Jersey City, Poster Child for What’s Wrong with School-Funding Reform?

John Mooney, Carly Sitrin | May 14, 2019 | Education
The district says cuts to state aid mean teacher layoffs and canceled after-school programs, but some pols and advocates argue Jersey City has the means to end its budget shortfall

Protesters at Jersey City BOE meeting on May 13
With New Jersey making changes to how it funds its public schools, no district is getting hit harder than Jersey City. And for all the talk of winners and losers, maybe no district better reflects how complex — and emotional — the debate has become.

Jersey City is facing a $120 million budget shortfall, as well as more than $27 million in state aid cuts, and could lose more than 400 teachers and support staff. District officials are suing the Department of Education, saying sustained cuts over multiple years would lead to school closures and consolidations. That, in turn, would mean more overcrowded classrooms, less special education programming, and the elimination of activities like sports and after-school programs — unless funding can be found elsewhere.

Bidding teachers goodbye

Jersey City Education Association (JCEA) president Ron Greco said on the first day of Teacher Appreciation week that 450 “reduction-in-force” (potential layoff) notices went out to teachers and another 100 or so secretaries. He told NJ Spotlight that about 250 teachers are likely to be laid off. JCEA membership is 3,200; the layoffs would thus affect about one in 13 teachers.

At a tense Board of Education meeting on Monday night, over 250 teachers, students, and concerned residents gathered to voice their concerns about the state of their district schools. But in a testament to how fluid these funding debates can be, late in the evening with the room almost empty, the board announced the possibility of minimal or no layoffs. In an attempt to plug the funding gap, the board is considering selling some buildings. That would potentially bring in over $10 million, and it’s estimated that a newly adopted payroll tax could bring in about $27 million (nearly double what had been anticipated). The payroll tax would be on businesses — not employees — and would amount to 1 percent of a business’s total payroll.

“We might be able to walk away with minimal or possibly even zero layoffs but that is going to be a function of the administration” Jersey City Board of Education president Sudhan Thomas said.

Credit: NJTV News
Sudhan Thomas, president of Jersey City Board of Education
Still, though these alternative sources of funding may sound promising, Thomas said the fight will continue in court.

“We have a right to our day in court to demand and fight this as a constitutional basis. We are not here to blame the city or fight with the state. We are here for one thing. We are here to provide a thorough and efficient education for the 33,000 students in Jersey City,” Thomas said.

Background check

What Thomas and the rest of the board are fighting are changes made to the School Funding Reform Act (SFRA), the formula that determines how much money a district needs to provide all students a “thorough and efficient education” as guaranteed by the state constitution. The formula is weighted, so it factors in costs for students with special needs, English-language learners, and those with financial hardships to come up with an “adequacy budget.” The state then calculates how much it can provide, and the taxpayers are expected to make up the rest of the cost.

Gov. Phil Murphy signed the school-funding reform bill (S-2) into law last year, saying the move is a long overdue step toward equal funding for all districts. The SFRA changes were heralded as an attempt to redistribute the money the state spends on education, with the understanding that budget constraints mean full funding for every school is not possible.

While some districts that had been shorted for years will finally see funding increases, districts like Jersey City still receiving “adjustment aid” that was supposed to be phased out years ago are facing deep cuts with the mandate to increase taxes to make up the difference.

“This lawsuit is nothing more than a brazen attempt to evade responsibility for supporting their own schools and their own students,” said Senate President and S-2 architect Steve Sweeney (D-Gloucester) in a statement. “They want to ignore the need to pay their local fair share and to pass the costs to taxpayers throughout the state with little accountability. Their lawsuit takes aim at the state’s school-funding law that is serving the needs of all the school districts in New Jersey.”

Eight other districts are also filing suit over their funding cuts.

“If the recent amendments to SFRA are permitted to be implemented … the calamity that would ensue would be insurmountable,” the Jersey City suit reads.

Unconstitutional and underfunded

Jersey City officials dispute the state’s position, arguing that the S-2 reforms to the SFRA are unconstitutional, and that the district is, in fact, underfunded. The lawsuit attributes that claim to three main factors: increasing costs to educate Jersey City students (the adequacy budget), a general reduction in state aid (known as equalization aid), and a tax-levy increase cap they say prevents them from being able to raise sufficient funds from the taxpayers in the district.

Schoolchildren protest with "pink slips" at Jersey City BOE meeting Monday night.
The 2 percent cap on property-tax increases, which was the handiwork of the Christie administration, has prevented some communities from being able to raise enough through taxes to make up any budgetary shortfall on the state’s end.

However, that cap was effectively eliminated for Jersey City when S-2 was signed. The changes to the school-funding formula authorize former Abbott districts that would lose adjustment aid to exceed the 2 percent spending cap to raise property taxes to their full local fair-share amount.

