Debt Payments Cast Shadow on Christie’s School-Aid Picture

John Mooney | March 8, 2013 | Education
While budget freezes or slightly boosts aid, state construction-grant assessments soar 60 percent

New Jersey school leaders expressed relief last week when Gov. Chris Christie announced in his budget address that no district would get less state aid next year and some would see modest increases.

But a closer look at the numbers indicates that while aid is largely staying flat, more than a few districts are taking sizable hits in their required debt-service payments to the state, in many cases eliminating any bump in aid — and then some.

According to data provided by the state yesterday, nearly 500 districts will see double-digit percentage increases in assessments paid to the Schools Development Authority for debt service on construction grants for projects launched in the last several years.

For many districts, it won’t be a lot of money, with the average increase at about $26,000.

But for more than dozen districts, the impact will top $100,000, not small change when state aid increases were as small as $1 for 41 districts and averaged about 1 percent overall.

Statewide, the SDA assessments will climb by more than $12 million to $33.9 million, a 60 percent increase over this year’s total.

The Barnegat district in Ocean County is seeing a $367,000 increase to more than $1 million, the largest total in the state. The debt-service assessment is tripling for Paramus, now facing a bill of close to $200,000.

Both districts were essentially flat-funded under Christie’s proposed aid distribution for next year, each receiving increases of less than 1 percent.

Livingston was another of the school districts slated for a $1 increase in state aid.

“But when we saw this, it is really a net decrease of $124,000 for us,” said Livingston Superintendent Brad Draeger.

Draeger said there are some tradeoffs, as the state also granted the district a waiver from its tax cap for increases in health-insurance costs. And he said the district doesn’t receive a lot from the state to start with, with aid barely topping $2.4 million.

But alluding to all the attention paid to Christie’s announcement that no districts would see aid cuts, Draeger added, “I didn’t see on a press release that the (SDA) assessments went up.”

The situation stems from a line item in school budgets that was added in 2011. Starting that year, districts were charged 15 percent of debt service for grants they had received from the SDA for new construction.

Created to build new schools for the state’s neediest districts – and facing criticism recently for the pace of that work — the SDA also provides grants to cover up to 40 percent of costs for other districts.

The first year, the assessments were about $21.8 million. After a refinancing, the total then dropped to $14.7 million in 2012, and then climbed back up to nearly $21 million this year, according to the state.

The state treasurer’s office said this year’s sizable increase to $33.9 million statewide is due to changing terms on the more than $9 billion bonds issued by the Economic Development Authority supporting those grants, leading to the one-time hit.

“Refinancing in the future could create some relief at that point, but it’s hard to predict,” said William Quinn, a spokesman for the treasurer’s office.

A Christie spokesman also stressed that while the SDA assessments are ultimately deducted from what districts receive from the state, they are wholly separate from the state formula aid that the governor announced.

“When there were savings in 2012, that didn’t count that as additional aid for districts,” said spokesman Kevin Roberts, referring to the drop in assessments that year. “They are categorized differently because they don’t factor into (formula aid) in any way, shape or form.

“The only place they tie together is the very end of the line when you talk about what total payment they get from the state.”

Roberts added that the grants the districts received from the state helped them construct and renovate their schools.

“The districts that are being assessed the most here are those that are experiencing a benefit as the result of the project and capital investment that has come from their own requests,” Roberts said.

“It’s a material benefit, and the state is still picking up 85 percent of the cost of that benefit,” he added.