Interdistrict Choice: Reforms are Needed Before Further Expansion

February 25, 2014 at 5:05 PM

There aren't many things that Wendell Steinhauer, president of the NJEA, and Chris Christie agree on, but Interdistrict Choice is one of them.  Chris Christie says "I love this program!"  Steinhauer declares "By just about any measure, New Jersey’s Interdistrict Public School Choice Program is a success."


Indeed, student choice over what school to attend is a great idea in theory, but in the real world New Jersey's Interdistrict Choice program has significant problems.  The bottom line is that its cost growth is unsustainable, the funding formula grossly overpays receiving districts, and Choice money aggravates existing funding disparities between New Jersey districts.  Interdistrict Choice provides benefits to a small number of students and districts, but at the expense of the vast majority of New Jersey students and districts that do not and cannot participate.  

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The way Interdistrict Choice funding works is that for every non-residential student a Choice district enrolls it receives regular state aid for that student plus "Choice Aid" that is equal to that district's Local Fair Share.   On average, Choice Aid is $10,479 per Choice student ($49,064,570 for 4,682 students), but the Choice award varies depending on the receiving district’s wealth, with the highest awards being nearly $15,000 per student.   The Choice money becomes part of the receiving district's regular budget and can be used for any purpose, including offsetting tax increases.


It is never acknowledged by Interdistrict Choice proponents, but the “Choice Aid” is taken away from the overall K-12 education aid package, ie, money that would have been part of the overall aid package for other school districts. As this program's popularity has grown so have its costs; a diversion that was only $9.8 million in 2010-11 has grown to $49 million in 2013-14 and to a proposed $54 million for 2014-15. (the increase is only so low due to a controversial 5% enrollment cap).


Proponents may say that $54 million is a tiny fraction of New Jersey's nearly $8 billion in K-12 school aid, but that amount is almost $40 a student.  For a hypothetical, socioeconomically average district with 5,000 students that is $200,000; more if the district is low-resource, less if the district is high-resource. Regardless of the precise amount, it is more than enough to keep a student assistance counselor, keep a music teacher, maintain an athletic field, keep a speech therapist, make buildings safer, keep a school library staffed, or buy technology for the PARCC assessments etc. 


The reason every dollar counts is that the last few years have been terrible fiscally for almost all New Jersey districts.  270 districts are Below Adequacy.  Hundreds more are only above Adequacy due to accepting heavy tax burdens.  Over 100 districts get less than 60% of the state aid that SFRA recommends and the state is nowhere near fully funding SFRA.  Few districts have managed to avoid severe cuts to teaching staffs, extracurriculars, and support staff like counselors.  Few haven't outsourced.  Few haven't imposed new fees.  Almost none have avoided tax increases.  Hundreds of districts have also seen enrollment growth, which adds to costs and makes their own participation in Interdistrict Choice impractical. 


The financial situation of Choice districts, especially established ones, is very different. 


Brooklawn, a 2001 pilot Choice district, has not had a tax increase since 2001, even though its tax rate is already the state minimum.  Deal, which has an astronomically high $12 million in property wealth per student, finances 43% of its budget through Choice money alone.  West Cape May gets $401,310 for 75 students (Choice and residential) and has used that money for large tax offsets.  Hoboken, considered the most overaided large district in New Jersey even without Choice Aid, receives $2.8 million in Choice Aid on top of $7.9 in other aids.  Stockton, which only has 60 students, is able to sustain teaching Mandarin, Spanish, and French.  Califon has maintained an average class size of twelve.


Of the 105 Choice districts in 2013-14, 91 got more than $100 per student, 51 got more than $500 per student in Choice Aid, twenty-five get more than $1,000 per student.  Deal's windfall is the largest: $1,961,388 for 170 students (Choice and residential), or $11,538 per student.  That enormous Choice windfall, plus Deal’s $1,060 per student in regular state aid, plus its own local taxes, push Deal’s per pupil spending to $17,500 per pupil.


The state's $49 million in Choice money in 2013-14 was unequally distributed among Choice districts.  Half of that Choice money goes to only twelve districts.  (please see note.)


Choice districts will say that Choice students increase their expenses and that the aid is justified.  Yes, having Choice students increases a district's expenses, but the marginal cost of another student is nowhere near the amount that districts receive for that student.  Before it became a Choice district Deal accepted non-resident students for $4,800 per student and presumably could still break even; now that it is a Choice district it gets $14,000+ in Choice Aid per Choice student.


Furthermore, the number of Choice students a district is paid for does not equal the net student population increase, since Choice districts can swap students with each other and be paid for the number out-of-district students they accept, even if they are losing their own students.  If a Choice district receives twenty students and sends twenty of its own students to other Choice districts it would get Choice Aid for twenty students, even though there is no net increase in its student population.


Choice districts are even paid for students who change their minds and never enroll since the Department of Education determines Choice aid in the spring when letters of intent are signed, not on who actually enrolls in the fall. For instance, Clinton Township was paid for 102 Choice students in 2012-13, even though only 88 Choice students were enrolled.  Since Clinton’s Local Fair Share was $12,580, Clinton received $151,000 from state taxpayers for educating students who weren't there.  



Even aside from being paid an amount that doesn't correspond to the real increase in student population or bear any relation to the marginal cost of an additional student, Choice funding is an overpayment because the students who enroll tend to be stronger students.


