Yes Education Law Center, Jersey City is Ridiculously Overaided

There is no district that exemplifies the absurdity of the frozen aid allocation more than Jersey City.

Note: Jersey City's Local Fair Share is $375 million for 2018-19.  

Jersey City's derelict wharves have given way to gleaming skyscarpers.  Jersey City's empty factories have become million-dollar lofts.  Jersey City's mayor calls Jersey City "New Jersey's Economic Powerhouse" and realtors and even residents call it "the Gold Coast."

There are several quantitative ways to measure this transformation, but by real estate value alone, since 1998 Jersey City's share of New Jersey's total Equalized Valuation has risen from 1.05% of the state's total to 2.35%.  Were Jersey City's $11.6 billion in PILOTed properties included in Equalized Valuation, Jersey City would possess 3.25% of New Jersey's total real estate wealth.

Note, this graphic was updated in Oct 2018 to reflect release of new Equalized Valuations.

Yet, despite that staggering increase in wealth, Jersey City still receives state aid as if it were the struggling city of the 1980s; getting $410.4 million in K-12 operating aid for 2017-18, an amount that is $151.5 million in excess of the $258.8 million that SFRA's core formulas actually say that Jersey City needs.

Thus, despite a 2018 Equalized Valuation of $28.4 billion, the Jersey City taxpayers only pay $116 million in school taxes, or 20% of the Jersey City Public Schools' budget.  Despite having New Jersey's largest tax base, Jersey City only has the 16th largest tax levy, behind poorer and/or smaller towns like Newark, Cherry Hill, Clifton, and West Orange.

Despite Jersey City's substantial growth in overall population, Jersey City's gentrification appears to have actually DECREASED student enrollment, from 31,328 in 2009-10 to a (projected) 30,815 for 2018, as childless residents and private-school families displace children who would have been in the public schools.

As public school families leave Jersey City, they often move to Jersey City's neighbors, contributing to enrollment increases and budget problems in most of the non-gentrified towns of Hudson County.

Source:
http://www.nj.gov/education/finance/fp/ufb/
Note 1: Yes, these numbers include charter students.
Note 2: Weehawken and Hoboken have seen enrollment growth since 09-10, but they were thoroughly gentrified in 2009-10 anyway. 

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It is obvious to many people that Jersey City's level of state aid is unfair, but not the Danielle Farrie of the Education Law Center.

The Education Law Center's case against redistributing Jersey City's Adjustment Aid isn't an argument so much as a redefinition of the words "overfunded" and "overaided" to mean "above Adequacy."  The Education Law Center denies the legitimacy of the common usage of the term, which means that a district receives more state money than SFRA's core formulas say it needs.

Here's the core of the Farrie/Education Law Center argument/redefinition:

JCPS receives more state aid for its adequacy budget than the formula would provide because of its allocation of transitional Adjustment Aid under the SFRA. However, this does not mean that the district is �overfunded,� �overaided,� or spending in �excess� of what students need for a thorough and efficient education. In fact, Adjustment Aid does not fully cover the district�s $253 million local levy gap.  

Adjustment Aid in Jersey City does not fund spending in excess of the level required under the SFRA for a thorough and efficient education for all district students. Even with Adjustment Aid, the district is spending $100 million below its adequacy target. A reduction in Adjustment Aid would have a severe impact on the district, further eroding the resources that are required to adequately educate all students to the state�s academic standards. For example, using average district compensation levels ($99,158 annual salary plus benefits), the total loss of $151 million in adjustment aid would require the district to cut over 1,500 positions, or one-half of all certificated staff.  [my emphasis]

Essentially the Education Law Center claims a monopoly on the right to define the words "overfunded" "overaided."  Instead of allowing those words to refer to state aid only (hence my preferred "overaided"), they say they must refer to spending relative to Adequacy.

In the Education Law Center's logic, since Jersey City's schools are only spending $17,149 per student and its full Adequacy budget calls for spending of $20,321 per student, therefore the Jersey City Public Schools cannot be "overfunded" or "overaided."

QED.

(note, Jersey City actually spent $23,466 per pupil in 2014-15, but SFRA's definition of spending excludes several significant revenue sources and spending categories, hence Jersey City's "spending as defined" is only $17,149.)


The Erasure of the Rest of New Jersey

There are many aggravating things about the Education Law Center's defense of Jersey City's aid hoarding, mostly that it sees the Jersey City Public Schools in isolation, ignores the budgetary needs of other school districts, ignores New Jersey's chronic budget crisis, and denies that the motivation to redistribute Jersey City's Adjustment Aid is to GIVE IT TO OTHER DISTRICTS WHO ARE UNDERAIDED AND FARTHER BELOW ADEQUACY THAN JERSEY CITY.

The Education Law center worries about cuts to Adjustment Aid, but it does not worry about what harm will be caused to non-Jersey City students whose schools remain badly to severely underaided (and below Adequacy) due to the state's failure to redistribute Adjustment Aid.

The Education Law Center's argument is only logical if you erase from your consciousness the children of Bayonne, Clifton, Plainfield, New Brunswick, Freehold Boro, Kingsway, Atlantic City, and other underaided districts.  It only works if you assume a profound selfishness on the part of Jersey City's taxpayers not to make up for Adjustment Aid losses with local taxdollars.

