I will be writing about this issue as it unfolds, it’s a big topic that taxpayers should understand.
This is a quick primer on why the Sweeney-Prieto proposal to cut $8.5 million in state aid from Jersey City Public Schools would, to use Superintendent Dr. Lyles term, cause a “major hardship” for the district. The proposed cuts are for state’s coming fiscal year (July 1, 2017 – June 30, 2018).
The Jersey City Public Schools budget is north of $650 million…it’s a huge nut of cash that is paid for by a combination of state, local, and federal funding. In the last 5 years, JCPS has remained steadily funded 75% by the state and only 17% funded by local taxpayers. The significance of this: despite Jersey City’s growth as a city over the last 5 years, we are no more independent as a city to fund our own school system then we were in 2012. We still, in 2017, only fund 17% of our schools budget.
In the budget approved for 2017/18, the state portion of the budgeted revenues is $494 million – this includes the entire bucket of aid, including adjustment aid, equalization aid, and grants for preK funding. The local portion of the budgeted revenues is much smaller – only $117 million.
There is a consequence to the local taxpayers’s small stake in the school funding pie: because the local budgeted revenues is so small as compared to the state budgeted revenues, the slightest shifts in state funding can cause a disproportionately large impact if it is lowered. Here’s why:
- The local school tax levy is $117 million for the coming 2017/18 school year – this represents a 2% increase over the prior 2016/17 school year.
- An $8.5 million state aid cut would require a 7% hike above and beyond the $117 million approved budget.
- JCPS is restricted from raising the school tax more than 2%…if it wants to raise it further, it must go to the public for an explicit budget vote.
Asking taxpayers to raise the school tax rate above 2% is a huge lift. The alternative is to cut the JCPS budget. Which is why the proposed $8.5 million state aid cuts would cause, to use Dr. Lyles term, “a major hardship.” The local school tax levy simply isn’t big enough to absorb the state aid cuts.
One reason the school tax levy is so small as compared to the rest of the budget: PILOTs, aka abatements. Abatements are one-third of Jersey City’s real estate, by value, and they don’t pay school tax. So abatements as a “vehicle of growth” for the city only work if one assumption holds true: state funding remains steady. When that assumption of state aid goes away, the cost of siphoning funds away from school coffers (into PILOTs) falls more squarely on the local taxpayers. And local taxpayers may not have the capacity to make up the shortfall … which in turn would require JCPS budget cuts. And budget cuts is likely what JCPS is facing if the Sweeney-Prieto deal goes through.
More to come on this so stay tuned.
To read more about the nexus of PILOTs and school tax, please check out this CivicParent article from November 2015.
Thank you. If the City had increased its contribution would the State have lowered theirs?
As I understand it, and I’m still researching and learning this myself:
– equalization aid would have gone down if the tax base had grown (vs development being siphoned into PILOTs). This is because equalization aid is based on the tax base and if our tax base was artificially low, then our equalization aid would be artificially high.
– adjustment aid may or many not have made up for any decrease in equalization aid – since adjustment aid is “hold harmless” aid based on the SFRA Act of 2008.
But underlying all of this is the fact that the state hasn’t been fully funding the SFRA Act (since 2012 as I understand it), so much dysfunction at state level clouding many of the “what if scenarios” here.
The state and city’s contributions are supposed to be independent according to SFRA.
If SFRA were fully funded and operating, a district’s local tax levy and its state aid would be independent, so there is not 1:1 state dollars:local dollars relationship. In theory, if a district wanted to have higher taxes to pay for extras, that would not deprive a district of state money. If a district wanted to have lower taxes and not provide several services, that should not entitle a district to extra money.
A significant exception to this is the pace at which a district gains aid if it is underaided. SFRA gives 20% boosts to underaided districts that are also under Adequacy. It gives only 10% boosts to underaided districts who tax themselves heavily and are above Adequacy anyway.
However, there are many people, such as the Education Law Center, who say that the state should not take money away from overaided districts who, through their own inadequate taxes, are below Adequacy. The Education Law Center also does not want thestate to give money to districts who are underaided and above Adequacy (through their own excessive taxes.)
Jersey City is hugely overaided, but its taxes are so low that it is below Adequacy.
Steve Sweeney’s state aid reform proposal has always had a reference to changing the tax cap law. Presumably this would enable the JCBOE to raise its tax levy above 2% without a public vote.
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