Gov. Chris Christie signed New Jersey’s 2017-2018 budget (FY 2018) into law on July 4, ending a three-day shutdown of state government due to the state’s delay in enacting a new appropriations act. The new budget includes $150 million in new school funding, while diverting $31 million in adjustment aid from districts considered to be “overfunded” to those that have been chronically underfunded.

The government shutdown did not result from the proposed appropriations act itself. The parameters of the budget were agreed to by the leadership of the Senate and Assembly on June 26. Instead, the standoff involved a proposal to restructure Horizon Blue Cross Blue Shield, the state’s largest health insurer. The governor made the restructuring a key to his agreement to sign the budget with the increased expenditures, including the additional $150 million in school aid.

Final Changes As enacted, the 2017-2018 state budget reflects the following changes from the governor’s proposed budget announced in February:

  • $131 million in additional aid for districts considered underfunded ($100 million in new funding, plus the reallocation of $31 million in adjustment aid from districts considered over-funded to those considered underfunded).
    • Districts losing funds due to the reallocation of adjustment aid have their losses limited to the lesser of 1) adjustment aid included in the March state aid notices; 2) 20 percent of the amount in excess of uncapped aid; 3) 2 percent of state aid included in the March state aid notices;  or 4) 1.5 percent of FY2017 the district’s general fund budget.
    • Two-thirds of the $131 million will go to districts receiving less than 70 percent of what they should receive under the state formula, with the remaining one-third going to the districts that fall between 70-99 percent of their formula amount.
    • The budget bill approved by the Legislature contained language authorizing the N.J. Department of Education (NJDOE) to provide loans to districts negatively affected by the $31 million reallocation. The governor removed specific references to “loans” and “interest” charged, giving NJDOE greater discretion over repayment of the funds.
    • Last week, the Office of Legislative Services issued a chart comparing each district’s total state aid under the Legislature’s June 26 compromise with the amount under the governor’s original proposal: https://www.njsba.org/wp-content/uploads/2017/06/stateschoolaid-chart.pdf. (The NJDOE Division of School Finance has not yet released a final school aid chart.)
  • $25 million in additional pre-school aid. Through his line-item veto power, the governor removed language limiting these funds to 17 school districts. As a result, the NJDOE will have greater discretion as to which districts will receive such aid.
  • $25 million in additional extraordinary special education aid, to help school districts pay for high-cost out-of-district placements required by a child’s individual education program. In 2016-17, the state reimbursed $170 million of the approximately $306.1 million requested by districts; a rate of 55 percent. This additional revenue will make $195 million available for reimbursement, an amount that should cover 64 percent of the expected reimbursement requests.
  • $13.7 million in additional aid to nonpublic schools for security and technology initiatives.
  • $7 million for lead testing.
  • $3 million for grants to vocational schools to create career and technical education programs.

Also, the appropriations act approved by the Legislature and signed by the governor did not include the governor’s proposed $1 million opportunity scholarship fund.

NJSBA Opposes Cuts The Association supports the increase in aid to underfunded school districts and the additional funding for extraordinary special education costs. However, it opposes the adjustment aid reductions.

“While the proposal also appears to lessen the impact of adjustment aid cuts to districts considered to be ‘over-funded,’ we cannot support a reduction in state aid for any school district, particularly at this stage of the budget cycle,” commented Executive Director Dr. Lawrence S. Feinsod.

Cause of Under-funding Enrollment is a major factor in the state’s current school finance system, the School Funding Reform Act of 2008. The amount of state aid to education has been insufficient to cover the full cost of enrollment growth for many years. Additionally, funding has been disbursed with a requirement that no district receive less aid than allocated in the prior year. The situation is compounded by the fact that, on several occasions dating back to the early 2000s, the state did not run the previous school funding formula. As a result, districts with substantial enrollment increases have never received adjustments in state aid as intended by the school finance system.