Government

Guest Column

Guest Column: New Jersey Must Redistribute State Aid

For the last year the most acrimonious fight in Trenton hasn’t been between the two parties or between the Legislature and Gov. Chris Christie, but between Senate President Steve Sweeney and Assembly Speaker Vincent Prieto, as Sweeney attempts to bring fairness to the allocation of school aid by redistributing state aid from districts that currently receive more money than the law say they need to districts that currently receive less.

What Sweeney is trying to do is eliminate the "Hold Harmless" provision in the School Funding Reform Act of 2008 — officially New Jersey’s school aid law — that prevents a district from losing state aid even as its tax base grows or enrollment shrinks.

The politicized provision that Sweeney is trying to eliminate is called Adjustment Aid and effectively disallows a district from ever losing state aid. The existence of Adjustment Aid means that if a district was getting $30 million before SFRA became law, but only needs $20 million, it still gets $30 million.

Sign Up for E-News

Due to Adjustment Aid and the state’s inability to put new money into SFRA, New Jersey’s state aid distribution has become even more unfair than it was prior to SFRA's passage. Make no mistake, New Jersey's school funding distribution is a system of haves and haven-nots.  For 2017-18 New Jersey will have 369 districts who are underfunded for a cumulative deficit of $2.1 billion, with some the most extreme deficits exceeding $10,000 per student.  West Orange is one of those underfunded districts, with a deficit of $18 million, or $2700 per student.

On the other side are 222 districts are overfunded for a cumulative surplus of $696 million, some of whom have surpluses exceeding $10,000 per student.  

Opposed to Steve Sweeney are the Education Law Center and the NJEA, who oppose redistribution. Vincent Prieto have not  ruled out any cuts  to Adjustment Aid, but more often he has said that New Jersey should just “fund the formula,” and let fairness come from large targeted increases in spending, and not spending the existing money more efficiently and fairly. But without redistributing aid, there is no way SFRA can be fully funded barring a miraculous turnaround in New Jersey’s economy.

The “just fund the formula” argument ignores history. Since 1976, New Jersey has almost never fully funded its aid formula. Even Tom Kean, who governed during the economically spectacular 1980s, underfunded his era’s aid law by a cumulative $950 million. Now, full funding is even more difficult, due to New Jersey’s slow economic growth, debt burden and the huge funding ambition of SFRA.

Kean presided over 9 percent annual revenue growth. Today, New Jersey’s revenue growth is 2-4% a year. Under Kean, New Jersey had a AAA credit rating and a fully funded pension system. Today New Jersey’s credit rating is the second worst in the country and our debt, pension, and post-retiree health care debts are $130 billion.

Even though state revenue increases by $1 billion per year from inflation and economic growth, increases in the pension, health care and debt service obligations consume all new revenue. Even before the Transportation Trust Fund tax cuts blew a billion-dollar hole in the state budget, we were in chronic fiscal crisis.

The "Just Fund the Formula" side also ignores what the funding deficit actually is, saying that it is only $1 billion and not the real $2.1 billion deficit.  The basis for this $1 billion claim is that SFRA contains Caps that limit a district's aid growth at 10% or 20% of what a district got in the past.  This means that even if SFRA's aid formulas say that a district needs $50 million, but it currently gets $20 million, the most aid a district can gain is 20%, or $4 million.  These Growth Limits force SFRA to disregard its own calculation of what a district needs and arbitrarily cap aid growth.  

Whatever the funding deficit should be reckoned at now, New Jersey's fiscal situation is going to get worse.  Much, much, much worse.

Currently New Jersey’s pension funds pay out $10.8 billion a year.  The state and localities put in $3 billion for FY2017 and active employees put in $2 billion.  

In a properly managed and funded pension plan, the gap between contributions and payouts would be made up by investment earnings.  Although the State claims $71 billion in assets, our investment earnings do not even come close to making up the deficit in contributions from the state and active employees.  

