2017-18 Looks Like Another Bad Year for State Aid

State Aid is Zero-Sum.
Accept It

Gentle Reader, we do not know if Christie will allow any state aid redistribution, will flat-fund all districts yet again, or even attempt to implement his so-called "Fairness Formula."

But one thing we can rule out is any significant increase in state aid as indications mount that it will be another bad year budgetarily for New Jersey.

The State Treasury created the FY2017 budget with an expectation that revenue would increase by 3.6% (which is $1 billion), but 3.6% isn't happening.

In December 2016, the Treasury said that revenues were only up by 2.1%.

In January 2017, things are worse, with the Treasury saying that revenues are only up by 1.7%.

These numbers are for FY2017 and FY2018 could be better (especially if people start taking more capital gains), but we are below where we forecasted ourselves being at this time last winter.  Persistently low revenue also makes Fitch and Moody's more likely to follow S&P in downgrading our debt, which will mean higher borrowing costs for New Jersey.

And even in good years, growth in the PHD costs of Pensions, Healthcare, and Debt exceed or equal New Jersey's revenue growth.

On top of low revenues so far, the tax cuts for the Transportation Trust Fund will start to eat into revenue and the state must reserve more money to make quarterly pension payments.

I'll let real experts ascribe causation to NJ's bad revenues and forecast FY2018, but I know this: Things Look Bad and the NJEA/Education Law Center's demand "Just Fund the Formula" is more ridiculous than ever.

Adjusted for Inflation, New Jersey's Quarter Revenues are
Still Lower than They Were Pre-Recession
Source: Pew Fiscal 50

And for anyone who thinks this mess is entirely Christie's fault and things will get better after we have a new governor and higher taxes, look at Connecticut, whose FY2018 deficit is yet again 8% of state revenue. ($1.5 billion out of $19 billion)

What this means we have to fight even harder for redistribution because fairness isn't going to come through new spending.

Sorry everyone, but ZERO-SUM RULES.  We have no choice but to redistribute state aid.

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See Also

• Why the Education Law Center's "Just Fund the Formula" is Impossible
• Phil Murphy Overpromises

Troy Singleton Epitomizes the Breakdown of the Legislative Process on State Aid

Update: Troy Singleton has Tweeted to me that he is actually a sponsor of Steve Sweeney's state aid reform resolution in the Assembly. Since Sweeney's bill is all about redistribution, I find that hard to square with the anti-redistribution comments Singleton has made.  I await further elaboration from the Assemblyman.

What On Earth Are You Thinking?

Troy Singleton is an Assemblyman from New Jersey's 7th Legislative District, located entirely in Burlington County.

Singleton is the vice-chair of the Assembly Education Committee, behind Marlene Caride.  Singleton's comments on education often are reported in the media.

The school districts making up District 7 are:

Beverly, Bordentown Regional, Burlington Township, Cinnaminson, Delanco, Delran, Edgewater Park, Florence, Moorestown, Mount Laurel, Palmyra, Riverside, Riverton, and Willingboro.

It does NOT include Pemberton.  (relevance to come)

Yet, even though Singleton is on the Education Committee, and as a legislator ought to understand how deep NJ's fiscal problems are, he has no coherent view on state aid.  

Back in April 2016, Singleton appeared to be a glimmer of hope on state aid reform, saying at an Assembly hearing, "I still believe that 'Hold Harmless Aid' is a misnomer."

At the time I was thrilled by that and thought Singleton was one of the Good Guys, so you can imagine my disappointment when I read the following recent statement from him on the subject of state aid redistribution:

"Assemblyman Troy Singleton, D-7th of Palmyra, cited an Office of Legislative Services study that found that at least 20 school districts in Burlington County would receive less aid if all existing school funding was prorated solely according to the formula. Some districts like Beverly, Burlington City, Pemberton and Willingboro would lose considerable amounts of aid and force those communities to either drastically raise property taxes or make significant cuts to school programs. 

"I can't believe that's what we really all want. We have to find a way to come up with the resources needed," Singleton said."

This statement of Singleton's is truly unbelievable.  District 7 has exactly two overaided districts, Beverly City and Willingboro, and each district is barely overaided, so they face minor losses of state aid and, if they wanted to make up the losses through taxes, relatively small increases.  

Willingboro is overaided by a trivial amount: $529,312, or $144 per student. That aid surplus is equivalent to only 0.7% of Willingboro's $71 million total operating budget. Beverly City is more overaided, by$184,330, or $619 per student, but that surplus is still only 2.7% of Beverly City's $6,810,533 total operating budget.

