Fine Print: State Auditor Calls Out ‘Convoluted’ Allotting of School Aid

John Mooney | September 22, 2016 | Education
Auditor confirms Christie administration’s underfunding — and overfunding — of school districts

Gov. Chris Christie
What it is: State Auditor Stephen Eells, whose office is an arm of the state Legislature, yesterday released a report on the distribution of state aid over the last two years under Gov. Chris Christie. The report detailed the levels of state funding to the New Jersey’s 500-plus districts and how they have matched — or not matched — the state’s School Funding Reform Act. The report concluded that although the Christie administration and Legislature had properly followed state budgeting rules, as required, the mandates of the school funding law had not been met.

According to the Eells report, “The SFRA formula aid has not been distributed per statute since fiscal year 2009. … Through fiscal year 2014, the methods followed for the annual calculations blended past and current data from multiple years to determine funding, making the distribution convoluted. During fiscal years 2015 and 2016, no data from either year was applied to the formula to determine funding. Consequently, there were significant differences between actual funding and what the SFRA dictates.”

What it means: The report largely confirms what critics and even the administration have long acknowledged — that the state has underfunded the SFRA formula by nearly $1 billion overall at the most recent count. But it also finds wide disparities of funding, with some districts receiving far more aid than they are entitled to in certain categories.

The politics: The report comes out at a time when school funding is back on the political front burner, as Gov. Chris Christie moves to vanquish the SFRA while the state Supreme Court and Democratic leaders seek more to fine-tune it. Whether this report changes the outcome of that debate much is uncertain, at best; it is more likely to just add to the argument that the current situation is untenable.

The background: It is no secret that the Christie administration — and others before it — have rarely, if ever, fully funded their respective school funding laws. Christie has been among the guiltier in that regard; coming into office on the back end of the Great Recession, he made steep cuts in aid almost immediately. Since then, he has largely maintained funding for school districts or made nominal increases, only further widening the gaps between the overfunded and the underfunded.

Perfectly legal: The Christie administration’s funding decisions and the Legislature’s acquiescence have been made through the state’s appropriations act that lays out the state budget annually. The appropriations act supersedes the school funding law, the report pointed out.

Common themes: A core finding of the report was that the Christie administration has not been applying school enrollments or other demographics in determining school funding levels. Districts that have had increases in enrollment were largely left at the same level of funding as those that have seen significant drops, the report said.

The impact: The failure to use up-to-date enrollment figures and other demographics led to wide disparities where some districts are receiving tens of millions of dollars in additional aid and others tens of millions less. The report detailed that 385 districts would have seen greater amounts in aid if actual district data was followed; it noted that one district was underfunded by $34 million in 2016. In contrast, while not naming its sample districts, the report found another district would have received $45 million less in 2016 if actual school data was used.

Recommendation: “Although the department is distributing funding per the Appropriations Acts, we recommend that the methodology for allocating funding be based on current student population and other demographics,” the report stated.

Funding for special education: Enrollment discrepancies also led to faults in the funding of special education and preschool, some to dramatic ends, according to the report. For instance, special ed funding is currently based on per-pupil amounts derived from a district’s classification rate and how it compares with the statewide average. That has led districts classified as having above-average numbers of pupils in that category to get considerably less funding than SFRA dictates and those below-average to get significantly more.

Recommendation: “We recommend that the department seeks legislation to calculate Special Education Aid utilizing actual classification rates.”

Preschool funding: This finding came down to enrollments, too, with the state auditor finding many of the state’s neediest districts eligible for preschool aid over-estimating their numbers of students and collecting the money for them. “Hold harmless” clauses in subsequent budgets only hardened the gaps between the funding that was entitled and what was received.

Recommendation: “Although the department distributed aid in accordance with the Appropriations Acts, we recommend the department seek language which allows subsequent payments to be adjusted based on actual enrollments. We further recommend the elimination of held harmless provisions so that aid is based only on current enrollment data.”

Department response: The state Department of Education issued a response to the auditor’s report on funding, agreeing on some items, on others not. On the report’s main point about the convoluted distribution of funding, finance director Kevin Dehmer said that while the goal of full funding is “laudable,” the department is bound to follow the appropriations act each year.