To show how acute need is outside of Jersey City, just look at Hudson County alone, since there are eight districts in Hudson County who were underaided, higher taxing and farther below Adequacy than Jersey City and who would benefit from the redistribution of Adjustment Aid from Jersey City and other overaided districts.

District	Actual State Aid	Uncapped SFRA Aid	Aid Gap	Local Tax Levy	Local Fair Share	Tax Gap	Adequacy Surplus or Deficit	Adequacy Excess or Deficit Per Student
Hoboken	$10,468,870	$3,166,333	$7,302,537	$42,502,765	$204,865,488	-$162,362,723	$7,820,582	$2,949
Secaucus	$1,130,674	$2,756,466	-$1,625,792	$33,987,669	$49,980,321	-$15,992,652	$547,026	$261
Weehawken	$2,668,254	$1,637,823	$1,030,431	$19,127,272	$35,287,202	-$16,159,930	-$734,970	-$551
JERSEY CITY	$410,696,575	$258,849,750	$151,846,825	$114,404,361	$370,261,455	-$255,857,094	-$97,547,549	-$3,172
Harrison	$25,459,593	$27,530,776	-$2,071,183	$9,229,913	$16,876,180	-$7,646,267	-$9,374,329	-$4,416
Kearny	$33,119,896	$66,094,340	-$32,974,444	$50,681,091	$46,112,551	$4,568,540	-$27,160,572	-$4,640
North Bergen	$58,323,031	$76,240,347	-$17,917,316	$46,734,214	$69,500,758	-$22,766,544	-$38,730,930	-$5,352
Union City	$181,270,544	$221,997,208	-$40,726,664	$15,418,637	$49,554,960	-$34,136,323	-$74,133,383	-$5,936
Bayonne	$56,916,073	$105,009,173	-$48,093,100	$62,876,035	$76,982,891	-$14,106,856	-$60,551,038	-$6,484
West New York	$95,592,169	$120,944,172	-$25,352,003	$16,061,559	$44,357,307	-$28,295,748	-$52,605,527	-$6,757
East Newark	$3,578,845	$6,251,466	-$2,672,621	$1,453,439	$1,924,110	-$470,671	-$3,076,326	-$8,011
Guttenberg	$5,784,546	$14,244,681	-$8,460,135	$11,099,825	$13,897,013	-$2,797,188	-$10,972,862	-$8,152

Indeed, Jersey City is $3,172 per student below Adequacy, which is the 49th biggest deficit in New Jersey, but most of Jersey City's neighbors are significantly worse off and five Hudson County school districts are in New Jersey's bottom ten of below-Adequacy spending.

Guttenberg and East Newark are, in fact, $8,152 per student and $8,011 per student below Adequacy, respectively, making them the two most under Adequacy districts in New Jersey.

West New York is $6,757 per student below Adequacy, the 6th worst in New Jersey and worst-off of any Abbott.  Bayonne is $6,483 per student below Adequacy, the 7th worst.  Union City is $5,936 per student below Adequacy, the 10th worst.

Nearby is Fairview Boro, in southern Bergen County, is the fifth most under Adequacy district, with a deficit $7,167 per student.

With the exception of West New York, all of the exceptionally under-Adequacy districts of Hudson County are hurt more by insufficient state aid than they are by insufficient local tax effort.  New Jersey underaids Guttenberg $3 for every $1 Guttenberg taxes below Local Fair Share. New Jersey underaids East Newark by $11 for every $2 East Newark taxes below Local Fair Share.  New Jersey underaids Bayonne $7 for every $2 Bayonne does not tax itself.  For Union City underaiding is more of a factor than undertaxing, though not as dramatically as for Guttenberg, East Newark, and Bayonne.

Fairview taxes at 100% of Local Fair Share, so its $7,167 per student sub-Adequacy spending is entirely the state's fault.

The Education Law Center's no-redistribution position is also eased by constant lies about what New Jersey's state aid deficit is, using the statutory (but artificial) deficit of  $1 billion and not the authentic Uncapped Aid deficit of $2 billion it was for 2017-18.  The Education Law Center, quite

The JCBOE doesn't want to close its Adequacy Gap

literally, says that "Capped Aid = full funding."

Jersey City's BOE Does Not Want to Raise Taxes Above the Tax Cap

The Education Law Center repeatedly presents an image of a Jersey City Board of Education that yearns to close its spending gap against Adequacy but is prevented by the tax cap.

"Jersey City has increased local revenue every year since 2008, but the state�s 2% annual property tax cap limits JCPS�s ability to make more progress towards closing the large local levy gap."  [my emphasis]

And:

"In other words, Jersey City is increasingly reliant on Adjustment Aid because it is unable to increase the local levy to keep pace with its growing adequacy budget and its increasing obligation to fund its budget through local revenues. "  [my emphasis]

And:

"Contrary to much speculation, JCPS has largely been living up to its obligation under the SFRA to increase local revenue for schools, but it is constrained by the state�s property tax cap. Year after year, the SFRA requires Jersey City to support a greater portion of its budget, and yet at the same time it will not allow the district to raise more local revenue."

