JCPS Funding: How JCPS Spends Its Money…A High Level Primer

I detailed in my last post how the JCPS budget is funded by a mix of state, local, and federal tax dollars.  But how is that money then spent? That is the main focus of this post. 

Governor Christie approved a budget this week that included $8.5 million in state aid cuts to Jersey City Public Schools for the coming 2017/18 school year.  If you’re a Jersey City taxpayer, there are two ways to view this aid cut:

1. $8.5 million is 1.2% of the $682 million JCPS budget for 2017/18 (the JCPS budget includes charter school funding).
2. $8.5 million is 7.2% of the $117 local school tax levy for 2017/18 (the $117 million represents an already-approved 2% tax rate hike over 2016/17).

There are diverging viewpoints of how these cuts will hit our city and school system:

• From the schools perspective, Superintendent of Schools Dr. Lyles characterized the funding cuts as “a major hardship” and Board of Education President Joel Torres characterized the cuts as “not a fair plan”.
• From the city perspective, Mayor Fulop characterized the cuts as much less bad then they could have been and asserted via Twitter that “we’ll manage fine.”

This is a complicated fiscal landscape mired in politics, but we can, and should, try to break it down.  In this post I’ll take a high level look at how Jersey City Public Schools spends its money.  The goal is to put the $8.5 million cuts into broad brushstroke perspective. As I write additional posts on this topic I’ll further refine the big picture view.

Let’s get civic and start to break it down.

JCPS Budget Environment: Macro View

To put the $8.5 million aid cuts into perspective, lets rewind to this past April, when the Jersey City Public Schools approved its budget for next year, the 2017/18 school year. The budget totals $682 million, which represents a $9 million increase over the prior year. Further, the JC Board of Education (the entity responsible for passing the budget) was only able to fund this $9 million spending increase after 8 actions were taken:

1. Revenue increases including: local tax levy increased $2 million (a 2% rate hike), a one-time $1.1 million payment from the IRS, and $5 million funded from the surplus.
2. Salary breakage for retirees
3. Reduction in vacancies
4. Reduction in non-salary allocations to schools
5. Central office non-salary cuts
6. Reduction in security camera budget
7. Reduction in extra pay/stipend
8. Decreased contribution to the preschool program.

Now, fast forward from April 2017 to July 3, 2017…when the state cut $8.5 million in Jersey City school aid from its 2017/18 budget.

Dr. Lyle’s “major hardship” is clear: she and the JC BOE took pains to pass a budget in April, simply to fund $9 million in new spending for 2017/18.  But now the state has erased $8.5 million from that budget, causing a new budget hole that must be plugged, either with new sources of funding or new expense cuts.

With all this in mind, let’s now look at JCPS’ expenses.

JCPS Major – A Primer on Major Expense Categories

Here are some of the district’s biggest expense categories.

• Personnel Expense. JCPS’ biggest expense is people, namely teachers, support staff, administrative staff, bus drivers, building personnel like custodians and cafeteria cooks, and so on.  Many of these employees are unionized over 3-year contract terms (e.g. the current JCEA contract is effective for the time period September 1, 2014 through August 31, 2017).  The biggest bucket of personnel expense is found in the “Schools Based Budget which in 2017/18 was over $300 million.
• Business Operations. JCPS is a large bureaucracy and as such it requires centralized business operations to function.  In 2017/18 this expense was over $120 million.
• PreK3 and PreK4. JCPS offers free preK3 and preK4.  This is 100% paid for by state aid, and in 2017/18 it amounted to over $70 million in expense.
• Charter Schools. Public charter schools are reflected in the JCPS budget, but effectively act as a pass-through expense item.  Meaning: the money funnels through the JCPS budget to each charter school where the money is then spent under the purview of each charter school’s administration. The JC Board of Education has no oversight of charter schools. There are 23 charter schools in the 2017/18 budget; a charter school is included in the budget if a student residing in Jersey City attends the school. I’ll cover charters in more detail in a later post. In 2017/18 this pass-through expense was over $60 million.
• Capital/Building Expense. JCPS has an aging building stock. Some of our schools are nearing 100 years old. And while Jersey City cannot build its own schools (it is statutorily restricted from doing so by state mandate), it is allowed to book capital costs for major upkeep and repairs. In 2017/18 this expense was a little over $1 million.

With this brief overview of major expense categories, let’s now look at year-on-year trends in spending.

Year-on-Year JCPS Expense Trends

We can glean insight around spending trends from Dr. Lyles’ budget presentations. Three years’ budgets are available, from 2015/16 through 2017/18.

Personnel Expense JCPS Schools. About 45% of the 2017/18 budget goes directly to the district’s 40 schools, as reflected in the “School-Based Budget” expense. As I noted above, this is mostly salaried employees working in the schools.  The 3-year trend has seen a slight decrease – from $308M in 2015/16 to $307M in 2017/18.

Business Operations. The budget presentations don’t give much breakdown about Business Operations and exactly what is included. But this expense is growing, from $113M in 2015/16 to $124M in 2017/18. I’d like to learn more about this expense for a future post, so more to come on this.

Charter Schools. Charter school spending generally tracks with enrollment increases (in fact spending growth lags slightly behind enrollment growth, percentage-wise).  The chart below is from Dr. Lyles’ 2017/18 budget presentation:

• Per the 2017/18 budget: 2014 charter enrollment was 4,633 students and 2018 enrollment is projected to be 6,103 (a 32% jump in 5 years).
• Funding-wise, 2014 charter funding was $51 million while 2018 funding is projected to be $65.8 million (a 29% jump in 5 years).

PreK3 and PreK4.  Over the past three years, spending has hovered around $70 million.  It will be interesting to look at enrollment trends on a per-school basis. More to come on this in a later post.

$8.5 Million Cuts – the Major Pressure Points

We can see from the 3-5 year data that significant funding pressure exists for JCPS.  Specifically:

• The biggest expense is personnel, thus that may be the biggest area at risk of new budget cuts, if budget cuts do happen.
• There is no indication that charter school enrollment will stop increasing. This will put pressure on both JCPS and the charters schools.
• Capital costs will likely continue as our school buildings continue to age.
• Finally, JCPS union contracts are due to expire on August 31st of this year…meaning new contracts need to be negotiated and planned for in the face of a shifting funding paradigm in the state legislature.

How will the cuts be dealt with remains to be seen – will JCPS cut its budget?  Will local taxpayers make up the shortfall?  These are, right now, big unknowns.

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