Bill to Fix Inequity in NJ School Funding Formula Goes to Governor

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TRENTON, NJ – Legislation sponsored by Assembly Speaker Craig Coughlin and Assembly Majority Leader Lou Greenwald to modify the school funding formula so schools receive fair and adequate funding that meets their needs received final legislative approval last week and now heads to Gov. Phil Murphy for his consideration.

The current school funding has drawn its share of criticism from lawmakers on both sides of the aisie.

Former Republican Assemblyman Jack Ciatarelli, a resident of Hillsborough, made school funding reform a major thrust of his unsuccessful campaign for governor in the Republican Primary last year.

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"Basing funding on the formula without taking into account enrollment shifts has made it really difficult for some districts to adequately provide for their students,” said Coughlin (D-Middlesex). “This will help address the inequities that have plagued our schools for too long and unfairly benefited some schools districts over others, and allow districts to properly meet the educational needs of their students.”

"Over the past year we've met with parents, faculty, and principals from districts across the state that have been underfunded and underserved by the current formula. Our students are being short-changed, and we must restore the balance in our funding formula to ensure the next generation of New Jerseyans receive the high-quality education they deserve," said Greenwald (D-Camden/Burlington).

Furthering the Assembly’s investment in education, the sponsors noted that the Assembly budget, which was also approved last week  by the Assembly Budget Committee, provides an additional $344 million in direct school aid to last year’s $8.1 billion school funding allocation.

The “School Funding Reform Act of 2008” (SFRA) was enacted with the purpose of determining the amount of state school aid each school district would receive based on the needs of the student population and local fiscal capacity. However, the SFRA has not been fully implemented since the 2008-2009 school year, resulting in school districts receiving levels of state school aid inconsistent with their current circumstances.

The bill would amend and supplement the SFRA to provide a mechanism for allocating state school aid from the 2019-2020 through 2024-2025 school years. Under the bill, a state aid differential would be calculated for each school district as the amount of state aid that the district received in the prior school year, not including educational adequacy aid and school choice aid, minus the sum of equalization aid, special education categorical aid, security categorical aid, and transportation aid as calculated under the SFRA prior to applying the state aid growth limit. 

In the case of a school district in which the state aid differential is positive, the differential would be reduced by a certain percentage each school year: 13 percent in the 2019-2020 school year; 23 percent in the 2020-2021 school year; 37 percent in the 2021-2022 school year; 55 percent in the 2022-2023 school year; 76 percent in the 2023-2024 school year; and 100 percent in the 2024-2025 school year.

Three groups of school districts would be exempt from these reductions: 1) county vocational school districts; 2) SDA (former Abbott) districts that spend below adequacy and are located in a municipality in which the equalized total tax rate exceeds the State average; and 3) non-SDA districts that spend below adequacy by at least 10 percent and are located in municipality in which the equalized total tax rate exceeds the State average by more than 10 percent. 

Additionally, in the case of an SDA district that spends above adequacy and is located in a municipality in which the equalized total tax rate exceeds the state average, the total state aid reduction would be limited to the amount by which the district is spending above adequacy multiplied by the percentage for the corresponding school year.

School districts in which the state aid differential is negative would receive an increase in state aid.  Specifically, each district would receive a proportionate share of the sum of the total state aid reduction from districts that have a positive state aid differential and any additional revenue included in the annual appropriations act for the purpose of providing direct state aid to school districts.

The bill would also require that, for school years 2019-2020 through 2024-2025, a school district that is spending below adequacy and experiences a reduction in state school aid must increase its general fund tax levy by two percent over the prior school year. It would also allow an SDA district that is taxing below its local share to increase its tax levy in an amount greater than the tax levy growth limitation.

The bill was approved 54-17-4 by the Assembly and 25-13 by the Senate.

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