The Education Law Center states that Jersey City's taxes remain low due to the tax cap, but the Jersey City Board of Education has not even consistently raised taxes at 2.0%.  In 2013-14 the Jersey City BOE only raised taxes by 1.78% and in 2014-15 the Jersey City BOE only raised taxes by 1.5%.

These are not the actions of a Board of Education that is determined to reach its Adequacy budget with local taxes.

http://www.jcboe.org/boe2015/images/pdf/depts/bueinesstech/budget/Proposed_Budget-2016-041715-FINAL1.pdf

The 2% Tax Cap is not an Insurmountable Barrier to Raising Taxes above 2% 

The Education Law Center concedes that the Jersey City BOE has not used the existing allowances in the tax cap for medical costs, admitting that the BOE has "failed to capture some available revenue. For example, the district could have raised an additional $4 million in 2018 to offset increases in health care costs."

A Board of Education already has the power to ask its voters to raise the tax levy.  It is problematic that the higher levy, if approved, would not go into effect into the middle of the next school year, but nevertheless, the power to hold a referendum exists and is costless to a school district.  The Jersey City Board of Education has yet to show a desire to do so.

So this claim by Danielle Farrie/the Education Law Center, "increases in local revenue from

The voting booth already gives a school
district the power to exceed the tax cap and state
aid reformers have hinted at changing the tax cap
to make exceeding 2% even easier.

year to year are statutorily capped at 2% of the prior year�s revenue amount" is not completely true.

Jersey City Can Afford to Raise Taxes More Easily Than Almost Any Other Town in NJ

Jersey City has the state's strongest real estate market, gaining 38.4% in Equalized Valuation from 2010-2016 and continuing since then.

So the refusal to raise taxes by more than 2.0% can best be explained by a lack of any desire to do so.  

The Jersey City BOE would gladly spend $20,321 per student - or whatever New Jersey says it should spend - if the state were paying.  But once Jersey City taxpayers themselves would have to pay, the Jersey City BOE begins to see the decreasing utility of spending above $18,000 per student.  I'm sure the Jersey City BOE wants the best for Jersey City children, but in their hearts, the Jersey City BOE members do not agree with the Abbottist doctrine that spending needs to be $20,000 per student to provide a "thorough and efficient education."

This reluctance to employ the allowances within the existing tax cap or go to a referendum exists despite Jersey City's school tax rate has fallen by a third since 2013-14 alone.




Sometimes towns with strong real estate markets see their tax rates fall due to the appreciation of the existing housing stock, while individual tax bills increase, but in Jersey City tax rates are falling due to appreciation and new construction, thereby actually reducing the average homeowner's tax bill itself relative to inflation.

Source:
http://www.state.nj.us/dca/divisions/dlgs/resources/property_tax.html#1
Tracking the all-in school+municipal+county tax produces the same pattern of
tax bills lagging inflation and even falling in some years.

As the Education Law Center says, it is true that Jersey City has increased its tax levy since 2009 by more than the average NJ district (35% vs 24%), but Jersey City was starting at an abnormally low levy ($86 million) that was lower than what it paid in 1989-90.  The average New Jersey district already had high taxes in 2009 and is so smashed by stagnant property values and already high taxes, that even an increase of 24% is a much larger sacrifice than Jersey City.

Jersey City's Trend of Falling School Tax Rates will Likely Continue into the Future.

Jersey City sees a constant stream of new developments and escalating housing prices of the existing housing stock.

One development, 99 Hudson Street, will be New Jersey's tallest building, and will alone will create a palpable reduction in the average Jersey City taxpayer's property taxes.

Conservatively estimated,
99 Hudson Street alone
will offset Jersey City's muni+school
taxes by 2.5%.

99 Hudson will have 780 apartments plus 15,000 square feet of retail.  The apartments will start at $770,000, so we can conservatively estimate that the total Equalized Valuation of 99 Hudson will be $700 million, or 2.5% of Jersey City's current Equalized Valuation.

Given the rapid pace of redevelopment in Jersey City and the expiration of PILOT agreements, even if Jersey City lost $30 million in Adjustment Aid per year and made up for those losses with local taxes, the tax rate increase would not be proportionate and individuals' taxes would not increase so dramatically.  In fact, for 2018-19 Jersey City's Local Fair Share grew to $399 million from $370 million.

For Jersey City to lose $151 million in state aid and make up for all those losses with local revenue it would be equivalent to a 130% increase in school taxes.  I admit that that would be a hardship for some people, but there are solutions for at least senior citizens in the form of NJ's property tax freeze and reverse-mortgages.  Jersey City residents would still be better off in taxes than people in most other towns, whose school taxes are often higher and real estate appreciation less (or negative.)

Undoubtedly, while paying higher school taxes might be very difficult for some Jersey Cityans, my greater sympathy will always be with people who have to pay higher taxes on depreciating houses, not appreciating ones.  (The median NJ town's Equalized Valuation has lagged inflation for years.)

