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NJSBA Testifies on New School Funding Formula

TRENTON, December 28, 2007— The New Jersey School Boards Association testified Thursday on the state's new school funding formula. In a statement to a Joint Meeting of the Assembly Budget and Education Committees, Michael Vrancik, Director of Governmental Relations for NJSBA, expressed the Association's concerns with the proposal.

Draft legislation to implement the formula, the School Funding Reform Act of 2008, was released late last week and has undergone preliminary analysis by NJSBA staff.

The following is the text of NJSBA's testimony.

Statement on the School Funding Reform Act of 2008

Michael Vrancik, Director of Governmental Relations
New Jersey School Boards Association

Joint Meeting of the Assembly Budget and Education Committees
December 27, 2007

Good evening.

I am Michael Vrancik, director of governmental relations for the New Jersey School Boards Association, a non-partisan federation of the state's local boards of education.

In the limited time available to analyze the 106-page draft bill, the New Jersey School Boards Association has identified several concerns, based on its longstanding policies on school funding. Let me share some of them with you.

• First, we strongly oppose the distribution of special education funding on a wealth-equalized basis, based on longstanding policy adopted by our members. According to a September 2007 study of special education funding, commissioned by NJSBA, poverty is not a significant contributing factor to learning disability. Conversely, learning and physical disabilities know no economic boundaries.

The same study also shows that local school districts currently pay 57 percent of the cost of state- and federally required special education. For many districts, wealth-equalized special education aid means that communities and local property taxpayers will carry a larger share of the special education bill. The situation will create further competition for limited resources between special and general education.

The philosophy behind the governor's funding plan is for education dollars to follow the services that our children need. With the proposed wealth equalization of special education funding, the dollars would not always go where the services are needed. It would be far more consistent with the governor's beliefs for special education aid to be allocated on a per-pupil basis regardless of where the child lives. In no way should spending for these special needs students be compromised to fit the needs of the new school funding formula.

• NJSBA shares the Legislature's concern about New Jersey's over-reliance on property taxes to fund education. We also support the administration’s goal to create a single, constitutional funding formula that could be applied to both Abbott and non-Abbott school districts.

However, the initial aid runs provided by DOE do not make clear that approximately 120 districts must apply almost all of their state aid increases to school tax reduction. The requirement for districts that spend above their local fair share and exceed the per-pupil adequacy amount aid must return increases beyond 2 percent for this purpose could significantly reduce the amount of aid needed to maintain current levels of education programming.

The formula should reflect an amount equal to a more appropriate measure such as the CPI as the cutoff for property tax relief. This will allow districts to keep enough of the increased aid to address normal growth in contractual and operating costs.

We question whether the primary intent of a new school aid formula should be a focus on tax relief rather than class room expenditures.

• NJSBA also urges the governor and Legislature to discontinue the practice of basing a school district's wealth for state aid purposes on both personal income and property wealth. The proposed legislation leaves this structure in place. It ignores the fact that school districts can tax only property, not income. Therefore, property wealth alone is the best indicator of a community's ability to contribute to the funding of its schools. The reliance on per capita income creates inequities in many districts that only serve to exacerbate the property tax burden faced by many homeowners in those communities.

The New Jersey School Boards Association has expressed concern about the lack of time for adequate review of the funding proposal. Information about the individual districts' fair share calculation and their individual per pupil spending as calculated by DOE must be provided to fully understand the aid amounts on a district by district basis. Sections of the draft legislation are not entirely clear, and more time and data are needed to assess their meaning and impact. Let me bring a few of these concerns to your attention:

• First, the bill would give the commissioner of education the authority to adopt and implement regulations to carry out the new funding plan—without the applications of the normal processes contained in the Administrative Procedures Act or any involvement by the State Board of Education.


• Second, the draft bill has conflicting language concerning the cap on school budgets. One section references the 4-percent local levy cap that was instituted earlier this year after the special session on property tax reform. Another refers back to the previous cap that was applied to the entire budget—that is, the greater of 2.5 percent or the rate of inflation—which was established under a 2004 law. Do both caps apply? If so, which one takes precedence?


• The large amount labeled as Adjustment Aid seems to reflect an amount outside the new formula calculations need to keep many districts whole. Some have suggested that these funds reflect per pupil adequacy amounts that are too low. Others have suggested that the Adjustment Aid amount represents a measure of educational spending beyond what the current state and local revenue streams can ultimately afford to spend. NJSBA would agree with the initial provision and strongly disagree with the latter premise.

Regardless, no data has been made available to assess the impact on districts as they approach the dual thresholds of per-pupil adequacy and taxing at a rate that approximates the pre-determined local fair share. Does the adequacy level, established through this bill, create a scenario in which a growing number of school districts will not receive state aid increases or will experience aid reductions?

As many have commented the school funding debate is not new. Nor are many of NJSBA's policies on school finance like those referenced above on special education funding and use of income in local fair share calculations. Although the proposed funding formula is the result of work begun in 2002, the actual language of the draft proposal has only been available for one week. There has not been sufficient time for adequate, educated commentary on an extremely complex piece of legislation.

Nonetheless, we are realists. We recognize that the governor and many legislative leaders want the School Funding Reform Act of 2008 signed, sealed and delivered by early January.

Whether the bill passes in the lame duck session or after the new Legislature convenes on January 8, let me make you aware of one fact: The New Jersey School Boards Association will closely monitor the implementation of the new law. In our eyes the proposed school funding methodology is the beginning of a new chapter in public education financing in which our local board members and you as our elected representatives share key roles. We will make certain that you hear from the boards of education in your districts about changes that may be needed to make our school funding system fair, equitable, sustainable and adequate.

The New Jersey School Boards Association, a federation of district boards of education, advocates the interests of school districts, trains local school board members, and provides resources for the advancement of public education.