New Jersey School Boards Association, 413 West State Street, P.O. Box 909, Trenton, NJ  08605-0909
Telephone: (609) 278-5202  ●  Fax: (609) 695-0413  ●  Web site: www.njsba.org/PI 

FOR IMMEDIATE RELEASE

Survey: New Law’s Unintended Consequences Hurt Schools, Taxpayers

TRENTON, September 28, 2004—A new law that made significant changes in school district business practices—in the name of short-term property tax relief—has already produced higher costs in some communities and forced the postponement of needed facility projects, according to a New Jersey School Boards Association report released today.

In addition, the statute (frequently called by its Senate bill number, “S-1701”) comes with a long list of harmful, unintended consequences for the future, according to the NJSBA report, which focused on a statewide survey of local school district officials. Unintended consequences of S-1701, identified by the survey respondents, include—property-tax hikes by 2006; inadequate supervision of classroom instruction; reduced education programs and staff; downgraded school district bond ratings; and elimination of hazardous-route transportation (for students who would otherwise walk along busy highways or streets without sidewalks).

 “S-1701 presents immediate and future consequences that our lawmakers never envisioned and, which I am certain, they do not want happening to the children and the taxpayers they represent,” said James J. Dougherty, Jr., NJSBA president.

[Click here to view "S-1701: Unintended Consequences"]

Conclusions  One hundred seventy-four (174) local school officials responded to NJSBA’s survey on the impact of S-1701 between July 21 and September 13.   Based on school officials’ responses to the survey questions, NJSBA arrived at the following conclusions:

• Chapter 73, Public Laws of 2004 (“S-1701”) has already disrupted financial operations, facility plans, and programming in a significant number of school districts through the immediate, forced reduction of surplus and the restriction of certain budgetary transfers.

• S-1701 will negatively affect preventive maintenance and will impede districts’ long-range facility and maintenance plans.

• The new law conflicts with previous and current statute and policies/procedures of the state Department of Education and the New Jersey Schools Construction Corporation.

• S-1701 will be detrimental to instruction and co-curricular activities.

• By reducing flexibility in school financial operations, S-1701 will make it increasingly difficult for school districts to contend with sharp increases in fixed costs—such as health coverage, utilities and insurance—over which they have no control.  The result will be cuts to academic programs, services and facility maintenance.

• S-1701 will seriously disrupt school district business operations and support services due to the severely restricted spending growth limitation adjustment (SGLA) for hazardous route transportation, the requirement for state approval of certain budget transfers, limits on administrative spending, and forced reduction of surplus.

“Considering the cost of S-1701 in terms of dollars and education, NJSBA is seeking its repeal,” Dougherty continued.  Legislation, A-3231, has been introduced by Assemblyman Bill Baroni (Mercer/Middlesex), to repeal the law.

“We don’t think our lawmakers want local school boards to choose between music programs and student safety,” said Dougherty.  “But that’s the type of predicament they will face next year if they now provide hazardous-route busing to safeguard their students.

“We don’t think the Legislature wants school boards looking in the face of deficits because they have emergency building repairs or unexpected out-of-district special education placements. But that’s what will happen because districts were forced to reduce surplus to perilously low levels.

“We don’t think our representatives in Trenton intended higher property tax bills in the future because of the one-time use of surplus for property tax relief or because districts had to defer preventive maintenance.  But that will be another result of S-1701.”

Survey results  NJSBA’s survey presented school officials with open-ended questions concerning the effect of various provisions of the law, as well as queries in which they identified its degree of impact on various school district operations.  Responses are summarized below:

Instruction and student programs:  Approximately 94% of respondents predict that S-1701 will have a “serious impact” or a “moderate-to-serious” on retaining academic programs.

Maintenance/repairs: Nearly 94% of school officials said the new law will have a serious or moderate-to-serious impact on their districts’ maintenance and long-term facility plans.

Business/non-instructional services: Over 96% (163) of local school officials said that S-1701 would have a serious or moderate-to-serious impact on business and non-instructional operations.  Respondents cited—reductions in hazardous-route busing; additional time and resources expended on state approval of budget transfers; delayed payment to vendors due to surplus reduction and restrictions on transfers; and postponement of routine maintenance activities due to administrative spending limits and budgetary transfers.

S-1701 was part of a legislative package that included the millionaires’ tax and the creation of a Constitutional Convention.  Its proponents billed it as a way to provide short-term property tax relief until the convention produced long-term reform. Major provisions of S-1701 include—

• Surplus reduction—S-1701 requires school districts to reduce surplus to 3% in previously approved 2004-05 budgets and to 2% in 2005-06 and to appropriate the money for municipal property tax relief.

• Hazardous-route transportation—The new law severely reduces the budget cap adjustment previously granted to school districts for the cost of busing students across busy highways or along streets without sidewalks. The change may force some districts to eliminate hazardous-route busing, a service that safeguards children, according to the NJSBA survey.

• Voter/community control—The law restricts the use of second-ballot questions through which voters could authorize expenditures of local funds for specific programs or services.  It also requires the state government to approve many school district budget transfers that, previously, have been handled by local school boards. 

• Administrative spending limits—S-1701 imposes administrative spending limits, even though the state’s own data shows that there are fewer administrators in New Jersey schools now than in 1989-90.  (In contrast, the number of teachers has increased by 30% during the same period, according to the state Department of Education.)

NJSBA’s report, hS-1701: Unintended Consequences includes more than 190 excerpts of written comments provided by local school officials to open-ended questions about the impact of the new law.  The excerpts highlight the problem facing school districts, according to Dougherty.

“A $30-million school expansion and renovation project is in danger because the new law will not allow the board to use capital reserve funds earmarked for the program—even though the financial arrangement was approved by the New Jersey Schools Construction Corporation.” (Hunterdon Central Regional)

“Because courtesy [hazardous-route] transportation will now fall within the budget cap, we will need to reduce the budget by $5 million to $6 million.  …we will be forced to cut transportation or programs and will have no way of giving the taxpayers a voice in keeping these programs or services.” (Cherry Hill)

“The Moody Bond Rating company has already told us that our fund balance (surplus) was low enough, and that our good credit rating would be in jeopardy if it got any lower… Now we are going to be FORCED to lower it!  [Surplus funds were] put aside for good reason—to be used for emergencies.” (Warren Township, Somerset County) 

“The perspective of local school officials will help legislators and other state leader put a face on the negative impact of this law,” explained Dougherty.  “We hope it will enable them to see S-1701’s unintended consequences on the school districts they represent.”