Also, the Education Law Center has no right to worry now about taxes rising so fast, since in the early 1990s it supported a state aid plan that would have taken all state aid - include pension payments - away from a quarter of New Jersey's school districts.  Among the school districts slated to lose most or almost all of their state aid were working class and middle-class districts like Belleville, Hackensack, and West Orange.  (see the NYT article  "Jim Florio's Dream is One Town's Nightmare")

Hints of Changing the Tax Cap for Aid-Losing Towns

A more significant omission from Danielle Farrie and the Education Law Center is not acknowledging that Steve Sweeney's state aid reform plan has always had a provision in it to change the tax cap anyway.

For instance, the Senate 2016 resolution to create a school funding commission contained this language to have the committee evaluate the tax cap.

1. (2) the tax levy growth limitation as established and calculated pursuant to section 3 of P.L.2007, c.62 (C.18A:7F-38) and its impact on the ability of school districts to adequately fund operating expenses;

In September 2017 when the Senate passed the concurrent resolution identical language about the tax cap was included.

Changing the tax cap for aid-losing districts also came up in the Senate state aid hearings in 2017, so the idea has already been discussed.

Steve Sweeney has studied SFRA and the aid distribution very closely and we can assume that he and his allies know that the tax cap needs to be changed to allow Jersey City and other aid-losing districts to tap their tax bases.

The Corzine-era 4.0% tax cap allowed a school district to increase the local tax levy if it lost state aid.  So reviving this provision would not be revolutionary.

Nonetheless, I concur with the Education Law Center that it might be necessary to require local tax increases for Jersey City and not leave it to the discretion of Jersey City's anti-tax Board of Education.

PILOT Exploitation

Another facet that makes Jersey City's state aid level especially objectionable has a long and aggressive history of using PILOT arrangements to increase municipal revenue, cut Hudson County out, and continue to leave statewide taxpayers with the bill for the school system.

The way this exploitation works is that in a Payment In Lieu Of Taxes arrangement the municipality gets 95% of the PILOT fees and the county gets 5%. (it used to be 100% municipal). Thus, it is possible to structure a deal where a developer pays less in taxes than under normal taxation, but a municipality gets more. Because PILOTed properties do not count toward a town's Equalized Valuation, they are "invisible" to the formula for Local Fair Share, legally equivalent to a non-profit owned property, like a cemetery. (see "The Problems of PILOTs")

In 2017 Jersey City's PILOTed properties were worth $11.6 billion, or a third of the total tax base.  If that $11.6 billion in property were part of Jersey CIty's Equalized Valuation, Jersey City's Local Fair Share would be $76 million higher than its $351 million for 2017-18.

I assume that all Jersey City politicians understand how PILOTed properties hurt taxpayers in the rest of Hudson County and sustain an artificially low calculation of Local Fair Share, but most of them don't say anything about it in public.

There are exceptions though.  For instance, Jersey City councilwoman Candice Osborne recently defended PILOTization because it

[Sic] He meant "[receive] less in
state aid for our schools."

means more state aid

"When it comes to the funding for schools. I have gone though the numbers multiple times and I've said this many times...The math to me makes sense for both the people getting the abatement as well as traditional taxpayers - because of the state aid."  (see 2:49:30)

Another instance of Jersey City politicians admitting that they grant PILOTs because of county taxation and school aid skews was in 2016, when Jersey City's former mayor (and convicted felon) Jerry McCann defended PILOTization not as a necessary development tool, but precisely because the use of PILOTs allows Jersey City to pay less in county taxes and [get] more state aid.

There is No Budget Pathway to Full Funding without Redistribution

Worse than the Education Law Center's defense of Jersey City's Adjustment Aid is that its repeated assertion that the deficit is only $1 billion per year and not the ever-growing $2 billion (against Uncapped Aid) it was 2017-18. 

Unlike politicians and journalists who use that $1 billion number because they are ignorant of how SFRA works and wouldn't know where to find Uncapped Aid, the Education Law Center does understand how SFRA works and does know how to get Uncapped Aid from the Department of Education.  Prior to the development of the state aid reform movement, the Education Law Center used to release deficits against Uncapped Aid.  (example 1, example 2, example 3)

The use of that simple, round number, "$1 billion," is itself a concealed argument, since it is imaginable for New Jersey to increase K-12 aid by $1 billion over several years, and therefore there is no need to redistribute state aid.

However, if the Education Law Center admitted that the deficit was really an ever-growing $2 billion the possibility of full funding without redistribution would look impossible, and the state's ability to expand PreK would also be called into question.

The reason redistribution is necessary is because New Jersey's economy does not deliver the growth it delivered in the 20th century.

In the late 1990s, New Jersey's income tax increased by 10% a year.  From FY2013 to FY2017, New Jersey's income tax only increased by 15% over five years, from $12.1 billion to $13.96 billion.  FY2018 saw an unanticipated 7.5% surge due to changes in the federal tax code and capital gains that is likely not repeatable.

For FY2019 income tax revenue will increase, but mostly due to a (proposed) rate increase that is certainly not repeatable.

Worse, the massive unfunded liability for the Teachers Pension And Annuity Fund and post-retirement medical for teachers claims the bulk of new income taxes.

For FY2016 TPAF payments increased by $387 million and post-retirement medical increased by $45.5 million.  For FY2017 TPAF payments increased by $324 million and post-retirement medical increased by $48.1 million.  For FY2018 TPAF payments increased by $411 million and post-retirement medical increased by $69.6 million.

