When the School Funding Reform Act was passed in 2008, it was heralded as a formula under which “money follows the child.” Under the School Funding Reform Act, state aid would be directed to at-risk children themselves, wherever they lived, as opposed to state aid being earmarked for certain school districts that historically had a lot of at-risk children. People called the School Funding Reform Act a “unitary funding formula” that would treat all districts equally, depending on their needs and tax capacity, instead of the previous system, under which the determination of state aid for the Abbott districts was different from other districts.
When the School Funding Reform Act is described by New Jersey's education establishment, the focus is always on the intricacies of how demographics determine a district's “adequacy budget,” how real-estate values and income determine “local fair share, “ and how the two are mathematically united to determine a district's “equalization aid.” In other words, the explanation of SFRA focuses on how the state has created a mathematical formula so that state aid goes out in inverse proportion to a district's wealth. Equalization aid supposedly equalizes academic opportunity for students in middle-income and low-income districts with their peers in New Jersey's high-income districts.
Indeed, there is a mathematical beauty to the formulas of the School Funding Reform Act. Philosophically, it's hard to argue with the School Funding Reform Act and even be proud of it as a model of progressive school finance.
Except that nothing about the usual description of SFRA is true in real life because there are other provisions in SFRA that contradict and override the equalizing attempts of equalization aid.
The first contradiction in SFRA is the provision for adjustment aid, the unfairness of which has received a lot of attention since 2016. Under adjustment aid, a district can effectively never receive less state aid than it received in 2008, regardless of what its contemporary enrollment and tax base are. If the School Funding Reform Act's formulas call for a district to receive only $15 million, but it received $25 million in 2008, it still gets $25 million. So, money doesn't “follow the children”; it quite obviously stays in the district after the children are gone. For 2017-2018, adjustment aid totaled $640 million. For 2018-2019, it is projected to total $709 million.
Many people say that adjustment aid was meant to be temporary, but adjustment aid has no statutory sunset. There is no allowance whatsoever to allow a district with a growing tax base to lose state aid and only a trivial reduction allowed if there is enrollment loss.
The second contradiction of “the money follows the child” is the imposition of "state aid growth limits" on the growth of an underaided district's state aid.
This provision has been less discussed than adjustment aid, but it is also an obvious contradiction to the idea that “money follows the child” and the reason that even as Phil Murphy has tried to follow SFRA for 2018-2019, the most underfunded districts have gained so little.
Under the state aid growth limits, if a district's spending is above adequacy, the most aid it can gain in a year is 10 percent of what it already got. If a district's spending is below adequacy, the most aid in can gain is 20 percent of what it already got. It does not matter to SFRA if a district only gets half or a third or a fifth of what it is supposed to get, the most it can gain is 20 percent or 10 percent. If a district is receiving $15 million, and SFRA says it needs $25 million, the most that district can gain is $1.5 million or $3 million, depending on its spending relative to adequacy.
To give a few real-world examples, Clifton's capped aid is $36,064,992, but SFRA says it really needs $74,093,370. Edison's capped aid is $18,590,429, but SFRA says it really needs $45,921,546. And so on …
When provisions in SFRA itself prevent a district from gaining the aid that SFRA’s core formulas say that it needs, it is wrong to say that the “money follows the child” because it doesn’t unless you can afford to wait for many years. While SFRA caps a district’s state aid growth, nothing caps its budget/tax problems.
Since spending relative to adequacy depends on local tax effort and not only state aid, SFRA punishes districts that have the generosity to tax themselves heavily, since high taxes can cause a district to exceed adequacy and therefore halve its state aid growth. For 92 underaided districts, spending only exceeds adequacy due to taxes that also exceed local fair share.
The existence of limits on how much aid districts can gain means that SFRA has two different ideas of “full funding”; the first is statutory full funding, where districts get their capped aid. The second is real full funding at uncapped aid. The first, statutory deficit is $1 billion for 2017-2018, but the second, real deficit is $2 billion and grows by at least $100 million per year.
Depending on who is making the statement, to say that only a $1 billion increase will bring New Jersey to “full funding” is highly ignorant, if not intentionally dishonest.
Fortunately, Steve Sweeney understands very well the defects in the School Funding Reform Act.
When he and his allies determined new state aid awards for 2017-2018 they flipped the State Aid Limits so that aid was calculated based on a district’s deficit, not its existing aid. Under this method, the most severely underaided districts gained the most. For instance, Chesterfield had been slated to get only 10 percent of its recommended aid, but after Sweeney’s intervention its aid doubled to 20 percent. Under Sweeney’s method of determining new aid, severely underaided districts gained more money than they did under Phil Murphy’s proposed state aid for 2018-2019, even though Sweeney had half as much money to work with.
Sweeney and his allies also understand that the real deficit is an ever-growing $2 billion, hence their acceptance of the necessity of redistributing adjustment aid.
The School Funding Reform Act is a good funding law in many ways, but the central tenets of the law — that is, the money should “follow the child” and state aid should vary inversely with district wealth — is contradicted by the provisions for adjustment aid and the state aid growth limits.
Although there is still not a consensus yet on what fixes to SFRA should be made, it should be recognized that the dominant factor in a district's state aid is still what it got the year before, not its contemporary conditions. As long as adjustment aid freezes a district's aid at 2008 levels and the state aid growth limits restrict a district's aid growth, aid does not “follow the child,” and New Jersey's aid distribution becomes more and more divorced from the reality of need today.