a $447 million increase from having the 10.75% tax bracket kick in at $1 million (instead of at $5 million) then another $752.7 million in organic revenue growth.

The $752.7 million in organic revenue growth is very high in comparison to recent years, which I suppose is based on accelerating economic growth.

• Between FY2013 and FY2014 NJ's income tax grew by only $203 million
• Between FY2014 and FY2015 NJ's income tax grew by $938 million.
• Between FY2015 and FY2016 NJ's income tax grew by only $106 million.
• Between FY2016 and FY2017 NJ's income tax grew by $602 million.
• Between FY2017 and FY2018 NJ's income tax grew by $1 billion.
• FY2019 is incomplete, but the Treasury's most up-to-date projection is a $410 million increase, despite creating the 10.75%/$5,000,000 top bracket.

Anyway, the massive contrast between the FY2020 budget and the FY2019 and FY2018 budget is how much smaller the increase for education-related debt is.  For FY2020, the increase for TPAF, Post-Retirement Medical, Whitman-era Pension Obligation Bonds (POBs), School Construction Debt Servicing, and teachers Social Security is only $141 million.

• For FY2019, the five mandatory items increased by $627 million.
• For FY2018, the five mandatory items increased by $507 million.

The biggest cause of the budgetary relaxation is that Post-Retirement Medical costs will decrease in absolute terms, by $244 million.  This is due to getting retired teachers onto Medicare Advantage.

If Post-Retirement Medical Care had increased at the $60 million a year pace it had increase in recent years, then the mandatory spending would be increasing by still a smaller amount than in FY2019, but by $400 million and the increase for K-12 opex aid would be much diminished.

Note, the $206 million is a net increase. There is also redistribution happening.

Of the $15.4 for education $8.7 billion is proposed for K-12 opex aid, aka "Formula Aid," a net increase of $206 million (+2.4%), however, underaided districts will gain substantially more than $206 million due to the redistribution of ~$80 million in Adjustment Aid.  The nearly $300 million for underaided districts should be greater than the natural increase in the deficit and continue to narrow the state's funding gap.

Phil Murphy did follow the new aid allocation method S2, which bases new state aid on a district's deficit, not its existing aid.  This approach focuses new aid on severely underaided districts and will be sufficient for every district to get at least 50% of its Uncapped Aid, for the first time in the SFRA era.

PreK aid will increase to $806.5 million, up $68.4 million (9.3%) from FY2019.  The increase for PreK is greater than the combined increases for miscellaneous items like Extraordinary Aid (+$5 million), Debt Service Aid (+$5.7 million), "Other Aid" ($15.1 million).

Next Year?

I did not foresee the spending cuts to post-retirement healthcare, so I thought that this year's budget would be much more difficult that it appears to be.

So I admit that I have a bad track record, but I don't know how the trend of higher and higher spending on pensions and other benefits will permanently reverse, nor do I think Phil Murphy will get an income tax increase through the legislature every year.

From the Path to Progress

So the phase-out of Adjustment Aid will have to continue.

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• Tentative Reaction to the Murphy FY2019 Budget Proposal
• New Jersey is a Debtors' Prison, the 2017-18 Budget

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"

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)

Looking at the 2018-19 State Aid Disparities

UPDATED STATE AID ANALYSIS IS HERE.

http://njeducationaid.blogspot.com/2018/07/2018-19-state-aid-disparities-narrow.html

THE FOLLOWING POST REFERS TO MURPHY'S ORIGINAL PROPOSAL BEFORE LEGISLATIVE MODIFICATION.

This post compares the proposed state aid levels of all New Jersey districts for 2018-19 with their Uncapped Aid levels.  By comparing actual Aid to Uncapped Aid we can see how stark New Jersey's state aid disparities are. 

While I am very disappointed and angry at the proposed distribution for 2018-19, at least the Murphy administration is attempting to follow some rational distribution of aid.  From 2013 to 2018 the Christie administration more or less flat-funded all districts, with the exception of those who participated in Interdistrict Choice.  For 2017-18, the Christie administration did not even initially calculate Uncapped Aid .