Thus, several the state’s pension funds will zero-out in the 2020s.  The Judges’ fund will zero-out first, in 2021, then State-PERS in 2024, and finally, the biggest of all, the Teachers Pension and Annuity Fund (TPAF) will zero-out in 2027.

Although it is difficult to forecast investment returns a few years into the future, once any fund has zero assets, its investment returns can be calculated precisely: $0.

Once the funds zero-out, the state and active employees will have to fund on a pay-as-you-go basis for pension outlays, which by then will be much higher than $10.8 billion.

So New Jersey is in fiscal crisis now, but that word is insufficient for what awaits in the 2020s, which is CATASTROPHE. 

Although New Jersey can (and must) increase taxes, even the so-called Millionaire’s Tax (to 10.75%) that the Democrats have repeatedly passed, would only bring in another $615 million per year. Other revenue enhancements, like closing corporate tax loopholes (ie, implement Combined Reporting) and legalizing and taxing marijuana, might bring a few hundred million more.

New Jersey can reform its system of corporate tax incentives too, but the amount of money New Jersey would gain is likely small.  First, the actual costs of these incentives is misunderstood, since there gap between what is approved and what the Treasury actually pays out.  For 2016, the State approved $1.6 billion in incentives, but the payout was $347 million.  Second, these tax incentives facilitate many worthy developments in NJ's struggling cities, from Paterson to Atlantic City.  Third, not every business that says it won't operate in New Jersey without a tax break is bluffing.  Some would leave New Jersey or not come here in the first place, thereby entirely depriving New Jersey of tax revenue.  

So, what the “just fund the formula” side doesn’t admit is that to fully fund just the K-12 portion of SFRA without redistribution would require either that New Jersey create the highest top-bracket in the United States or increase income taxes for middle-class taxpayers.

And even if New Jersey figured out a way to raise revenue by $2.1 billion to fully fund SFRA (without redistribution), we have many other obligations other than K-12 education too, such as higher education and maintaining the social safety net, so putting all that new tax money into education is not realistic.

The School Funding Reform Act was billed as a reform of the Abbott system, which was a State Supreme Court requirement that the state fund the 31 Abbott districts at the highest spending levels in the country. Jon Corzine’s School Funding Reform Act was a worthy bill, but it was not so much a “reform” of Abbott as an expansion of it to previously neglected poor and working-class non-Abbotts.

The architects of SFRA spent years working out the intricacies of funding targets and acceptable local taxes, but they forgot one simple thing: where the state should get the new money for schools in the first place.  

Fully funding SFRA is not realistic under any likely scenario, but with redistribution, fair funding for hundreds of thousands of children at least is within reach.  

Jeffrey Bennett is a former member of the South Orange-.Maplewood Board of Education. He writes a blog on New Jersey education aid.

The opinions expressed herein are the writer's alone, and do not reflect the opinions of TAPinto.net or anyone who works for TAPinto.net. TAPinto.net is not responsible for the accuracy of any of the information supplied by the writer. Click here to submit a Guest Column.

TAP Into Another Town's News:

You May Also Be Interested In

Sign Up for E-News

West Orange

Evolve Cycle And Fitness Presale Happening Now!

May 18, 2018

CALDWELL, NJ - Evolve Cycle and Fitness is now offering 10 classes for only $90. That’s only $9 a class when you purchase before its official Grand Opening on Friday, June 1, 2018. 

Only two weeks left to take advantage of this limited time offer! Call Martha at 973-979-5919 or click here to sign up.

Evolve Cycle and Fitness is a Premier Fitness Boutique ...

Save Up To 20% at CNP Treasures

WEST ORANGE, NJ — Are you still looking for the perfect gift for your mom or that special someone in your life for Mother's Day? Then CNP Treasures has you covered! Save up to 20% at CNP Treasures located at 14 Northfield Ave in West Orange.

Come by this weekend so we can help you find the perfect gift! Offer expires Sunday, May ...