Source for 2010 http://www.state.nj.us/treasury/omb/publications/10bib/BIB.pdf
Source for 2019 http://www.state.nj.us/treasury/omb/publications/19bib/BIB.pdf

For FY2017 Phil Murphy has proposed a $757 million income tax increase, but even that plus natural revenue growth only leaves $283 million left over for new K-12 opex aid.  Debt and indirect aid are still taking the bulk of new education-related spending.

For FY2019 TPAF payments from income taxes will increase by $392.5 million, with a few hundred million more from lottery profits, and post-retirement medical will increase by $51.8 million.

Equality is a Goal in and Of Itself


For 2018-19 Jersey City is slated to receive $175 million more than SFRA's core formulas say it needs, or $5,716 per student, the 8th largest state aid surplus in New Jersey. In percentage terms, Jersey City will receive 174.6% and is on a trajectory to receive 200% of its recommended state aid for 2020-21. 

Meanwhile, the median district is underaided by $419 per student and receives 85.4% of its Uncapped Aid.

To me, having equal aid, according to need, is a goal in and of itself.  

If justice is equal treatment under law, and a formerly poor district like Jersey City is allowed to get 200% of its recommended aid, while 75 districts get not even 50% of their recommended aid, than New Jersey's distribution of state aid is savagely unjust.

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See Also:

• 2017 Changes in Equalized Valuation: the Urban Core Grows
• Jersey City's Tax Abatements Hurt Jersey City Too
• The Two Faces of Steve Fulop
• Bullshit, Lies, and Hypocrisy from Steve Fulop
• Steve Fulop, Flippant and Thankless Again
• Why Jersey City's New unPILOTed Skyscraper Helps Taxpayers, Not Public School Kids
• Jersey City Declares Own City Hall Blighted
• Jersey City Should Not be an Abbott
• In Five Years, Jersey City Will Not Be Eligible for Equalization Aid

Why is the ELC so Supportive of Adjustment Aid?

The Education Law Center gets over a third of its budget, something above, $550,000 per year - from the NJEA and the NJEA, by virtue of being a teachers union has a bias in favor of higher education spending and an indifference to spending the state's money at its maximum efficiency.  Furthermore, the NJEA's largest local is the Jersey City Education Association.  (the Newark teachers are represented by the AFT).   So the Education Law Center's largest funder has a direct financial interest in sustaining Jersey City's Adjustment Aid.

I have to point out that the Education Law Center is not a disinterested organization. 

Falsehoods from Toms River

Since Steve Sweeney and Vincent Prieto agreed on a plan that would redistribute $31 million (originally $46 million) of the $670 million New Jersey has been giving out as "Hold Harmless Aid," the most vocal opposition has come from Toms River.

For background, Toms River receives $68.3 million in state aid, even though SFRA's core formulas say it only needs $47.2 million.  That $21.1 million excess is one of the ten largest in New Jersey in total dollars and works out to $1300 per student.

The $21 million in excess aid, plus Toms Rivers' own acceptance of very low student spending, allow Toms River to tax at only 75% of Local Fair Share, with a $151 million 2017-18 tax levy on a Local Fair Share of $197.6 million.

Despite having over $46 million in untapped Local Fair Share, and a knowledge that most New Jersey school districts tax above Local Fair Share, the Toms River Board of Education opposes any redistribution.

As part of their campaign in defense of their own aid hoarding, the Toms River Board of Education and its administrators have been writing op-eds arguing tha aid cuts are "unfair" for many reasons, the following of which are chief:

And how in good conscience can these legislators propose taking $3.3 million dollars from Toms River Regional when we are still reeling from the effects of Superstorm Sandy and have $600 million in ratables that have yet to be recovered? The topic of property tax assessments highlights another known critical flaw of the school aid formula- it allows for districts to have significantly understated property tax assessment totals in the aid calculation, which matters greatly because a district�s �wealth� is the basis for a large portion of a district�s school aid. For example, the property wealth calculation does not include Payments in Lieu of Taxes (�Pilots�) and tax abatement programs, which excludes millions of dollars in property ratables, which could be material to the calculation of a district�s school aid. The same legislators are also aware that large school aid increases, some in the millions, would be given to several districts whose towns have not had property assessment revaluations in over 25 years! Having an understated property ratable figure provides large aid dollars for several districts, and since the pot of school aid is limited, it takes away significant amounts of school aid that would be spread to the rest of the districts in the State.

Where to begin?
1.  A Lack of a Reval has No Effect on State Aid

It is true that there are towns in New Jersey (all in Hudson, Middlesex, and Union Counties) that have not done revals since the 1980s, but it is completely erroneous to say that a town's lack of a property reval in any way affects its state aid.

This is because state aid is based on Equalized Valuation, not the official assessment.

Equalized Valuation, which is also used to apportion county taxes, is calculated based on the ratio of sales prices to official valuation.

If, on average, sale prices are 115% of official assessment, then Equalized Valuation equals 115% of the town's total official assessment. If sale prices are, on average, 200% of official assessment, then Equalized Valuation equals 200% of the town's total official assessment.  Since Equalized Valuation is the product of official assessment times the sales ratio, a lack of a reval does not affect it.