Some Choice districts, like Springfield and Upper Freehold have frank admissions requirements.  Few other Choice districts have admissions requirements, but officials from Choice districts themselves disclose  that the children who enroll are higher performing students relative to the average of the sending districts.  Although saying that the children who enrolled in Brooklawn from Camden were behind residential students, the Superintendent of Brooklawn told a reporter,“The ones using choice to get out of the failing districts have parents who are more involved, more interested and want something better for their children.”  A Deal teacher was a little more direct, "the application process ensures only the most desirous families end up there."


The fact that Choice students are higher performing is not a reason to condemn the program, but it is a reason why the $10,479 average Choice aid (plus regular aid) is an overpayment. High-performing and middle-performing kids, by definition, need less remediation.   All else being equal, high-performers are less expensive to educate. 


There is even more clear evidence that children in special education underparticipate in Interdistrict Choice. According to a Rutgers study done when Interdistrict Choice was still in the pilot phase, only 7.7% of Choice students are in special education, compared to 16% of New Jersey students statewide.  The legislation for Choice Aid clearly gives Choice districts permission to reject children in special education if educating them would create an “undue financial or administrative burden on the district.” 


Like with underparticipation from struggling students, if special education students underparticipate, then the state is overpaying Choice districts.


Finally, it also appears that there are very few low-income participants in this program. Comprehensive information about FRL-eligibility and Choice students was not available at the time of writing, but some districts with many Choice students, like Deal and Stockton, report 0% of their students being FRL-eligible. 


One reason for low enrollment from low-income students is that they cannot afford the transportation to a Choice district.  Sending districts typically give students “Aid in Lieu of Transportation.”  This amount - $884 –doesn't cover a year's worth of transportation to a school that may be miles away.  Middle-class parents can find money to make up the balance for transportation costs, but poor parents cannot.


Again, the low participation by FRL-eligible students means that the Choice Aid award is an overpayment, since middle class and upper-income students are less expensive to educate.  The great difficulty low-income students would have in participating also increases the program's skew towards academically higher-performing students.




Since Choice districts attract higher-performing students, it is surprising that there is no controversy around Interdistrict Choice like there is around charter school choice since charter schools are accused by their critics of disproportionately drawing higher-achieving students.


The academic impact on sending districts of losing more motivated students should be assessed.  If the sending districts are low-performing, then remaining high-achievers will suffer as their peer group shrinks and advanced classes may not be offered.  Perhaps families of high achievers would have relocated from sending district altogether if it were not for the Interdistrict Choice exit or the high-achievers would not have thrived in the home district, but losing high-achievers to Interdistrict Choice makes improvement by the home district even more of an uphill struggle.  




Despite the fact that overall K-12 aid will be flat for 2014-15, Interdistrict Choice advocates are calling for new 5% enrollment cap to be lifted.   I assume that Choice advocates have pure motives, but since K-12 education aid is finite, the flip side of what they are calling for is weakening non-Choice districts by forcing deeper cuts to the Equalization Aid that needy districts get and the Special Education Aid, Security Aid etc that all districts get.   


Interdistrict Choice is a great concept but it needs to be combined with sustainable growth and fair funding.  Choice advocates who want this program to grow should advocate that Choice districts only be paid for their net change in enrollment, only be paid for students who follow through and enroll, and, most importantly, be paid less per student, since the marginal cost is nowhere near the $10,479 average (+other aids) that Choice districts get.  Absent these reforms, the Christie Administration’s cap is very responsible.


Interdistrict Choice has now had three years of full-scale implementation.  Let us hope that the experience of these three years can be used to make reforms that will benefit all New Jersey students. 


Jeffrey Bennett

Mr. Bennett is a member of the South Orange-Maplewood Board of Education. The opinions stated here are solely Mr. Bennett’s own.  


* The twelve districts that get half of Choice Aid are Englewood, Hoboken, Ocean City, Kenilworth, Deal, Hammontown, Morris Hills, Middle Township, Clinton, Upper Township, Central Regional, and Manchester Regional.


One reason for that concentration of Choice Aid in only a few districts is that low-Local Fair Share districts get more money in the form of regular state aid and less in  Choice Aid, while high-resource districts get more money in Choice Aid and less in regular state aid. For instance, half of Folsom’s (DFG CD) 416 students are Choice students, but Folsom only got $965,000 in Choice Aid for 2013-14, which his much lower than the $10,465 per student average.  However, Folsom gets additional aid for Choice students in the form of regular state aid.


Since state taxpayers save some money by no longer having to give regular state aid to the sending district but there are no offsetting savings from Choice Aid, the net costs to state taxpayers are lower when students enroll in low-resource districts and higher when students enroll in high-resource districts.   

Because of this, there are scenarios where there could be net savings to state taxpayers from Interdistrict Choice.


If a student transfers from a district that gets an extremely high level of state aid, such as Asbury Park ($24,000 a student) or Camden ($19,000 a student), to a district that gets low state aid, there would be net savings to taxpayers even with the Choice Aid payment to the receiving district.  However, this kind of district transfer is not the rule.  Only 15% of Deal's Choice students are from Asbury Park. 

When it does happen there is an academic impact on sending districts to consider as well. 


Interdistrict Choice is at its most expensive for state taxpayers when a student transfers from a low-aid district to another low-aid district.  Since there are few DFG I and J districts that participate in Interdistrict Choice now this kind of transfer will likely become more common as the program expands to higher-resource districts. 

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