Senate panel backs larger tax hikes in towns facing school aid cuts

Senate lawmakers approved a bill Thursday that would allow school districts facing state aid cuts in the current or coming school year to exceed the state’s 2% cap on property tax hikes.

The measure, which cleared the committee in a bipartisan 4-1 vote, is an effort to ease schools through funding transitions under a 2018 bill that phased out state assistance to some school districts as New Jersey moved to implement the school funding formula it enacted in 2008. The 2018 bill is known widely by its bill number, S2.

As a result of the realignment, districts that have historically underfunded their local share of education budgets saw dramatic funding cuts. But runaway inflation, a steep increase in property valuations, and shifts in enrollment led to outsized cuts last year, including for some districts with no history of underfunding.

By allowing districts to exceed New Jersey’s 2% property tax levy cap, lawmakers and education advocates hope to defray the effects of the aid decreases and help other undertaxed districts meet their school funding obligations. How much districts can exceed the cap is variable, but the bill would allow them to raise local levies enough to offset state aid cuts or bring school funding up to constitutionally adequate levels.

“Under the current cap, it would take the 174 undertaxed districts an average of 12 years just to reach their current local fair share obligation, and in many districts, it would take literally decades,” said Danielle Farrie, research director at the Education Law Center.

Under New Jersey’s school funding formula, municipalities are responsible for a portion of the education funding needed to afford students an adequate education — a constitutional guarantee in New Jersey, per courts. The so-called local fair share is calculated individually per district, and state aid is meant to fill what funding needs local taxes do not.

Farrie added that Schools Development Authority districts — a set of typically low-income districts — that received similar tax levy cap waivers had succeeded in significantly boosting local school funding as a result.

Jersey City, which has faced more than $200 million in state aid cuts since the enactment of S2, funded only 31% of its local fair share in 2019, Farrie said. This year, that figure was up to 87%.

The legislation won support from a broad array of local school officials and education advocacy groups, though some suggested the bill be amended in conflicting ways.

Jessie Young, a legislative advocate for the New Jersey School Boards Association, urged the committee to remove provisions that would bar districts that raise tax levies in excess of the cap from reducing teaching staff or spending on instruction or support services without first getting approval from the commissioner of education.

“We think that is a severe and unnecessary restriction on districts’ basic budget development flexibility,” Young said. “There are any number of ways that a district might be able to achieve some cost savings in its instruction and support programs and its budget that don’t compromise quality of services.”

Others urged the committee to amend the bill in the other direction, by having that requirement cover other certified school staff — like nurses, counselors, and librarians — and uncertified support staff.

“We would like to see that expanded to include the entire staff of a school,” said Francine Pfeffer, associate director of government relations for the New Jersey Education Association, the statewide teachers union.

Young added that it would be more appropriate to allow districts to raise their levies enough to meet their local fair share, instead of to reach full adequacy, as the latter could lead to taxes that are too high for residents to sustain.

“We don’t want to let the state off the hook of its share of its responsibility for its part of the district’s adequacy budget by giving the district all that flexibility to raise all the way up to its adequacy budget,” he said.

The bill is expected to go before the Senate Budget and Appropriations Committee before reaching the chamber’s floor. The bill’s Assembly companion has yet to come before a committee, though it’s unlikely to face significant opposition.

School Funding Reform Act eyed for reform

Sen. Vin Gopal (D-Monmouth), the education committee’s chairman, signaled there are more sweeping changes on the horizon for New Jersey’s school funding formula, which is set to reach full funding for the first time in the fiscal year that begins July 1.

“It’s a priority of the committee to look at the SFRA since we’re at the end of S2,” the senator said, adding he expects to hold a hearing on the formula in the coming weeks.

Since the enactment of S2, school funding has repeatedly emerged as a potent issue, including in Gopal’s own legislative district, where numerous school districts have seen their state aid slashed since the law went into effect.

The fracas over school funding came to a head last year after districts faced more than $150 million in cuts for the 2023-24 school year, though lawmakers reversed roughly two-thirds of those cuts by approving $102.7 million in supplemental aid. 

Absent formula changes that may not occur before S2 completes its reconfiguration of school aid, lawmakers will likely have to renew that supplemental aid to avoid stark cuts in this year’s budget.