Ironically, by insisting that the state maintain a frozen aid distribution, the Toms River BOE and administration are effectively say that the state not do a "state aid reval" of its own.

2.  Toms River was Overaided Before Sandy, Loss of Ratables is Factored into State Aid

Toms River (and Brick) have repeatedly said that it is unfair to take aid away from them because they have not recovered from Hurricane Sandy.

First of all, Toms River was overaided before Sandy occurred. In 2011-12 Toms River got $9.8 million in Adjustment Aid.  In SFRA's first year of 2008-09, Toms River got $18.5 million in Adjustment Aid.

Now, post-Sandy Toms River is more overaided than it was before Sandy, but the loss of tax base that Toms River brings up is already built-into the calculation of Toms Rivers' Local Fair Share state aid.

Since Toms Rivers now has an Equalized Valuation of $15,167,528,438 versus the $16,065,236,923 it had previous to Sandy, Toms Rivers' Local Fair Share is reduced by about $6 million, approximated based on

Equalized Valuation alone.  I do not have data on a loss of Aggregate Income, but if it is lower than it was pre-Sandy, that would reduce Toms Rivers' Local Fair Share as well.

What causes Toms River to lose state aid is that Toms Rivers' enrollment has also declined, partly due to Sandy and that enrollment decline causes Toms Rivers' Adequacy Budget to fall.  However, as enrollment declines, so does staffing needs, Out Of District tuition, and a few other budget items, so Toms Rivers' expenses are lower.

(See also:
"Jersey City's Property Reassessment Won't Change State Aid")

3.  PILOT Reform without Adjustment Aid Reform Does Nothing.

Toms River is correct that PILOTing is a distortion of state aid, since PILOTed property is "invisible" to the determination of Equalized Valuation and thereby Local Fair Share, but even if PILOTed property were included in the calculation of Local Fair Share, districts with a lot of PILOTed property (namely Jersey City) would not lose any state aid unless Adjustment Aid were also addressed.

If PILOTed property were included in the determination of Local Fair Share and no reform to Adjustment Aid were made, all that would happen is Jersey City's and Asbury Park would have some of their Equalization Aid converted into Adjustment Aid.

4.  Extra Aid for Low Spenders?

Toms River also makes an out-of-left field argument that it should be rewarded with extra state aid because it spends (and taxes) so little.

In terms of trying to justify their new aid proposal, can the same legislators explain how it is possible that aid increases would be given to districts who have total per pupil costs over $29,000 already (compared to $16,319 in Toms River Regional)? This highlights one of the critical flaws with the State Aid formula- it allows for unlimited per pupil costs, and gives no credit or consideration to districts with lower per pupil spending. The formula unjustly portrays lower-spending districts like Toms River Regional as not paying our �fair share� in taxes when in fact we do pay our fair share. The reason we tax less is simple- we spend less! So before taking school aid from any district, per pupil costs should first be capped and no additional school aid should be given when that cap is exceeded.

What Toms River is doing here is attempting to redefine Local Fair Share to something other than the formula contained within SFRA.

Based on its Equalized Valuation and Aggregate Income, Toms Rivers's Local Fair Share at $197,593,919, compared to a 2017-18 tax levy of only $151,916,715.  This gives the Toms River schools an equalized school tax rate of only 0.9529 for 2017-18, which is significantly below New Jersey's 1.35 average.  

Given that Toms River has that $45.6 million in untapped Local Fair Share, it has the economic ability to compensate for the $21,140,413 in excess aid it might lose.  If Toms River made up for that lost $21 million in state aid its school tax rate would only become 1.08.

This is a twisted point to unpack:

So before taking school aid from any district, per pupil costs should first be capped and no additional school aid should be given when that cap is exceeded.

There are only a handful of districts spending $29,000 in New Jersey and all of them are losing state aid or seeing flat aid.  Lebanon Boro and New Hanover are high-spending districts that are gaining trivial amounts of aid ( $670 total and $3,598 total, respectively), so I can't figure out what Toms River is talking about here other than they want to distract from the issue of Adjustment Aid.

There are some very affluent districts who are gaining aid, such as Millburn, Princeton, Mountain Lakes, and Livingston, but these districts don't have spending that is anywhere near $29,000 per student.  If Toms River believes that affluent districts shouldn't get state aid, then that is a separate issue, but they are making an argument that is actually contrary to the principles that Toms Rivers' Republicanism usually stands for.

If Toms Rivers' implied demand that districts actually get extra state aid because they spend very little were implemented then it would have the perverse effect of equalizing spending between districts that make very different local tax efforts,  since the low tax/low spending districts would get extra state aid.  On what planet does cutting aid from districts that choose to tax themselves make sense?

If Toms Rivers' demand were granted, there would be a rush by Boards of Ed to slash their tax levies, slash their budgets, and receive extra state aid.

It makes no sense except in that it supports Toms Rivers' self-interest.

Finally, what is really missing from Toms Rivers' argument is any acknowledgement of how indebted and fiscally screwed New Jersey has become.