So I have no idea what Singleton's definition of "considerable" is, Willingboro and Beverly City's excesses don't count as "considerable" in my book.  

By contrast, Singleton's District 7 has EIGHT (8) districts who are more underaided than Beverly City is overaided.

• Delran is underaided by $4781 per student.
• Riverside is underaided by $4018 per student.
• Bordentown Regional is underaided by $3420 per student.
• Edgewater Park is underaided by $3187 per student
• Burlington Township is underaided by $3166 per student.
• Palmyra is underaided by $2205 per student.
• Riverton is underaided by $1447 per student.
• Florence Township is underaided by $1194 per student.

Delran, in fact, is one of NJ's greatest activists for fair aid. OurFairShareNJ, in fact, was founded by Delran residents. 

Click to Enlarge

Click to Enlarge

Again, Pemberton Township is not in Singleton's district, but it is New Jersey's second biggest aid hoarder, after Jersey City, with a monstrous $25.8 million aid surplus, or $5,981 per student, itself a figure that is the 9th highest per pupil aid surplus in New Jersey.

Even though Pemberton is about 44% FRL eligible and has barely any ELLs, Pemberton gets $19,000 per student.  That $19,000 per student the third biggest state aid package in New Jersey, after fellow Abbotts Asbury Park and Keansburg.  

• See Pemberton: The Unknown Aid Hoarder

(As an Abbott district, Pemberton also gets PreK and 100% state-funded facilities.)

Finally, although aid redistribution should not be conditioned on spending relative to Adequacy, Willingboro and Beverly City are both ABOVE Adequacy by amounts greater than what they would lose. Willingboro is $2,167,656 above Adequacy. Beverly City is $1,048,242 above Adequacy.  

For the last two years, cost increases for
Pensions, Health Care, and Debt have
Exceeded or Equaled Revenue
Growth

So Troy Singleton, What Are You Thinking When you Put Pemberton's Grotesque Excess Ahead of Your Own Constituents?!!?!?!?

Singleton answer. as recorded at the hearing and in a Twitter comment to me, is that the formula should be fully funded, "We have to find a way to come up with the resources needed,"

But Singleton has no idea how to do this BECAUSE THERE IS NO WAY TO DO THIS.  NJ's increased costs for Pensions, Health Care, and Debt consume all new revenue and the politically plausible tax increases we could pass on the rich would be insufficient to fully fund SFRA.  

The K-12 component of SFRA is underfunded by $1,946,380,097 if redistribution is not allowed and that $1,946,380,097 figure is an increasing target.

The PreK component of SFRA is underfunded by about $675 million.  ($675 m = 50k eligible students * $13,500 per student)

Source:
https://www.njpp.org/budget/fast-facts-debt-sentence

NJ's higher education system has been underfunded (and irrationally funded) too.  

NJ's non-pension debt servicing will decline starting in 2019 and perhaps economic growth will accelerate, but the tax cuts that were part of the TTF deal will consume $1 billion a year starting in FY2018  (which Singleton voted FOR) combined with the many non-education obligations we need to increase spending on means that we are in no position to fully fund SFRA.

Singleton Proves Sweeney is Right on the Process

Since June 2016, Steve Sweeney has proposed not an ordinary legislative process to restructure state aid, but the creation of an ad hoc, empowered committee that would decide on changes and then have a straight up-or-down vote in the legislature.

Sweeney's argument is that the legislature is incapable of redistributing state aid because legislators would fail to see the big picture and protect their own constituents.

Troy Singleton, sadly, proves how correct Sweeney's judgment is, since not only does Singleton want to protect (some of) his own constituents, but other districts that happen to be in Burlington County, including indefensibly overaided Pemberton.

And even if NJ could fully fund SFRA, how is it fair to have some districts at 100% funding while others are at 120%, 160%, even 500% of their funding?

Troy Singleton was never passionate about state aid, but last spring he appeared to be a Good Guy.  I don't know what happened.  This stance could be an attempt to curry favor with Vincent Prieto (who in turn is working for Steve Fulop) or the NJEA.  It could be just a delusion that NJ is rich enough to not have to cut any district's state aid.

Sigh.  For state aid reform to happen, underaided districts are going to have to push a lot harder.

Singleton's office number is (856) 234-2790. Call him.