Although the Murphy administration describes itself as a 180 turn from the Christie administration in education policy, and that's the reality in a lot of ways, one thing the Murphy administration and Christie administration have in common is that they have no choice but to prioritize the state's debt payments.  As large as Murphy's $283 million increase in K-12 aid is, it is significantly smaller than the increase for teacher pensions, ie the Teachers Pension And Annuity Fund.

(Note, this does not include money from the lottery that is going to education)

See below for a definition of "Uncapped Aid."

The Scope of the Disparities:

The Big Picture:
There are 212 overaided districts with a total surplus of $708.7 million.  This is almost $70 million more than 2017-18, when the surplus was $643 million.  (I am excluding Interdistrict Choice aid)

The Murphy administration's proposed increase for the 171 of the 212 overaided districts is $28,604,340.

There are 380 underaided districts with a total deficit of $1.913 billion.  This is $52 million less than 2017-18, when the deficit was $1.965 billion.  (again, I am excluding Choice Aid, plus I am also excluding Atlantic City's Commercial Valuation Stabilization Aid, which is $32 million.)

If New Jersey could redistribute Adjustment Aid, the net deficit is only $1.205 billion.

Notes on New Jersey's State Aid Have-Nots

There are 75 districts getting 50% or less of their Uncapped Aid.

If the state wanted to prioritize this sub-50% districts, it would only cost $106 million to bring them all up to at least 50% funding, or less than one-seventh of the total excess aid that the overaided districts receive.

Chesterfield is, yet again, in in last place, getting only 21% of the state aid SFRA recommends for it. River Edge is the next lowest aided, getting 24%, then Hasbrouck Heights at 24.5%, Elmwood Park at 26%, and Robbinsville at 27%.

There are 43 districts whose deficit is larger than $4,000 per student.  To bring all of these districts up to a deficit of $4000 per student (which is still terrible) would require $155.7 million, which is about one-fifth of the state's excess aid.
(The $155.7 million number does include Atlantic City's Commercial Valuation Stabilization Aid)

Atlantic City's Taxes are 287% of Local Fair Share. 

(+$52 million over LFS)

Phil Murphy's proposed budget will give Atlantic City $1.2

million in tax relief.

Bound Brook is the worst-off in deficit in dollars per student, at -$8,999 per student. Then Atlantic City (even with the $32 million CVSA), Manchester Regional, Fairview, and Freehold Boro.

Several vo-techs, like Atlantic County Vo-Tech, Cumberland Vocational, and Passaic County Vocational are also extremely underaided.

Atlantic City, has, by far, the worst taxes, with a tax levy at 287% of Local Fair Share. ($81,888,890 out of $29,396,657) 

Manchester Regional, up until his year, had the worst taxes, but its tax levy was in the low-200% rage of Local Fair Share. Manchester Regional's 2017-18 taxes are still at 219% of Local Fair Share, which is the second worst in New Jersey.

Newark's deficit is the largest in total dollars, $130,042,863.

Notes on New Jerseys' State Aid Haves

There are 68 districts getting 200% or more of what SFRA's real recommendation for them is is.  23 lucky districts get over 300%. Washington Township in Burlington County tops off the overaided districts, getting 563% of its aid target.

If the districts receiving 200% or more of their state aid got their aid reduced to "only" 200%, it would free up $76.8 million.

Tavistock is a non-operating district that claims three students living there.  It is getting $2299 on an aid target of $299, so it technically gets 1003% of its recommended aid.

Jersey City's Taxes are only 29% of Local Fair Share.
Jersey City is Gaining $1.8 Million in State Aid.

Deal, whose tax base is astronomically large, is getting $2,039,184 in Interdistrict Choice money, plus $200,045 in formula aid, on an aid target of only $187,443. That works out to 1195% of Local Fair Share, but I have decided to exclude Interdistrict Choice money from this analysis.