As I have posted many times on this blog, all of New Jersey's new

revenue is absorbed by the "PHD" expenses of Pensions, Healthcare, and Debt, even though New Jersey is still underfunding its pensions by $2.5 billion.

The amount of money New Jersey can plausibly gain by increasing taxes is $1-$1.5 billion and it would be irresponsible and imprudent to put all of that money into K-12 education.

Without redistribution there is no realistic budgetary pathway to fairness for underaided districts.

Sadly, even with complete redistribution of Adjustment Aid and the injection of another $500 million today's underaided districts will still not be brought to 100%.

Toms River is acting in its own self-interest nothing else.

Jennifer Beck: Take Politics Out of State Aid (Unless Monmouth County Benefits)

Senator Jennifer Beck has again released misleading statements on state aid in an incoherent,

analytically incomplete op-ed where she defends Adjustment Aid, criticizes attempts to redistribute it from most districts, and yet says that the state should help districts that have had surging enrollment.  

There aren�t a lot of details being provided on [Sweeney's] plan, but estimates suggest that it could end up costing Monmouth County schools over $100 million in state school aid. This plan, if estimates are true, isn�t a fair or equitable solution to our school funding crisis.\ 

In New Jersey, we are supposed to fund our schools in a way that gives all of our children an opportunity to succeed. We all know the problems that exist under the current school funding program: 

It�s led to municipalities like Jersey City, which has the tax base to support their local schools but underfunds them by $255 million � while pocketing more than $418 million a year in state aid. 

It�s led to New Jersey underfunding schools where student enrollment has exploded. In fact, state aid for our schools has remained essentially flat since the School Funding Reform Act (SFRA) was enacted in 2008, leaving property taxpayers on the hook to pay more. For example, Freehold Borough is 527 students over capacity and Red Bank�s enrollment has grown by 267 in the last five years. But the state has not pulled its weight.
It�s led to a system where 421 school districts throughout the state overpay in property taxes to fund their schools. Property taxpayers are paying more than they need to because the state has failed to live up to its end of the deal. In Ocean Township, local taxpayers are paying $8 million more in property taxes for their schools than they are required to by the state....

While I am grateful to see that some of our [meaning Monmouth County's] underfunded schools would be among those that get more funding (because they need it), I noted that his area seems to be getting quite a bit more than Monmouth County and other counties. Politics can�t play any part of such an important process that impacts both our property taxes and our children�s education.

What Beck is saying is that she doesn't want "politics" to impact property taxes and education unless Monmouth County benefits.

Admittedly, Beck is correct that Monmouth County would be a net loser in any likely aid redistribution.

FIRST, for 2017-18, Monmouth County has 26 districts with a grand total of $99.7 in excess aid, but Beck omits multiple key facts on that, Monmouth County also has 28 underaided districts with a total deficit of $51.9 million.  These underaided districts include poorer districts including Freehold Boro, Red Bank Boro, and Long Branch,  plus some middle-income and affluent districts including Rumson-Fair Haven, Holmdel, and Freehold Township.

SECOND, half of the $99.7 million in excess aid in Monmouth County only goes to two districts, Asbury Park and Freehold Regional, each of whom has $25 million in excess aid.

Asbury Park's state aid exceeds $24,000 per student, of which nearly $11,300 per student in excess of SFRA's target.  Asbury Park's grotesque state aid amount has led to to PILOT virtually all of its new development, for a grand total of perhaps $1 billion in hidden PILOTed wealth.

THIRD, many of the aid-losing districts in Monmouth County are resort towns on the Atlantic Ocean that have gigantic tax bases relative to their student populations.

Belmar has $29,571 in Local Fair Share per student. Lake Como has $23,424 per student. Deal has $98,708. Allenhurst has an astronomical $1,706,505 per student.

Several of the non-resort towns have large tax bases too.  Tinton Falls has $19,550 per student in Local Fair Share.  Henry Hudson Regional has $23,262 per student. Middletown has $16,405 per student.  

FOURTH, more than $2 million of that excess is in Interdistrict Choice money that is not subject to redistribution.  This Choice money mostly goes to Deal, which gets $1.8 million alone.  (Monmouth County's total Choice Aid is over $3 million, but some of that goes to districts who are still underaided despite that infusion).

FIFTH, New Jersey is the country's most indebted state.  Thus, the state cannot increase K-12 aid very much and so budgeting is zero-sum.  The more aid hoarding that Jennifer Beck can preserve, the less new aid there is available to NJ's underaided districts, including Red Bank and Freehold Boros.

Beck also says she favors some redistribution, but says we should start with the statutorily overaided districts for whom the existing statute of SFRA allows aid reductions.  These are 46 districts who, despite Adjustment Aid, get more money than the SFRA dictates they should due to post-2008 enrollment loss.

Let�s start the reform with the 46 school districts that are overfunded in state dollars.

Ok, that's a good idea and is better than nothing, but barely.  These 46 districts only get $11 million total in extra aid.  

And silliest of all, Beck says at her conclusion what she had already said a few paragraphs previously:

Any school funding reform plan should be one where decisions aren�t based on politics, but rather on what is best for our students, parents, taxpayers and teachers.

Decisions aren't based on politics?

What on earth is Beck herself doing but appealing to the naked self-interest of Monmouth County itself?  

