State Aid

New Jersey school districts fund their programs with three basic sources of revenue - local property taxes, federal aid, and state aid. Much has been written about the successes and failures of the 2008 state aid funding formula. An interesting source is @stateaidguy whose Facebook Page can be found here at New Jersey Education Aid.

The School Funding Reform Act of 2008 (SFRA) is based on a pretty good concept. School districts should fund their budgets with local property taxes up to their ability to pay those taxes. In a nutshell, that number is called "Local Fair Share". If property taxes fell short of another concept called "adequacy" - the amount of money the state says a school district of a certain size needs to operate - then the balance would be made up by state taxpayers as state aid.

When people talk about a state aid "calculation" what they really mean is Local Fair Share calculation. Local Fair Share is based on the "wealth" of a district. Wealth is determined by two factors - the total property value of the municipality and the incomes of the residents. 

All else being equal this plan could work. But, of course, it's not.

Right from the start the thirty-one so-called Abbott Districts were more or less exempt from the calculations. Somewhere around 55% of all the state aid money went to these districts while the other 570-plus districts split up what was left. Because New Jersey does not have an unlimited supply of money, many of those 570 or so districts were chronically underfunded in state aid. Can you guess who that included?

During my first decade or so on Hillsborough's school board, I reported each March that our school district was underfunded in state aid. Five million, six million, seven million - it was always the same. The truth was, and is, that Hillsborough does not have a lot of high tax rateables in town and there is an inordinate burden on homeowners to pay that local fair share. At least we could take comfort in the fact that the state recognized this - even while at the same time telling us "too bad, there's none left for you". In order to try to reach adequacy, Hillsborough was compelled to raise taxes up to the state limit of 2% each year and to take waivers when possible to pay for outsized increases in health insurance premiums. But it was not sustainable.

The effect of this over the course of five or six or seven years was that while other districts that received full funding or were indeed overfunded were able to increase their program offerings and teaching staffs, and build surpluses all Hillsborough could do was cut.

Then in the late 2010s, something miraculous happened. According to the state, Hillsborough became wealthy. No longer was Hillsborough underfunded each year by millions of dollars, now we were OVERFUNDED! And, oh yeah, we would have to pay that back!!!!

Other districts that were told to "pay it back" were able to do so out of surplus - either in actual dollars or by eliminating surplus positions that were added when they were flush with cash. All Hillsborough could do was keep cutting. And this is the position Hillsborough is in today.

In future posts, I will provide my own solutions for this mess and my recommendations for this year's budget.