With State Aid in Deep Freeze, Towns and Schools Are Out in the Cold

Colleen O'Dea | March 8, 2017 | Budget
What does a flat budget look like? Higher property taxes, fewer services and staff, and nothing extra for teachers and students

frozen money cold cash
Home owners in New Jersey, which has the highest property taxes in the nation, should expect taxes on their homes to rise even higher as a result of Gov. Chris Christie’s budget proposal to freeze state aid to nearly all municipalities and school districts.

The state-imposed 2-percent property tax cap should blunt tax increases, but could mean cuts in services or staff in some places. School aid is also being kept flat, which will put even more pressure on districts already struggling to keep teachers happy and give students what they need.

Follow this link to access an interactive database of school and municipal aid for all New Jersey towns and school districts.

Although the law caps property tax increases at 2 percent, there are enough exemptions to allow for a slightly larger increase. Between 2015 and 2016, the average property tax bill in New Jersey rose by 2.3 percent.

“Local budget makers should be commended for the quality of services they continue to provide, while struggling to keep those (property tax) increases as low as possible,” said Jon Moran, senior legislative analyst with the New Jersey State League of Municipalities.

While not happy about it, town officials have gotten used to receiving no additional help from the state to cover salary and benefit increases and other rising costs.

Proposed aid for municipalities (2017) and schools (2017-18)
Proposed aid for municipalities (2017) and schools (2017-18)

Recommended state aid to municipalities and school districts for the next year. Choose one or more items or just click search to enter the database

“For the seventh straight year now, almost every New Jersey municipality is looking at level funding in combined Energy Tax Receipts and CMPTRA property tax relief,” Moran said. “The cumulative rate of inflation over that period has decreased the value of that funding by 11 percent.”

He said that even unadjusted for inflation, the nearly $1.4 billion in property tax relief aid proposed by Christie is lower than the amount the state provided in 2008, 2009, and 2010, as New Jersey cut a cumulative $320 million in municipal aid as a result of the recession.

The only town that will see an increase in municipal aid this year is Harrison in Hudson County, which is slated for $1.2 million more than 2016. Harrison will see the amount as transitional aid, meant to help cover extraordinary circumstances — the loss of ratables due to tax appeals.

Municipal aid figures released late last week on the state Department of Community Affairs website do not include Atlantic City, which was removed from the spreadsheet this year. The state effectively took over the city late last year. Atlantic City received $26.3 million in state aid in 2016. Departmental officials could not detail on Tuesday what Atlantic City could expect this year.

The New Jersey Department of Education also posted late last week the breakdown of how $8 billion of a total $13.8 billion in state support for schools would be distributed to districts under Christie’s budget. The total tab includes roughly $4.6 billion in pension, Social Security, and post-retirement health benefits for school staff that is paid on behalf of districts and $9.2 billion given to schools for day-to-day spending and debt service on school construction.

Local aid breakdowns do not include debt-service aid. The $8 billion enumerated for general purposes would be just $3.1 million higher in the coming school year than in the current one, or an increase of 4/100th of a percent.

This could be difficult for some school districts to stomach, as they had been getting at least small increases in aid annually — Christie’s last budget had increased school aid by about 1 percent and all but two districts had received a nominal aid increase. Under the governor’s current proposal, fewer than 100 districts would see any additional aid, while 82 percent would get no extra state support.

While the state Department of Education indicated that total state support for school aid has increased by more than 46 percent since Christie took office in 2010, he has consistently underfunded the state’s school aid formula. This year, the gap between what schools are getting and what the formula requires is estimated at $1.2 billion.

Frank Belluscio, deputy executive director of the New Jersey School Boards Association, said school officials still have almost two weeks to submit proposed budgets to county education offices so it is unclear how they plan to deal with the tight aid situation.

“With the 2 percent tax-levy cap, use of local revenue to close the gap between flat state aid and increased fixed costs is limited,” he said. In addition to raising taxes, Belluscio said some of the budget-balancing strategies districts can use include using banked, or unused, cap dollars from previous years and reducing programs.

“The state aid situation is particularly difficult for districts where flat state funding levels have not recognized enrollment increases or other factors,” he added.

Newark stands to get the largest dollar aid increase, of about $1.4 million, while the biggest percentage increase would go to Beach Haven, a 12.6 percent rise in aid equivalent to just $25,382. State education officials said districts slated to get increased aid would do so for one of two reasons: they expect to get additional choice students or they host charter schools and expect to have more students attending charter schools than last year.

While the aid proposals are just that at the moment, and the Legislature will hold hearings on and eventually vote on Christie’s budget, lawmakers recently have made little, if any, changes to the governor’s aid recommendations.

That doesn’t mean officials can’t wish for more aid.

“We hope the day is coming when the state’s recovery and reforms will allow it to restore municipal property-tax relief funding to bygone levels,” Moran said.