Aid Payments Due to Schools May Bear Brunt of State Budget Crunch

John Mooney | May 6, 2014 | Education
Delay or elimination of some payments may be one way Christie administration tries to close $800 million gap

Acting Commissioner of Education David Hespe.
With the state facing an $800 million shortfall in its fiscal 2014 budget, there are only so many places that the money can be found to close the gap — and state aid to schools is among the most obvious.

After all, state education aid makes up more than one-third of the overall budget, totaling more than $12.8 billion.

But in a sometimes testy hearing before the Assembly budget committee yesterday, acting Education Commissioner David Hespe offered few clues about whether the answer might simply be delaying school-aid payment until the next fiscal year or eliminating the aid payments outright — or something in between.

“At this point in time, I cannot say what the impact will be, although we can certainly assume given that school funding, both direct and indirect payments, makes up a third of the budget, we can certainly assume there will be some impact,” Hespe said in response to repeated questioning that opened the hearing.

“I just cannot say what that is,” he said. “The goal would be to limit impact to as little as possible. . . . At this point in time, everything is on the table, and I don’t have the ability to take anything off the table.”

State Assemblyman Gary Schaer (D-Passaic), chairman of the budget committee, prodded Hespe further, sometimes sounding like a lawyer in cross-examination.

“Forgive me, I don’t mean to put you on the spot, and I understand the governor will do what he believes what he needs to do to have the less disastrous effects,” Schaer said.

“The question then becomes, can we ask what cuts can be made to the education department in next few weeks to help us overcome the difficulties which the state is confronting?”

But Hespe wasn’t budging, saying that even if he knew, it wouldn’t be his decision to announce what steps might be taken.

“Out of deference to the governor, those are probably announcements he should be making, not myself at a budget hearing,” he said.

But Hespe agreed that none of the options would be good one: “Given there are only eight weeks left in the fiscal year, there are no cuts that I believe can be made without great difficulty.”

The options are indeed limited at this point, with only a few weeks to the end of the school budget year.

The most obvious would be to postpone the next school-aid payment to July. The state already defers the final two payments of the school year into the next fiscal year, a practice started under former Gov. Jim McGreevey to help solve his own budget crunch. This move would add a third deferred payment. The payment, amounting to about $400 million, is slated to go out May 22.

But even if the state could pull back at this point, the impact may be felt more in cash flow than in real hardship, as most districts have in the past either tapped into surplus to keep paying the bills or entered into short-term borrowing , with the state then helping to defray those borrowing costs.

More significant would be eliminating one of the aid payments altogether, amounting to essentially a 5 percent cut in aid.

Other options might include reductions in specific aid categories, such as special-aid costs or aid for districts experiencing big enrollment growth.

One hot-button topic of late has been the massive growth in schools and students enrolling in the state’s inter-district school-choice program, with the state already putting a cap on the funding for next year.

But, again, Hespe wasn’t saying much yesterday.

“At this point, all we would be engaging in is conjecture, and I don’t think any of us want to be engaging in conjecture at this time,” he said. “The stakes are very, very serious, as we all know, and I can’t see my conjecturing at this time being helpful to anybody.”