ANOTHER BIG CAMPAIGN ISSUE: A NEWSCHOOL FUNDING FORMULA

By David Rebovich - July 5, 2007 - 9:26am

By November "asset monetization" is likely to be in every New Jerseyans' vocabulary.  Governor Jon Corzine sees the practice as a way to rescue state government from its fiscal problems.  But most folks are skeptical, and Republican candidates in this fall's midterms want to tap into that sentiment and warn voters that Democrats may pass an unpopular plan in the lame duck session.  However, no matter what happens with asset monetization, there's another big issue that lawmakers may also not deal with until addressing until after the election, and citizens should be concerned about this as well. That issue is a new school funding formula.

Yes, last year's special session of the legislature on property tax reform was supposed to come up with a new school funding formula.  It didn't but did do a solid study that resulted in a list of principles to help guide the entire legislature and the governor in developing a new formula. Even with this guide, lawmakers will still have to address several difficult questions. What precisely constitutes a "thorough and efficient system of education?"  How much should local taxpayers contribute to their school system? Do all the districts currently labeled "distressed" deserve the enormous amount of state aid they receive? And, if a new school funding formula calls for the state to provide more aid to certain districts, from where will that money come?

No wonder this issue may not be tackled during the campaign season. Nonetheless, there are big pressures for creating a new school funding formula. The most obvious one is the ever increasing property tax rates in suburban areas which, despite the new cap, will continue to rise.  Especially hard hit are those districts experiencing increases in overall enrollment and in special needs students.  The latter are defined as children from low income families, for whom English is a second language, or who have a developmental disability.

A second reason has to do with concerns about the Abbott school districts. Given improvements in local economies and increases in ratables in some districts, should they still be considered distressed and eligible to have most of their education costs picked up by the state? Are the billions of dollars in state aid sent to the Abbott districts spent effectively?  Or, are there administrative inefficiencies and patronage jobs that can be cut?  Do the improvements in educational performance, which are typically small, justify the huge amount of money spend per pupil in the Abbott districts?  And, would residents of these districts feel more invested in their schools, and make those schools more accountable, if they paid a bit more towards them?

Then there is the equity question that has significant financial and political ramifications. In the absence of a clear definition of what a "thorough and efficient system of education" is,  the state supreme court ruled that distressed school districts should receive state aid so that they can spend as much money per pupil as the average of the state's one-hundred wealthiest districts. If this is the definition of every New Jersey school child's constitutional right, why don't the hundreds of other non-Abbott, non-wealthy school districts receive enough aid so that they can spend as much per pupil as their wealthy and distressed counterparts?  That's a question that educators, parents of school kids, and property taxpayers throughout the state want answered.

In the meantime, this spring education advocates pressured the governor and the legislature to provide more of what's called extraordinary aid for special education. They had hoped the state would be able to pick up all, or at least eighty percent, of the costs above $40,000 for any special education student regardless of where the child resides. Local school officials also wished that state government decided how to provide funding for new school construction and refurbishment.  The court has mandated state support for these projects in Abbott districts, but helping non-Abbott districts is at the discretion of lawmakers. While there will be political pressure to help the non-Abbott districts, the state's fiscal condition may prevent it from doing so.

What the legislature and the governor did do in the new budget was increase state aid to non-Abbott school districts by three percent. This is the first time in five years that those districts have received more state aid.  The new budget also includes a hike in direct aid for increases in enrollments and targeted assistance for at risk students, both of which have created financial pressures on many non-Abbott districts. In addition, the state is providing more funds for full-day kindergarten and for pre-school programs. 
According to the Joint Legislative Committee on Public School Funding Reform, a new school funding formula should address these issues and more. The committee's final report recommended that a new formula be based on the characteristics of the student population of a district as well as the district's ability to pay. This would mean that state aid would "follow the children" and not be based on geography alone. In addition, the committee wants public-funded pre-school programs for all children who qualify, whether they live in Abbott districts or not, and all-day kindergarten in all districts.

What also needs to be resolved is the cost of a thorough and efficient system of education. The committee suggests relying on "professional judgment panels," a standard practice nationally, to determine the resources needed to achieve educational standards. Any such calculation, however, should also take into account the added costs of educating students deemed at risk, with special needs, and with limited proficiency in English.

What taxpayers will want to know, of course, is who will foot the bill for a new school funding formula..  Well, the joint committee recommended that school districts look seriously at sharing and regionalizing services, adopt best practices in administration and program delivery, find ways to reduce school transportation costs, and cut unnecessary state mandates. Yes,  616 school districts are too many for state the size of New Jersey, but the committee did not decide how many school districts the state should have.  However, it did state that the Abbott districts should be reviewed and consideration given to making residents in those districts pay more toward their schools.

Along with stricter caps on local property tax increases, some of these recommendations are already being considered by school officials. But without requiring districts - Abbott, suburban or rural - to pursue savings measures, education costs will continue to rise. And, if the state plans to help districts implement the goals and programs above, the cost will likely be a billion dollars or more a year.  From where will that kind of money come?

Some Republican legislators have argued that hundreds of millions of dollars of wasteful and ineffective spending can be found in the high priced, low achieving Abbott school districts.  However, the joint committee proposed a "hold harmless" clause in the new school funding formula, meaning that no district should lose state aid because of the disruption that cuts would likely cause.  That may be a politically popular view in the Abbott and high aid school districts but will make funding a new school funding formula more difficult.

Governor Corzine has already said that he will not support an increase in the state income tax because of the negative effect that would have on the state's climate for business.  What then?  Did anyone say "asset monetization?"  After all, the Governor argues that borrowing billions of dollars against the toll roads will enable the state to pay down its debt, thereby freeing up funds for necessary and good programs and policies. Perhaps the advocates of "asset monetization" will try to sell an otherwise unpopular plan with the promise that it will enable state government to provide more aid to schools.  

David P. Rebovich, Ph.D., is Managing Director of the Rider University Institute for New Jersey Politics (www.rider.edu/institute).  He also writes a regular column, "On Politics," for NEW JERSEY LAWYER and monthly reports on New Jersey for CAMPAIGNS AND ELECTIONS Magazine.