Budget & Finance

N.J. Panel Eyes Changes in School Funding

By Catherine Gewertz — November 28, 2006 5 min read
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In an attempt to reduce property taxes in New Jersey, a legislative committee is recommending that the state completely rewrite the way it finances schools and wipe out the special-needs designation that has driven billions of dollars in extra funding to its poorest urban districts.

The recommendation is one of 98 that were unveiled Nov. 15 at the end of a three-month special legislative session aimed at controlling the highest property taxes in the nation: $5,800 on average for Garden State homeowners. It is now up to the legislature to act on the committee’s suggestions.

The recommendations of New Jersey’s joint legislative committee on public school funding reform is available from the New Jersey Legislature.

Legislative leaders have pledged to give homeowners a 20 percent property-tax credit, paid for largely with revenue from a recently enacted sales-tax hike and money used in a property-tax-rebate program.

Three committees weighed in with dozens of ideas, including capping annual property-tax increases, merging some of New Jersey’s 566 municipalities, consolidating local services to save money, and better controlling the cost of public employees’ pension and retirement benefits.

‘Winners and Losers’

A fourth panel focused on school funding, which relies heavily on property taxes. After hearing expert testimony that amounted to a primer on school finance, the committee is proposing that the state adopt a unified approach to paying for schools that would apply the same indicators of need to all 1.4 million of its schoolchildren statewide, regardless of where they live.

That approach requires finding out how much it would cost to provide the “thorough and efficient” education required by the state constitution, then adjusting to account for factors that affect cost and the community’s ability to pay. Such factors include how many low-income and special education students are enrolled, and the per-capita income of the district’s adults.

New Jersey currently takes a more fragmented approach to school funding. Because of state supreme court rulings in the long-running Abbott v. Burke lawsuit, the state must ensure that 31 poor, urban districts have enough money so they can spend as much as the richest districts.

A Different Way to Pay?

A joint New Jersey legislative committee has issued recommendations on school finance reform. Among them:

• State aid for every school district should be based on characteristics of the student population and the district’s ability to pay.

• A new formula for school aid should be devised based on the nationally recognized “professional-judgment panels” model for determining the resources necessary to meet educational standards.

• The formula should be based on “costing out” calculations developed through the model to determine the base per-pupil cost of a thorough and efficient education, as well as the additional weights for special education, at-risk, and limited-English-proficient students. That should also include the use of a geographic cost-of-education index to accurately reflect differences of cost-of-living throughout the state.

• The formula for calculating a district’s ability to pay should be based equally on a district’s relative property wealth and income. Property wealth and a district’s income should be calculated by considering the equalized property valuation and income on a per-capita, not aggregate, basis.

SOURCE: Joint Legislative Committee on Public School Funding Reform

Additional aid categories have been created for subsets of “non-Abbott” districts that prove need. The rest get what many view as relatively minimal need-based adjustments.

Abbott districts have invested in a range of improvements, such as universal preschool, new curricula, and teacher training. Test scores show their students improving at a faster clip than those in other districts, though most still don’t match state averages.

But discontent with the funding structure has grown in the past few years as budgetary pinches have held funding flat in New Jersey’s other 585 school districts, and growth in state aid to the Abbott districts has outpaced such aid to other districts.

Critics point out that while the Abbott districts enroll 23 percent of the state’s schoolchildren, they receive 57 percent of its education dollars. State money provides only 39 percent of education spending in New Jersey schools on average, putting added pressure on districts to hike property taxes, and leaving few good options for non-Abbott districts with little property wealth.

Sen. John H. Adler, a Democrat and the co-chairman of the legislature’s joint committee on school funding reform, said the panel wants to extend to all districts the Abbott principle of full funding based on need, but also believes it must control spending so the state can afford to take on a greater share of education costs.

“There’s been a very divisive tone to education funding discussions over the last years as communities feel pitted against one another,” he said.

To manage costs, the committee recommended measures such as putting caps on annual district budget hikes, giving the state commissioner of education more authority to intervene in district operations, and teaching more special education students in regular school settings.

The committee’s report said that in fashioning a new formula, it is “inevitable” that there will be “winners and losers,” and it tried to cushion the blow with a provision that would guard potential losers against sudden drops in aid. But it didn’t specify how long that provision should last.

Ready for Battle

Advocates for the Abbott districts are girding for battle with the legislature over potential losses in aid.

David G. Sciarra, the lead lawyer in the case, said the state still lacks an accurate basis for a funding formula because of flaws in the way its experts have calculated costs. The new base amount state officials proposed—$8,500 per pupil on average—is 22 percent less than the base funding Abbott districts are paid now, and 17 percent less than the average district statewide receives, he said.

Stanley M. Sanger, the superintendent of the Union City, N.J., school district, credits the Abbott funding structure with enabling academic improvements that have produced better test scores and graduation rates in the 11,000-student district.

“To eliminate that would be to allow us to go into regression,” he said.

But representatives of wealthier districts said the local property-tax burden has to change.

Lynne Strickland, the executive director of the Garden State Coalition, a group of 110 middle-income and wealthier districts, said many of her members must rely on local funding for 90 percent of their budgets.

State legislative leaders say their goal is to find another $1 billion to funnel into schools annually. But experts expressed doubt there would be enough money to do that and also reduce property taxes by 20 percent. The most recent New Jersey figures show the state spends $11,000 per pupil on average, and about $14,000 in Abbott districts.

“New Jersey is already one of the top-spending states [on education] in the country,” said Mike Griffith, a nationally known school finance expert who is a consultant for the Denver-based Education Commission of the States. “The recommendations are good, but it would be a very high-cost system. Where is the money going to come from?”

Sen. Adler said adding $1 billion to education funding and cutting property taxes by 20 percent represent “two competing, legitimate approaches.” Whether both can happen, he said, is “not resolved.”

A version of this article appeared in the November 29, 2006 edition of Education Week as N.J. Panel Eyes Changes in School Funding

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