Sweeney’s Fix for School Funding Would Cut Some Districts’ Adjustment Aid

John Reitmeyer | June 1, 2018 | Budget
Senate President’s aim is to gradually help ‘underfunded’ districts while undoing the ‘overfunding’ of others

Senate President Steve Sweeney
With only weeks to go before the next state budget needs to be adopted, Senate President Steve Sweeney has proposed new legislation that would rework New Jersey’s school-funding law to get more money to school districts where state aid hasn’t been keeping pace with enrollment.

The measure formally introduced by Sweeney (D-Gloucester) yesterday is his latest attempt to get around so-called “enrollment caps” in the school-aid law that have prevented many K-12 districts from getting the full amount they should otherwise be receiving under a funding formula that was adopted in 2008.

The new bill would lift the enrollment caps, starting with the 2018-2019 school year. But it would also allow for a seven-year phase-in period to eventually make all the “underfunded” districts whole, a goal that could easily cost around $2 billion to accomplish.

Another key element of the legislation is a provision that would, also over seven years, take away the “adjustment aid” that by law has been provided to some districts outside of the actual formula even if their enrollment doesn’t justify it. Some of those districts would be given a chance to backfill that revenue loss by temporarily easing the state’s 2 percent limit on local property-tax increases, and Jersey City would also be allowed to levy a local payroll tax to help support its local schools.

The loss of adjustment aid is likely to face resistance from many public-education advocates since it would mean some districts will ultimately lose some funding. It will also put Gov. Phil Murphy on the spot as he’s yet to say definitively how he will address school-funding disparities that have been building up over the last 10 years — especially since his fiscal year 2019 spending plan proposes undoing a series of temporary school-aid changes that were written into the current, fiscal 2018 budget.

Governor: ‘equitable distribution’

Murphy, speaking on 101.5 FM radio yesterday afternoon, said he had yet to review Sweeney’s bill. But he promised there would be an “equitable distribution” of school-aid in the fiscal 2019 budget, which is due to be enacted by June 30.

In all, Murphy, a Democrat, is proposing to increase direct budget funding for K-12 districts by nearly $284 million in his overall $37.4 billion spending plan for fiscal 2019. That marks a clear departure from the trend of flat funding during the tenure of former Gov. Chris Christie.

Murphy has described his budget plan’s additional $283.6 million in school aid as a down payment toward an eventual goal of fully funding the school-aid law, something Christie never did. But even that promise is controversial since the enrollment cap that is holding back aid for many districts is written into the law.

The spending plan that Murphy unveiled in March doesn’t build upon the effort launched by Sweeney and other lawmakers last year that used budget language to take away some funding from the districts that receive adjustment aid, while at the same time giving more to those whose state aid has been held back by the enrollment caps. The governor has since promised to work with legislative leaders to address those concerns, but he has yet to offer any real specifics publicly.

What ends up happening to his budget’s $522 million line-item for adjustment aid and other pots of money that have been used to boost funding for “overfunded” districts is an open question. The issue continues to be discussed in ongoing budget talks between lawmakers and the Murphy administration that are happening behind closed doors.

To be phased out over seven years

Under Sweeney’s new legislation, the adjustment aid would be phased out over seven years, starting with a 5 percent reduction during the 2018-2019 school year. The size of the reductions would then grow in each of the next six years, to eight percent, 10 percent, 14 percent, 18 percent, 21 percent and 24 percent, before being fully phased out.

In a prior piece of legislation proposed by Sweeney in 2016, he had sought a more rapid, five-year phaseout of the adjustment aid. He said he agreed to the longer timeline after negotiating a deal on the school-funding issue with Assembly Speaker Craig Coughlin (D-Middlesex), and he now expects the measure to pass both houses by early June.

“At the end of the day, we really think we struck a balance that recognizes there are some hardships with districts that are going to lose some funding,” Sweeney said during a news conference in Trenton yesterday.

To help address those hardships, Jersey City — which is one of the more notable districts receiving adjustment aid — would be allowed to levy a local payroll tax specifically to raise more money for public education. But for Jersey City, the phasing out of adjustment aid would happen more rapidly, over five years. Other districts, known as former Abbotts — a name that’s rooted in the Abbott vs. Burke school-funding fairness legal case that goes back decades in New Jersey — would be allowed to exceed the state’s 2 percent cap on tax-levy increases during the seven-year phase-in period. The bill also creates a special category for vocational-technical school districts that rely more heavily on aid from county freeholder boards.

Still, Sweeney’s proposal drew immediate criticism yesterday from David Sciarra, executive director of the Education Law Center, a group that led the Abbott vs. Burke litigation.

‘We remain adamantly opposed…’

“We remain adamantly opposed to any changes to the school funding formula that cut resources required for the provision of a thorough and efficient education,” Sciarra said. “By slashing state aid over the next seven years, Senator Sweeney’s proposal would do just that, impacting school children across the state.”

“It also appears that the only recourse to make up the state aid cuts under Senator Sweeney’s proposal would be huge and successive increases in local property taxes for schools,” Sciarra said.

A spokesman for the New Jersey Education Association, the state’s largest teachers’ union, said yesterday the organization was still reviewing Sweeney’s new legislation and would offer comments after a full analysis of it.

It’s unclear under Sweeney’s bill exactly where the state will come up with the money needed to fully fund the districts that are currently being shortchanged by the state, including through the enrollment caps. But the redistribution of adjustment aid would help make it more affordable.

Jeffrey Bennett, a former South Orange-Maplewood school trustee and research director of the Fair Funding Action Committee, an advocacy group, raised the state’s broader fiscal challenges, including heavy debt and rising public-employee pension costs. Bennett, who runs a blog on school-funding issues, said, “No one wants to take state aid away from any district, but there’s zero budgetary way New Jersey can fairly fund the underaided districts without redistributing state aid.”

Tax hikes in Murphy’s budget

Murphy’s fiscal 2019 budget plan generates roughly $1.7 billion in new revenue through a series of proposed tax hikes — including the establishment of a millionaires tax and the restoration of a 7 percent sales-tax rate. But Sweeney and Coughlin have yet to embrace those tax hikes, even as they haven’t disputed the need to spend more in key areas like K-12 education.

Dan Bryan, the governor’s press secretary, said yesterday that Murphy is “committed to fixing the inequities in New Jersey’s school funding, the most notable among them being the systematic underfunding of the school funding formula over the past eight years.”

But, Bryan added, “in order to fix the inequities in our school funding system, we need the revenues proposed in Governor Murphy’s FY19 budget.”

“The Governor and his team have been working with the Senate President and Assembly Speaker on modernizing the SFRA, and he looks forward to reaching an agreement soon that works for all New Jersey students and families,” Bryan said.