Budget Breakdown: Why education spending makes up so much of the budget

The last Budget Breakdown spoke about how the budget calls for a record-high level of spending. Now it’s time to go over the biggest single item in the budget, which is the category of education spending.

The state will spend some $15 billion on K-12 education during the 2019 fiscal year, which is more than 40 percent of the total budget. Or looked at another way, it would be enough money to fully fund a new rail tunnel under the Hudson River, with some money left over to buy some new trains.

The bulk of the state’s K-12 education spending — about $9 billion — is going right out the door to local school districts across the state in what’s known as formula aid. This is funding that is provided to the school districts based on a complicated formula that is supposed to take into account things like student needs, wealth disparities, and a host of other factors to ensure the state’s dollars are being divvied up in a way that is fair and also effective.

In fact, the new budget, which is the first to come during the tenure of Gov. Phil Murphy, added about $350 million to the formula-aid spending, and Murphy, a Democrat, is also promising to make boosting that specific line item even more in the annual budget a top priority. Murphy has signed into law a series of school funding formula changes that were sought by lawmakers.

RELATED: Murphy signs law to ‘modernize’ school funding formula

Now another big part of the school funding budget category relates to paying for the pension and health benefits costs of retired teachers across the state. That’s something that the state decided to take on decades ago, and it now accounts for about $2.5 billion in annual state spending, which is more than enough money to build a new MetLife stadium in the Meadowlands.

Paying down the debt on school facilities across New Jersey that the state has helped fund accounts for another $1 billion in spending that falls under the budget’s education category.

Now many would argue that all of this spending on education makes sense since that’s our future in New Jersey — educating the next generation of our residents and taxpayers. But it’s also something that happens in many ways as a basic function of the state’s tax system, and also the state constitution, which requires every dollar raised by the income tax, the state’s largest single source of revenue, to go toward property tax relief – which is the probably biggest headache for any state homeowner.

So how does all this talk of income taxes and property taxes relate back to the issue of education spending and the budget? Well, when you look at most residential property tax bills in New Jersey, the biggest portion typically goes to fund the local, K-12 school district, and those districts tend to rely heavily on property taxes as their main source of revenue. So that means, for every dollar that comes from the state for things like classroom aid, building debt and retiree benefits, assuming the school board is disciplined when it comes to spending, that’s a dollar that doesn’t have to come out of the pockets of those local property taxpayers.