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

UPDATE: 

S1701 Signed Into Law; NJSBA Provides Analysis

TRENTON, July 7, 2004—On July 1, Governor McGreevey signed into law S1701 (the substitute for A99). The legislation, a companion bill to the new millionaires’ tax (the “Fair” tax plan), will change local school district financial operations—but not for the better, according to the New Jersey School Boards Association.

[Click here for NJSBA's analysis of the legislation’s provisions.] 

S-1701 will require school districts to spend down surplus to imprudent levels, force choices between hazardous-route transportation and other important programs, and infringe on voters’ ability to authorize locally funded education initiatives, according to James J. Dougherty, Jr., NJSBA president. In addition, some districts will be forced to change their tax levies this year, even if voters already approved the district's budget in April.

“Ironically, the bill is cloaked as property tax relief but, in reality, could lead to increases in local tax rates in the not-too-distant future,” said Dougherty.   

NJDOE issues memo regarding reduced surplus  Dougherty noted that the legislation requires school districts to reduce their budget surplus below 3%, even though voters had approved budgets with “more realistic” surplus amounts in April. According to a recent memo from the New Jersey Department of Education to school districts, the provision takes place immediately and forces some districts to change tax levies this year.

[Click here for a New Jersey Department of Education memo to school districts regarding budget surplus reductions and tax-levy changes]  

The Department of Education is convening a statewide meeting July 8 with county school business administrators and county superintendents, who will then provide guidance to local school officials on implementing the provisions of S1701.

Dougherty noted that reducing surplus to below 3% could negatively affect a school district’s bond rating and increase costs. 

“School districts set aside surplus to enable them to meet unanticipated costs,” said Dougherty, citing examples such as required special education placements or surges in energy costs.  “Without adequate surplus, cutting education programs may be local school boards’ only option to meet these emergencies. 

Property tax relief  Reducing surplus below 3% this year will not resolve New Jersey's property tax problem, according to Dougherty.   

"There is a far more effective way to control property taxes: that is, full funding of the state's school finance laws, including the statute requiring a higher level of state support for state- and federally required, high-cost special education placements.  Unfortunately, the Fair tax plan did not come with full funding of the state's school aid formulas; they have been short-funded for three years in a row." 

More restrictive cap  Another provision of S1701 reduces the size of the state-imposed limit on school district spending growth, or budget cap, from the greater of 3% or the inflation rate, to the greater of 2.5% or the inflation rate. 

“NJSBA will collect data from school districts to assess the impact of this change on school programming,” said the NJSBA president.  “We also need to assess its impact on school district negotiations.” One hundred ninety-five school districts are negotiating labor contracts that begin with the 2004-05 school year, according to NJSBA.  A large number remain unsettled. 

Transportation safety  S1701 will make it more difficult for a school district to provide transportation to students who would otherwise cross busy roadways or walk along streets without sidewalks.  Such “hazardous route busing” is not state subsidized. And the state, up to now, has allowed adjustments to school district budget caps for the full cost of providing such busing. 

“S1701, however, places more of the cost of hazardous-route busing costs under the budget cap,” said Dougherty. “With the increasing cost of fuel and the limited cap adjustment, school districts will have a much more difficult time providing hazardous route transportation.” 

Loss of community decision-making  Several provisions of S1701 will lessen a community’s ability to determine school finance matters and related educational policy, according to Dougherty. 

Currently, the voters of a community have the right to approve or reject proposed expenditures above a school district budget cap.  These proposals are presented as separate ballot questions that cite specific education programs or projects to be funded. 

“These proposals involve local funds only,” noted Dougherty.  “The community determines if it is willing and able to raise the money to fund the expenditure over cap for programs ranging from full-day Kindergarten and after-school enrichment programs to extra-curricular activities.  The legislation, however, restricts a community’s ability to act on these separate ballot questions.” 

In addition, the legislation requires state government approval of many routine school district budgeting functions, such as line-item transfers, according to NJSBA.  “Such a restriction infringes on a local school board’s ability to respond quickly to the financial needs of its schools,” said Dougherty. 

Administrative spending   The legislation’s administrative spending limits also infringe on local school boards’ ability to make education staffing decisions based on state and local academic goals.  Moreover, they are not needed, according to NJSBA.

“The administrative spending limits address a problem that does not exist,” Dougherty continued.  “We’ve yet to see statistics that points to uncontrolled administrative spending in New Jersey’s public schools.  In fact, available data shows virtually no growth in the number of school administrators.”

• New Jersey State Department of Education statistics show that school districts have placed additional resources in the classroom, not in the front office, NJSBA officials pointed out.  From 1989-90 to 2002-03, New Jersey student enrollment increased by 27.1%, and the number of classroom teachers grew by 28.2%.  Yet, the number of school administrators increased by only 0.1% during the same period.
• The percentage of school spending that goes toward administration in New Jersey declined sharply between 1992-93 and 2000-01, according to the latest available statistics from the U.S. Department of Education.  During this period, New Jersey’s ranking among the states in administration spending fell from 3rd to 21^st.

“School district staffing should be determined by local and state academic goals, such as New Jersey’s Core Curriculum Content Standards—not through an arbitrary, state-imposed limit,” Dougherty said.

g:/PI/www/2004/S1701-Update