Critics say the funding formula is out of step with the actual costs of education as New Jersey has expanded its learning standards and introduced new curricula. (Dana DiFilippo | New Jersey Monitor)
New Jersey lawmakers are preparing tweaks to the state’s school funding formula months after inflation and a white-hot housing market spurred outsized cuts to state education aid for a third of the state’s school districts.
The contours of the reforms remain blurry, and lawmakers do not expect to approve the legislation until the next legislative session, said Sen. Vin Gopal (D-Monmouth), chair of the Senate Education Committee.
But Gopal said the policy would include provisions to address categorical aid to districts’ transportation and extraordinary special education costs, which are provided independently of the state’s funding formula.
“The formula hasn’t really been touched since 2008. The world’s changed since 2008,” Gopal said.
Legislators renewed their focus on school funding this spring, after the state told more than 160 districts — including about two dozen in Gopal’s home of Monmouth County — that they would receive cuts in state aid.
Though lawmakers defrayed two-thirds of those cuts with a one-time appropriation of nearly $103 million, the districts are expected to face even larger cuts in the coming budgetary year, when New Jersey completes the phase-out of aid to overfunded districts that began when New Jersey moved to fully implement its 2008 school funding formula in 2018 under legislation known widely by its bill number, S2.
It’s unclear what changes legislators are seeking to make to the school funding formula that governs how much aid individual districts receive from the state, nor is it clear whether they will make other allowances — like allowing underfunded districts to exceed the 2% cap on property tax increases — meant to keep districts at full funding.
Gopal has sponsored bills that would calculate a district’s share of education costs by averaging property valuations over five years instead of only the preceding year and create a task force to study the state’s funding formula, among others.
How school funding works and doesn’t
Since 2008, New Jersey has determined how much aid to send to districts by using a weighted student formula created by the School Funding Reform Act.
The formula assumes a base cost for each student — at present, $12,451 — which is then multiplied based on factors that increase cost, including a student’s age, their receipt of free or reduced lunches, and their status as an English language learner, among others.
State aid only funds a portion of districts’ education costs, and districts are expected to contribute funding through local taxes at a level determined by the funding formula and called the local fair share, which rises along with a district’s property tax base.
Advocates say the formula and inputs like teacher salaries that were weighed roughly two decades ago fell out of step with the actual costs of education as New Jersey expanded its learning standards and introduced new curricula.
“The standards were different in New Jersey back then. The goals were different. The assessments used to evaluate the standards were different, and the mix of kids in New Jersey schools was somewhat different,” said Bruce Baker, a professor at the University of Miami who specializes in public school finance.
At the same time, districts have seen their ability to meet their local funding obligations curtailed. In 2010, Gov. Chris Christie signed a bill that capped property tax increases to 2% annually.
The policy was meant to slow the growth of New Jersey’s property taxes, which were then already among the nation’s highest. The cap succeeded in slowing the growth of property taxes — the Tax Foundation says ours remain the highest in the nation — but it has also sharply limited districts seeking to meet their local school funding obligations, especially in the face of steep cuts to state aid seen in some districts since 2018.
“Those districts are basically in an impossible situation where on the one hand the state is saying, ‘in order to provide a constitutionally adequate level of education, you need to raise this money,’ and on the other hand they’re saying, ‘you cannot raise this money,’” said Danielle Farrie, research director at the Education Law Center.
The cap can be circumvented, though doing so requires a ballot initiative, and attempts to enact steeper property tax hikes often carry political consequences. Farrie suggested districts that are not meeting their local fair share be allowed to exceed the property tax cap without first asking voters to bridge their school funding gaps faster.
The state could gain other efficiencies by improving its collection and use of data on student demography, district poverty, and teacher wages to estimate education costs, Baker said. Vermont and Kansas adopted similar reforms in recent years.
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