In total dollars, the biggest excess is Jersey City's, at $175 million. Powered by surging real estate and a little additional state aid from Phil Murphy, Jersey City's excess aid is up $24 million from its $151 million excess in 2017-18. Jersey City's school taxes are now only 29% of Local Fair Share.

Jersey City's excess aid is the ninth highest in dollars per student too, $5,716 per student. That's more than the total aid of its impoverished neighbors Guttenberg and Fairview get total!

Jersey City's Local Fair Share is $398 million. This is growth of $30 million in Jersey City's Local Fair Share in one year. This means that if Jersey City lost $30 million in state aid per year and made up for that loss with local taxes that its tax rate would not increase.

Also, Jersey City's Local Fair Share is growing at a rate where it will no longer qualify for Equalization Aid in 6-7 years.  Right now the Local Fair Share is $398 million, but once it reaches Jersey City's $590 million Adequacy Budget (for Equalization Aid) the only state aid Jersey City will qualify for will be the three categorical aids.

This means that even if Jersey City's Adjustment Aid is redistributed the state should still be able to use money currently going to Jersey City for needier school districts.

Hoboken's Local Fair Share is $217 million, which surpasses Edison to be the second largest in NJ after JC.

Hoboken's Local Fair Share is $217 million, the second largest
in NJ.  Hoboken's LFS is  $79,000
per student and yet it gets $10.5 million.
Hoboken's LFS per student is more than 2x Millburn's.

Pemberton's surplus state aid is $25,680,554, the second most in New Jersey.

Asbury Park is overaided by the most per student, with a surplus of $11,827 per student. That excess aid alone is more than what low-wealth non-Abbotts like Freehold Boro, Dover, Guttenberg etc get total for their students.

Loch Arbour is at 100%

Loch Arbor is the only district in New Jersey to get 100% of its Uncapped Aid: getting $3,944 for its 5 students, which is exactly SFRA's recommendation. (Since Loch Arbour's Local Fair Share is $1,301,988, it could give up all of its aid and not notice a thing.)

Abbott Specific Notes

The Abbotts are disparate. They range from Asbury Park and its mammoth $11,827 per student surplus to Plainfield, with its -$4,594 per student deficit (itself the 32nd largest in New Jersey).

For 2018-19 eleven Abbotts will be overaided, which is two fewer than the thirteen overaided Abbotts of 2017-18. The two Abbotts who slipped from overaided to underaided are Salem City and Burlington City. Their slippage, despite additional state aid, underscores how dynamic state aid is and that the deficit against Uncapped Aid constantly grows.

Only three of the Abbotts pay above their Local Fair Share (Burlington City, Salem City, and Phillipsburg)

The median Abbott only pays 56% of Local Fair Share. Hoboken's taxes are only 20% of Local Fair Share, despite having a levy that is extremely high in dollars-per-student.

  Lakewood

Lakewood is now overaided!

Lakewood actually has a rapidly growing tax base and its Local Fair Share increased from $92,974,112 for 2016-17 to $102,034,106 for 2017-18 to to $111,534,172 for 2018-19. During that time there has also been a decrease in the student population.

Thus, Lakewood's state aid deficit, which was $19 million for 2016-17, has increased to a small surplus of $1,566,821.

Although SFRA does not work for Lakewood and the district does require additional state aid, the district also has the ability to increase the tax levy in excess of 2% (which it has been doing).

Debt Takes Most of the Money

In a continuation of what happened under Christie, the state is putting much more money into various debt categories than it is putting into

See Also:

• "Despite Aid Increases, Inequalities Worsen: Phil Murphy's FY2019 Aid Proposal"
• "Tentative Reaction to Murphy FY2019 Budget Proposal"

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Definition of Uncapped Aid:
Uncapped Aid = the real full funding for every school district. The term "Uncapped Aid" derives from the fact that SFRA contains legal "caps" on how much a district can gain in a single year, which are usually a 10% or 20% increase on what the district received the year before. Due to these caps, a school district's statutory "full funding" may differ greatly from what SFRA's formulas say it actually needs.