Montclair HS Student Reported Sexual Assault in All-Gender Bathroom, Officials Say

May 17, 2018

MONTCLAIR, NJ - According to published reports on Wednesday, Montclair Police officials are investigating allegations of sexual assault reported to have occurred in a bathroom at Montclair High School.

Montclair police officials state that officers received a report about an incident at the high school of a sexual nature that occurred around 3:18 p.m. on Monday. The ...

Upcoming Events

Wed, May 23, 7:00 PM

Livingston Community Center (lower level), Livingston

NJ-11 Congressional Candidates Debate, hosted by ...

Education Government Law & Justice

Carousel_image_ca99dbbe4665a685b474_screen_shot_2018-05-22_at_9.15.03_pm

Mon, May 28, 10:00 AM

Township Hall, West Orange

2018 Memorial Day Observance

Community Calendar

Carousel_image_3dd755d9dc476b5f4dc3_unnamed__4_

Mon, May 28, 8:00 PM

West Orange High School, West Orange

Board of Education Meeting

Community Calendar Education

Clarifying Points Made in Article About WOHS Air Quality Issues

May 14, 2018

Dear Editor, 

I am the advisor to West Orange High School's student newspaper, The Pioneer. My Editor-in-Chief, Anna Favetta, is the student who researched the topic and wrote the article bringing this issue to light. She worked on the article for 4 months before she had adequate and proper information for it to go to print. 

An article on the BOE presentation of the ...

What It Means to Me - A Baseball Story

We are all in amazement of the dedication and talent of our young West Orange athletes. One of the goals of our youth sports programs is to develop our players so they are ready for high school and are prepared for success at that next level of play. Throughout the course of the year we will be featuring some of our talented young athletes and coaches. This week we have the perspective of ...

West Orange On Three!

The spring season is in full swing, and we are excited to debut this new column focusing on all things youth sports!  We thought we would kick things off with an overview of the programs West Orange has to offer, and then go behind the scenes to see what makes youth sports tick.

West Orange Police Athletic League (PAL) and Mountain Top League (MTL), together with the West Orange ...

Summer 2018 Events at the West Orange Public Library

May 15, 2018

WEST ORANGE, NJ — Beginning in June, the West Orange Public Library will offer the following events for area residents of all ages:

Dinosaurs’ Rock!                                             

Monday, June 11, 4:00 p.m.

Field Station Dinosaur visits with the ...

10-Year-Old Cancer Patient Receives Donation from Randolph Hockey Family

May 21, 2018

RANDOLPH, NJ — While the inter-town hockey battles on the ice between Randolph and Roxbury are fierce at every age level, when it comes to real-life battles off the ice, there is no hesitation to offer help to their neighbor.

Such is the case with a recent gesture of unity and support from the members of the Randolph varsity hockey team, when they came together to ...

A Royal Pain

I went to a big wedding over the weekend.  It was in England.

I like to think I was invited, but according to the Royal Guards and the Thames Valley Police I was not.  But more about that later.

You see, not too long ago I received an evite addressed to me from H&M@royalwedbot.co.uk.  Curiously, it was in my spam folder with a warning message. For an evite it was pretty ...

'Turning Off the Morning News' brings comic twist

‘Turning Off the Morning News’ tackles today’s issues with a comic twist

By Liz Keill

PRINCETON, N J – Despite the late night comics, no one quite captures the insanity of the political/social status world like Christopher Durang.

His latest play, “Turning off the Morning News” hit the ground running.  John Pankow as Jimmy addresses the audience, ...

'To Kill a Mockingbird' Sustains Timeless Appeal

SUMMIT, NJ – The Summit Playhouse provides a stellar production of a much loved classic, “To Kill a Mockingbird.”

The Harper Lee novel, later a Gregory Peck film and now a stage production, retains all the warmth, intensity and integrity that made it such an appealing hit in the 1960s. And there will be a new production on Broadway in December with a script by Aaron Sorkin ...