Although SFRA is complex, Sweeney's plan is quite simple: to give each district in New Jersey 100% of its recommended funding, no more, no less.  

That's not politics, that's justice according the old definition of equal treatment under law.  

---

See Also

• How Overaided Districts Would GAIN if SFRA isn't Changed

Ocean City Represents Jersey Shore Aid Hoarding

Ocean City, Cape May:
Huge Tax Base + Substantial
State Aid
= Life is Good

Across New Jersey, hundreds of districts are struggling with budget cuts they never would have imagined having to make only a few years ago, but unable to prevent those cuts due to tapped out taxpayers.

From the largest districts, like Newark, which faces a $30 million deficit and Paterson, which faces a $20 million deficit, to medium-sized districts like Egg Harbor Township, which faces a $6.6 million deficit and the loss of other 40 staff members, to small Chesterfield, which faces a $500,000 deficit on a Total Operating Budget that is only $9.6 million.

Yet, there are some notable exceptions to this rule of sacrifice and austerity and this blog post is about one of those exceptions, Ocean City.

Like the rest of the state, Ocean City isn't getting any aid increase, but it only needs to increase taxes by 0.1%, or $5 per household, to avoid any cuts at all.  Whereas New Jersey's average school equalized tax rate is 1.3, Ocean City's is only .215.

The lack of a real tax increase isn't because of any kind of managerial genius by Ocean City's business office, it's because Ocean City was able to save over $2 million from the previous year and Ocean City's tax base is absolutely enormous relative to its (falling) student population.  A .1% tax increase for Ocean City brings in $1.2 million. 

Ocean City's example of budgetary abundance amidst an "ocean" of deprivation isn't alone.  There are many other districts at the Jersey Shore like it.  Avalon, Stone Harbor, Cape May Point, Allenhurt, Sea Isle City, Longport, Long Beach Island, Beach Haven, Seaside Park, Spring Lake, Lavallette, Bay Head, Sea Girt, Cape May City, Deal, Margate, Interlaken, and North Wildwood all possess over $60,000 in Local Fair Share per student.

Although a great deal of attention is (rightfully and necessarily) focused on Jersey City, Hoboken, and Asbury Park as aid hoarders, Jersey Shore districts ought to get some scrutiny too.

Like Hoboken, these Jersey Shore districts tend to have poorer students, but their enrollments are so small and their tax bases so gigantic, that these districts have no need for any state aid whatsoever, let alone their Adjustment Aid.

Ocean City's Equalized Valuation per student actually exceeds Hoboken's and dwarfs that of any affluent suburb, such as Millburn.

For 2016-17, Ocean City's Equalized Valuation was $11.6 billion, the sixth highest in New Jersey, but it only had 1,447 students.  Hoboken, by contrast "only" had $13.3 billion in Equalized Valuation for 2,600 students.  Ocean City's school tax rate is thus only 0.2, meaning the average homeowner with a $500,000 property only pays $1,000 in school taxes.   Yet that minute, 0.215 tax rate produces over $15,000 per student in local taxes.

Despite that enormous tax base, Ocean City receives $3,787,076 in state aid, or $2,617 per student.

With that large local tax contribution plus state aid, Ocean City's student spending is $17,869 per pupil, although unlike an Abbott its students are not particularly poor (they are 19% FRL-eligible, 2% ELL).

The example of Ocean City also underscores how misleading the Education Law Center's 2015 policy brief on Adjustment Aid was, "The Facts On Hold Harmless Aid."

That report took the (out-of-date) DFGs and used "low-DFG = low-wealth,"middle-DFG = middle-wealth" when the DFG classifications are socioeconomic, not tax base.

According to Danielle Farrie of the Education Law Center, a district like Ocean City would be "middle wealth," since its in DFG DE but, as you can see, calling Ocean City "middle wealth" is totally irrelevant when it comes to state aid.  Ocean City has very few students relative to its tax base and even if they were all in poverty, there is no justification for $3,787,076 in state aid while New Jersey is in fiscal crisis and so many hundreds of districts are budgetarily desperate and/or overtaxed.

Sen. Jeff Van Drew
(Democrat, Dist. 1):
Are other places in NJ
in budget crisis?
What a pity.  

What's more, Ocean City's DFG DE classification makes no sense based on its current student demographics.  As mentioned above, Ocean City is only 19% FRL eligible and 2% ESL.

So Ocean City represents the problems of Adjustment Aid, but also the problems of SFRA, since a district like Ocean City has no need for any state aid and the state is bankrupt.

Ocean City and the rest of Cape May's aid hoarding is also a political problem for reform, since Ocean City's State Senator, Jeff Van Drew, is anti-reform and was one of six Senators to vote against Steve Sweeney's state aid reform proposal, saying, �I believe there is a huge potential in the direction that the new commission would go not to hold them harmless anymore. It would be a very significant blow."

Based on Van Drew's opposition, it's likely Cape May's Assemblymembers are anti-reform too.

Ocean City also represents the wrongness of the Education Law Center's defense of Adjustment Aid.

Adjustment Aid rarely goes to genuinely needy districts.  It is privilege, not equity.

Update: Hoboken's budget picture is also excellent.