Uncapped Aid also refers to the amount of state aid that overaided districts would get if it were not for the mechanism of Adjustment Aid delivering over 100% of their state aid to them. In the case of Adjustment Aid districts, "Capped Aid" might more accurately be called the "pre-Adjustment Aid state aid target," but that is too wordy, so I just call it "Uncapped Aid" even though the aid caps do not apply to districts who are already getting over 100% of their recommended state aid.

Despite Aid Increases, Inequalities Worsen: Phil Murphy's FY2019 Aid Proposal

UPDATED STATE AID ANALYSIS IS HERE

On Thursday, March 15th, the Murphy Department of Education, led by Asbury Park's former superintendent Lamont Repollet, released its proposed state aid figures for 2018-19.

Due to a combination of raising the income tax to 10.75% and a surge in state revenue, the Murphy administration is able to meet the next step of the Christie administration's ten-year rampup to full TPAF funding (+$392.5 million), as well as provide big increases for free community college (+$50 million), free PreK (+$57 million), and what I assume is another round of mostly Abbott construction (+$148 million in debt service)

The Murphy administration is proposing to increase K-12 operating aid by $283 million, which would be the biggest state aid increase since 2012-13. They are claiming this will bring New Jersey to full funding of SFRA, "The Governor is committed to putting New Jersey�s schools on the path to full funding within four years, and is proposing an additional $283 million in formula aid."

While that increase is worth lauding, the Murphy administration is following SFRA (almost) to the letter, including increasing Adjustment Aid for already overaided districts and utilizing SFRA's flawed design of how to distribute new aid.

Therefore, while the underfunding of state aid diminishes slightly, the inequalities of the distribution are exacerbated.

(I have calculated aid growth in dollars per student and put it online here.)
(I also have Actual Aid vs. Uncapped Aid here.)

1.  Insufficient Help Goes to the Lowest Aided

The reason the distribution is unfair to the most underaided districts in NJ is that the Murphy

administration strictly followed the State Aid Growth Limits, which restrict a district's aid gain to 10% or 20% of what it got the year before, regardless of how underaided it is.

For the 2009-2010 school year and thereafter, total stabilized aid shall include Equalization aid, Special Education categorical aid, Security Aid, and Transportation aid.
d. For the purposes of this section, �State aid growth limit� means 10% in the case of a district spending above adequacy and 20% in the case of a district spending below adequacy.

Back in 2008 the authors of SFRA were being overly optimistic about NJ's revenue growth, but Capped Aid was supposed to be an incremental step towards the goal of real, full funding, not the goal itself.

The Murphy administration, however, is treating Capped Aid as the goal in itself, is making the achievement of Capped Aid by FY2023 the goal and calling that "full funding."

Hence, the districts that are supposed to get a 20% gain in one year are stretching that out into four 5% gains.

Phil Murphy to New Jersey
"Capped Aid = Full Funding"

Because the State Aid Growth Limits are calculated based on existing aid, the lower a district's state aid is, the less money it gains in real terms.  (see "The Skews of Capped Aid")

For instance, Freehold Boro got 45% of its recommended, Uncapped Aid for 2017-18 and is underaided by over $7,675 per student.

Under the proposed State Aid distribution, Freehold Boro will gain 5% ($534,991), which equals $318 per student. Likewise, Red Bank Boro, which only gets 38% of its Uncapped Aid (-$4219 per student), will likewise only gain 5%, or $178,503, and yet that only equals $127 per student.  

Bound Brook, NJ's most underaided district in dollars per student (-$9,546 per student for 2017-18)), is gaining 5%, but that is only $300 per student.

In 2017-18 Steve Sweeney and his state aid reform allies - Paul Sarlo, Louis Greenwald, Teresa Ruiz, Joann Downey, Eric Houghtaling - based new state aid on deficits and even though they had only $130 million to work with, they delivered larger aid boosts to the most underaided districts in New Jersey.

On the other hand, districts that are modestly underaided will gain far more.  