According to the lawsuit, “JCBOE has increased its local revenue as permitted by SFRA and the local levy has increased between 2008-09 and 2019-20 by nearly fifty-seven percent.” The suit noted, “SFRA’s two percent property tax cap, only recently removed, has constrained the speed with which JCBOE can increase its local revenue to provide funding consistent with its LFS.”

Like Sweeney, however, not everyone agrees with Jersey City’s case. Lawmakers from both sides of the aisle have called the district “overfunded” and have slammed it for what they say is unfairly taking money from long underfunded districts.

“After stealing billions of school aid from the rest of the State for decades, Jersey City’s lawsuit should be tossed in the garbage,” Sen. Mike Doherty (R-Warren/Hunterdon) said in a statement.

Jersey City by the numbers

But according to the Education Law Center (ELC), the district is not overfunded at all and is severely below adequacy. The issue is where the money should come from. During the 2017-2018 school year, the ELC said Jersey City schools spent $100 million less than it should have on its students thanks in part to that 2 percent levy cap. City taxpayers, the ELC notes, should have contributed $370 million through local property taxes, but only put in $117 million. State aid helped narrow some of the shortfall but did not eliminate it.

In the most recent school year, that trend continued.

According to data compiled in the lawsuit, Jersey City’s Adequacy Budget for the 2018-2019 school year was calculated at more than $590 million — meaning it would cost that much to educate its students. Under SFRA, the district was entitled to receive $191 million in equalization aid, (state aid) for the 2018-2019 school year. Under SFRA, the city’s local fair share was calculated at $399 million.That same school year, Jersey City contributed $124 million towards its fair share, leaving a gap of $275 million.

At the same time, before the S-2 changes, the JCBOE was expecting to receive $182 million in adjustment aid to help fill that local levy gap. With that money taken away, Jersey City was “below adequacy” by about $104 million.

Since the 2009-2010 school year, Jersey City has operated below adequacy by more than $750 million, according to the lawsuit.

“When teachers complain about lack of supplies, when students complain about lack of facilities, I’ve gone into some of those bathrooms, I would rather not go to the bathrooms … the fact is it’s a direct result of $750 million of underfunding by the state,” Thomas said on Monday.

Unfounded claims?

Some, like Jeff Bennett, research director of the Fair Funding Action Committee, assert that Jersey City should simply raise taxes on its residents to account for that shortfall. Further, he said, the district’s suit claims of “municipal overburden” are unfounded.

Bennett argues that Jersey City’s property-tax rate (1.6 percent) is substantially below the state average (2.4 percent). Jersey City’s school tax rate is barely above 0.4 percent, which also is substantially below the state average of about 1.4 percent and is one of the lowest of any K-12 district in New Jersey.

The infrastructure expense

But as Thomas noted, funding costs are also needed for significant school building infrastructure.

“Adding insult to injury, JCBOE has been forced to use a portion of its adequacy budget, which is meant to be used solely for operational costs such as staff and programs, towards its capital expenditures such as school maintenance and repairs.” the lawsuit reads.

Under the district’s 10-year Long Range Facility Plan, the long-troubled School Development Authority (SDA) was to provide it with $1.4 billion in funding to build additional schools and to maintain the existing schools. Of this amount, however, the SDA — which has said it is completely out of new funding — only provided $361 million, leading to a shortfall of over $1 billion for the district’s capital expenditures.

“Not one of the 40 school buildings … can provide safe potable water for drinking due to lead being present in their pipes, forcing (the board) to purchase water from outside private suppliers,” the suit reads.

Finding the funds

With the lawsuit pending in Hudson County Superior Court, the district is looking to other sources to solve its funding crisis, starting with the changes announced at Monday’s meeting — selling buildings and implementing the payroll tax. However, that money is not guaranteed.

“I don’t know how we can start a meeting at six o’clock with over 500 layoffs and now there could be possibly very minimal to none,” Greco said. If they can find the funds, “that would be wonderful, but I think this is another charade of City Hall trying to look good or do the right thing if they’re now coming forth with the money.”

The school board also approved a new four-year contract with the teachers union this week that freezes pay in its first year and features changes to the healthcare plan and reduced compensation for things like after-school programs. The board estimates that with these reductions and building consolidations and other measures, it may be able to just close the budget gap.

Still, some believe the board should be asking more of its taxpayers.

Matt Schapiro, a board member and vocal critic of the teachers union told NJ Spotlight “the board has been spending money it didn’t have for a long time and lacks the political courage to raise enough revenue to cover our costs.” He added, “We cannot ‘whack-a-mole’ a way out of this. We cannot sue our way out of this. The only way to create a sustainable funding model is to show the courage now … and start engaging the city, start engaging our school levy.”