NJSBA Analysis of Governor Corzine’s
FY 2006-07 Budget Proposal
Governor
Corzine has released his proposal for the state budget for Fiscal Year
2006-2007. The $30.9 billion proposal includes $2.5 billion in cuts and a 1%
increase in the sales tax, as the means to balance the state budget facing a
$4.8 billion deficit. Thanks to NJSBA’s advocacy efforts this year, the
Governor’s budget proposal provides a $1 billion increase in total school aid,
however only 10% of that amount is considered direct school aid, resulting in
flat-funding for most districts for the fifth year in a row. NJSBA advocacy
efforts also succeeded in securing funding in the proposal for school
construction aid. Additional advocacy on behalf of NJSBA members will be needed
in the coming months to see other cost-savings and common-sense changes to the
final budget.
REVENUE
As
mentioned above, this year’s State budget proposal contains a 1% increase in
the sales tax, which would generate an estimated additional $1 billion,
representing a greater share of total state revenue than last year. It also
includes income tax relief for lower income working citizens, reducing the
percentage of total state revenue from income tax by 2 percent. The budget proposal
does not include restoration of rebate cuts made in the FY 2005-06 budget, and would
fund only 70% of the current pension obligation. Additionally, the governor
proposes to cut over 1,000 funded employee positions throughout state
government. In total, state revenue from the various taxes collected are
projected at $30.6 billion. If projected fund balances are added, that total
amount rises to $31.4 billion.
EXPENDITURES
Governor Corzine’s proposed
expenditures amount to $30.9 billion in this year’s budget. Of that total
amount, what is considered school funding represents nearly one-third. As
mentioned above, the Governor’s budget proposal provides a $1 billion increase
in total school aid, 10% of which is allocated for formula aid, above average
enrollment growth and Abbott preschools[1] ($103.6
million). The proposal also calls for aid for school construction including
debt service aid ($113 million). Almost 80 percent of the increase ($823.2
million), however, is allocated for the teachers’ pension fund (TPAF), post
retirement medical benefits, debt service on pension obligation bonds and FICA
payments to districts. For most districts throughout the State, this means
flat-funding for the fifth year in a row, according to State aid figures
released by the NJ Department of Education, though some districts would receive
modest increases or decreases based on changes in enrollment.
Other major state departments
competing for dollars include: Human Services ($5.2 billion), Higher Education
($2.0 billion), Health and Senior Services ($1.6 billion), Transportation ($1.2
billion), Law and Public Safety ($581 million), and Environmental Protection
($347 million).
One of the biggest surprise
areas in the State budget proposal is the amount of funding for property tax
relief, estimated at approximately 44 percent of the total expenditures this
year. The imposition of the gross income tax required its exclusive use for
property tax relief. State funded programs earmarked for property tax relief
generally fall in four categories: School Aid, Municipal Aid, Other Local
Government Aid and Direct Taxpayer Relief, encompassing the homestead rebates
and NJ SAVER programs. These programs are
projected to cost in excess of $13.6 billion in the FY 2006-07 budget proposal.
That means that nearly $1.3 billion from revenues other than the Property Tax
Relief Fund (PTRF) are also dedicated to property tax relief.
The Regional Efficiency Aid
Program (REAP) has been eliminated in the Governor’s budget proposal.
Continuation funding has been provided for Regional Efficiency Development
Incentive (REDI), but the funding for REDI will be utilized to support the
Sharing Available Resources Efficiently (SHARE) program.
BUDGET LANGUAGE PROVISIONS
Last year’s Appropriations Act
included a provision giving the Commissioner of Education review authority over
board member travel. This language remains in place in the Governor’s budget proposal,
however, no additional language provisions were added. It is possible that the
Legislature’s version of the budget could contain language provisions limiting
the power currently vested in school boards.
NJSBA ADVOCACY EFFORTS
NJSBA calls on the NJ
Legislature to maintain current levels of State education funding and not
approve any decreases in the FY 2006-07 State budget. The dramatic impact that
State aid for public schools has on local property tax rates must be
communicated to legislators, because the single largest factor limiting further
growth in local tax rates is level funding for public education. NJSBA is still
reviewing the Governor’s proposal to cut Abbott spending and will communicate
any needed action shortly.
NJSBA is also advocating this
year for legislative reform of the State Health Benefits Plan (SHBP) so that
participating school districts can negotiate cost-containment provisions
commonly found in the private sector. Unlike private insurance carriers, the
SHBP does not permit local school boards to implement cost control through
negotiations. Local boards cannot negotiate employee contributions, different
levels of coverage for various groups of employees, the amounts of deductibles
and co-payments, or offer incentives to waive duplicate coverage. Furthermore,
the NJSBA opposes any attempt to mandate membership by school boards in the
SHBP.
NJSBA
is also seeking legislative commitments to implement the recommendations put
forward by the Education Mandate Review Study Commission. These
recommendations, made by the commission over two years ago have never been
addressed. Nonetheless they provide
concrete examples where districts could provide relief in the form of shared
services, streamlined district operations and improved service delivery.
Special
education costs also need to be continually reviewed to determine instances
where districts can more efficiently deliver necessary services. The Governor’s
proposed budget for fiscal 2006-07 includes $19.5 million to expand in-district
special education programs[2]. Pupil transportation aid, approximately $310
million, should be thoroughly analyzed to verify that the appropriate
allocations are being made to each school district based on the most recent
enrollment data. Even if each district is only receiving a proportional
allocation now, it should be an equitable one.
Lastly, given the timing of
the budget deliberations and the actual passage of an appropriations bill well
after school budgets are voted on, NJSBA is advocating that any increase in
property tax relief be tied to local school revenue efforts.
For additional information on the State budget or
NJSBA’s position and efforts for school aid, please contact the NJSBA
Governmental Relations Department at 1-888-88NJSBA, ext. 5215.