Trenton was only underaided by $2856 per student, but for it to gain 5%, equals $793 per student. 

Newark was underaided by $2852 per student for 2017-18 but its 5% gain equals $729 per student.  Paterson was only underaided by $3,062 per student but its 5% gain equals $717 per student.  

Half of all new aid will go to only thirteen districts, all Abbotts.  As usual, the Abbotts get about 55% of all new aid.

Under the Murphy/Repollet plan, any district that already gets 83% or more of its Uncapped Aid will reach full funding in four years, but districts that receive 60% or less will have to wait years, even decades.  

Since Freehold Boro receives 45% of its Uncapped Aid, At increases of 5% a year Freehold Boro will bring only be at 65% of what is its 2017-18 Uncapped Aid by FY2023. Under this pathway it would take Freehold Boro 16 years to reach what is just its 2017-18 Uncapped Aid (neglecting inflation and enrollment growth).

Some districts are even worse off. Chesterfield only got 19% of its Uncapped Aid in 2017-18. Under Murphy's planned 5% increases Chesterfield will take THIRTY SIX YEARS (2054!) to get what is only its 2017-18 Uncapped Aid.  (Chesterfield's aid increase is a paltry $52 per student)

Some districts that are underaided but nonetheless above Adequacy are the most screwed. Cherry Hill was underaided by $1397 per student, but it is gaining only $44 per student.  West Orange was underaided by $2459 per student, but is gaining a pathetic $36 per student.

Although it is a unique district, Lakewood is only gaining $239,242, or $39 per student.

2. Adjustment Aid is Sustained and Increased

Even worse than blindly obeying the flawed State Aid Growth Limits is the restoration of Adjustment Aid to about 172 already-overaided districts, for a grand total of an additional $28,604,340 increase in aid.

• Marlboro was overaided by $5.3 million, it is gaining $270,369 (+$58 per student)
• Pemberton was overaided by $25 million, it is gaining $658,924 (+$154 per student)
• Brick was overaided by $23 million, it is gaining $750,798 (+$88 per student)
• Asbury Park was overaided by $24 million, it is gaining $796,127 (+$360 per student)
• Hopatcong was overaided by $9.2 million, it is gaining $169,007 ($109 per student)
• East Orange was overaided by $22.5 million, it is gaining $1,114,526 (+$115 per student)
• Jersey City was overaided by $151 million, it is gaining $1,863,714 (+$61 per student)
• Manalapan was overaided by $13 million, it is gaining $498,300 (+$100 per student)
• Ocean Township was overaided by $5.5 million, it is gaining $464,924 (+$175 per student)
• Keansburg was overaided by $6.9 million, it is gaining $160,716 (+$114 per student)

Even Deal, whose Local Fair Share is $17 million for 178 students, is gaining $124,117 (+$697 per student) (this is mostly from Interdistrict Choice)

Asbury Park's state aid gain of $796,127 is actually greater than its severely underaided neighbors, Red Bank Boro (+$178,503) and Freehold Boro (+$534,991) will get COMBINED.  No wonder Asbury Park's superinintendent is "delighted."

 

Since Murphy plans to "fully fund" (ie overfund) overaided districts for another three years, the total projected gain is $84 million.  

The legal justification for increasing aid to the overaided is that Adjustment Aid technically does not allow a district to receive less than 102% of what it got in 2007-08, but Adjustment Aid was cut in 2010, 2013, and 2017.

What Phil Murphy and Lamont Repollet are trying to do is bring all these overaided districts back to their aid levels of 2008-09. Hence, since Jersey City's aid was then $417.9 million versus $410 million for 2017-18 , the Murphy administration has it on a four year path back to $417.9 million. Likewise, Asbury Park's peak aid was $57.6 million versus the $54.4 million it got in 2017-18, the Murphy adminstration has a four year path for Asbury Park back to that peak.

(See "How Overaided Districts Would GAIN Money if SFRA is Not Changed.")

