Advocates, school officials largely united on funding reforms

A bevy of education advocates and school officials told New Jersey lawmakers exploring a rework of the state’s school funding formula that changes should roll more education costs into formulaic aid, defray the effect of stark shifts in property valuations, and allow towns to more quickly meet their share of education funding.

The witnesses invited to testify before the Senate Education Committee Thursday presented a largely unanimous view of what must change to bring stability to school districts that have experienced extraordinarily volatile state aid fueled by inflation and an overheated real estate market in recent years.

Updates to the formula enacted in 2008 should examine multiple years of property valuations to prevent the massive shifts in aid roughly one-third of the state’s districts have seen each year since lawmakers approved a bill, known as S2, that phased down aid to some districts considered overfunded by the formula, the witnesses said.

“Four years ago in fiscal ‘21, there were 21 school districts that saw an increase in their equalized valuation of 10% or more — 21 school districts statewide,” said Jesse Young, legislative advocate for the New Jersey School Boards Association. “Last year, fiscal year ’24, that number skyrocketed to 322 school districts.”

In New Jersey, local districts are responsible for a portion of the school funding needed to give students an adequate education — a constitutional guarantee in New Jersey, per courts.

That portion, called the local fair share, is calculated individually for each district, and state aid fills the remaining part of a school’s adequacy budget.

In simple terms, increased property values and other inputs, like declining enrollment, raise a district’s fair share and decrease the amount of state aid it would receive in a given year. But witnesses told legislators annual gaps created by the formula were often too large for districts to fill under New Jersey’s 2% cap on property tax hikes.

“The valuation has absolutely no correlation to collected tax, not by the schools, not by the town. There’s no correlation,” said Scott Feder, superintendent of the South Brunswick School District. “A billion new dollars shows up on the valuation. There’s not a billion new dollars. It shows the worth. The money isn’t collected because all we collect is the 2% increase.”

New Jersey has capped annual property tax increases to 2% since 2010, though towns can seek larger increases with voter approval. Though the cap has successfully slowed property tax growth, it has also injected uncertainty into local budgets by making towns and districts less able to respond to rapid shifts in costs or funding.

School districts facing cuts should be exempted from the cap, multiple witnesses told the committee, warning mandating such districts observe the limit on property tax hikes could compound the effects of cuts across multiple years, leaving districts further and further from their fair share of funding with each cut.

“We have no ability to raise revenue,” said Matthew Murphy, interim superintendent of the River Edge School District. “So could there be a mechanism in which the community wants to raise revenue in a short period of time, maybe if the town council agrees to it and the school board agrees to it?”

Numerous witnesses said the state should update the timeline for schools to submit tentative budgets to the state. Such budgets are due in late March, just weeks after districts receive updated state aid figures, and rarely reflect what a district’s final spending plan looks like.

“That budget in Brick schools never reflects our actual budget, which is done at the end of April. That tentative budget gets advertised. It’s, in my opinion, false information that’s then given to taxpayers because … we actually don’t have all our information actually figured out by that point,” said James Edwards, business administrator for Brick’s school district. “The tentative budget is really not worth the paper it’s printed on.”

Others added the schedule gave too little time for districts to budget around cuts or increases to state aid, suggesting lawmakers could push the deadline or extend grace periods to districts facing outsized changes to state school aid.

“I would also say it’d be helpful for those districts that receive $100 million out of the blue,” Murphy said. “How are they adequately going to put a budget together in three weeks to spend $100 million?”

Advocates and lawmakers agreed the updated formula should include costs not covered under the current system, including extraordinary special aid, transportation, and mental health services.

Others said New Jersey should move special education funding to a tiered system that accounts for the needs created by individual students’ disabilities. Under the current formula, a district receives the same amount for a student who has dyslexia as it does for a student who has severe autism.

Sen. Vin Gopal (D-Monmouth), the committee’s chairman, said he hopes to have a bill ready by the summer, but it’s not clear whether changes will be in effect for the 2025-2026 school year.

“I’d like it for this upcoming September,” he said. “It may not be possible. It may be the following year.”