If Adjustment Aid were reduced by a fifth, according to Steve Sweeney's state aid reform plan, NJ's underaided districts would be gaining an additional $128 million. ($128 million = a fifth of 2017-18's $640 million in excess aid)

3.  Ignoring SFRA When It Benefits the Overaided

Lamont Repollet has already told people that he had "no choice" but to blindly obey Adjustment Aid and the State Aid Growth Limits, but he is ignoring SFRA when it benefits overaided districts.

SFRA has no statutory sunset for Adjustment Aid, but it does allow a minimal decrease in Adjustment Aid is allowed if a district's enrollment loss after 2008 exceeds 5%.    (See "Adjustment Aid Has No Statutory Sunset")

There are actually 45 districts that SFRA calls for $9.8 million in cuts to, but Murphy/Repollet are ignoring this provision of SFRA.

District	SFRA Allowed Aid Loss (despite Adj. Aid)	Proposed Aid Change for FY2019
Beach Haven Boro	-$619	$0
West Cape May Boro	-$3,929	$0
Lawrence Twp	-$7,368	$0
Deal Boro	-$12,602	$0
South Amboy City	-$13,695	$0
Califon Boro	-$25,451	$0
Milford Boro	-$31,640	$0
Union Beach	-$37,569	$0
Hampton Boro	-$37,857	$0
Upper Freehold Reg.	-$47,019	$0
Cape May City	-$57,377	$0
Elk Twp	-$60,133	$0
Port Republic City	-$63,349	$0
Montague Twp	-$68,702	$0
Glassboro	-$71,938	$0
Commercial Twp	-$78,341	$0
Hillsborough Twp	-$81,254	$0
Washington Twp	-$86,701	$0
Delaware Twp	-$88,516	$0
Downe Twp	-$89,019	$0
Dennis Twp	-$92,124	$0
Neptune City	-$93,351	$0
Oaklyn Boro	-$98,879	$0
Brooklawn Boro	-$132,585	$0
Lafayette Twp	-$140,013	$0
Frenchtown Boro	-$154,323	$0
East Amwell Twp	-$157,165	$0
Waterford Twp	-$166,921	$0
Byram Twp	-$179,052	$0
Estell Manor City	-$202,559	$0
Harrison Twp	-$206,468	$0
Roosevelt Boro	-$213,779	$0
Upper Pittsgrove	-$252,837	$0
Ogdensburg Boro	-$259,688	$0
Bloomsbury Boro	-$286,288	$0
Clinton Twp	-$302,694	$0
Delsea Reg. H.S Dist.	-$381,559	$0
Plumsted Twp	-$421,093	$0
Greenwich Twp	-$455,185	$0
Buena Regional	-$546,074	$0
Tuckerton Boro	-$565,991	$0
Lower Cape May Reg.	-$761,881	$0
Clearview Regional	-$824,053	$0
Freehold Regional	-$885,391	$0
Hoboken City	-$1,069,199	$0
Total	-$9,812,231	$0

Conclusion

New Jersey is proposing to increase income taxes by $765 million and income taxes are actually surging, but only $283 million of that is going into K-12 state aid.

Increasing funding for NJ's many streams of indirect aid - TPAF, post-retirement medical, and construction debt service - is required, and Phil Murpy has a mandate by his electoral victory to increase PreK and community college aid as he wants.

However, Phil Murphy repeatedly promised to "fully fund that formula" and what he is doing will not bring New Jersey anywhere near to that point, and in fact, will preserve inequalities and in many cases, make them worse.  By completely ignoring the legislature's work last year to expose and fix state aid inequalities, he is trying to govern without the input of Democtatic officials who are actually more knowledgeable on state aid than he is.

All of us in the state aid reform community have our work cut out for us in explaining to the public, elected officials, and journalists why the proposed increases have to be changed.

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See Also

• "Tentative Reaction to the Murphy FI2019 Budget Proposal"
• "New Jersey = Debtor's Prison: The 2017-18 Budget"
• "Looking at the 2018-19 State Aid Disparities"