Jersey City Funding Crisis: Banked Cap, Explained

Jersey City Public Schools: CivicParent Funding FAQs
I have been trying to understand how Jersey City Public Schools are funded and am sharing questions I’ve endeavored to answer. As I learn, I’m sharing with the community in the hopes others will also learn and advocate. Where applicable I’ve provided citations and resources so that anyone reading this can research further.

Q: How is Jersey City “under-funded”?

Per the NJ’s education funding formula, we should have $624 million in our budget to provide a “thorough and efficient” education.  But, per the Education Law Center, the JC BOE 2017/18 schools budget had only $523 million. So in 2017/18 we were nearly $100 million “under funded.”

Q: What determines “full funding” of our school system?

The School Funding Reform Act (SFRA) is a law enacted in 2008 that determines how much money a district should get based on the population of the school district.  The formula looks at the number of students in the district and then applies weighted measures for students who may require more funding, like

  • English as second language (ESL) learners.
  • Economically disadvantaged students.
  • Special needs students.

The idea is: students with a greater set of needs will need more support, thus more funding is applied. The aim is to provide every student with a “thorough and efficient” education, which is a mandate in NJ’s Constitution.

It is important to note that NJ has never fully funded the formula, thus many districts are not receiving their “fair share” of state aid, making the debate about state aid an extremely important issue for parents and public schools stakeholders throughout NJ.

Q: Why is Jersey City criticized for being “over-aided” by the state if we are under-funded overall?

The chart below (from this Education Law Center (ELC) report) shows what SHOULD be happening vs. what ACTUALLY is happening.

  • The left bar: this is what SHOULD be happening. We should be paying $370 million in local school tax. And receiving $255 million from the state. In full, our schools should receive $624 million, per the state formula, to ensure our kids get a “thorough and efficient education”.
  • The right bar: this is what ACTUALLY is happening. We are paying only $117 million in local school tax…vs the $370 million that would result in “full funding” of our schools per the state formula.  The state is giving us $151 million in what’s called “Adjustment Aid” to cover the *local* funding shortfall, also referred to as the “local levy gap.”

Q: So…why are our schools under-funded? Why aren’t we paying more locally?

We can objectively point to a few key factors driving our local under-funding:

  • Our school tax levy is TOO LOW, i.e. we have a “local levy gap”. The school tax levy = the amount raised by taxes to support the public schools (including charters).
  • We are restricted, by state law introduced in 2010, from increasing our local school tax levy by more than 2% per year. This limits our capacity as a city to fix our local under-funding problem and I explain a bit more about this below.
  • Abatements. We have too much real estate that doesn’t pay school tax. Here are some initial facts to paint the big picture:
    • Jersey City’s entire tax base is valued in 2018 at about $29 billion. Generally speaking, this property pays school tax.
    • But then we have an additional $10+ billion of real estate that is subject to abatement contracts.  Jersey City is the largest grantor of abatements in NJ, with $10 billion of abated property consisting of luxury housing, office buildings, and hotels. Abated property does not pay school tax.  If these abated properties were required to pay school tax like regular property, they would pay about $50 million into the school tax levy.
    • I’ve written editorials about this PILOT-not-paying-school-tax-problem on CivicParent in 2015 and in The Jersey Journal in 2017 (co-author with former BOE Trustee Ellen Simon)

Q: Can’t we just raise more in local school tax?

No, it’s not that easy. We’re severely hamstrung by state law. Here’s why:

  • In 2010, NJ (under Governor Christie) created a “2% levy cap“. That “cap” restricts school districts from growing the local school tax levy by only 2% per year.  Here’s what 2% growth per year looks like for Jersey City’s local school tax levy:

We cannot, and will not, afford basic year-on-year inflationary increases if we are limited to 2% local levy growth. Consider: in five years we grew our school tax levy by only $9 million, yet we have a local shortfall of $250 million.  There is a disconnect between what we are being asked to do (raise more locally) vs. the tax levy cap. This issue must be addressed in the state legislature in Trenton.

There is one exception that Jersey City has it’s disposal, to marginally increase local funding. It’s called “Banked Cap.”

Q: What is Banked Cap?

Banked Cap is one of the few exceptions to the 2% local levy cap rule. 

When a district has expense increases related to certain items, including enrollment or health care costs, it can “bank” those increases (for up to 3 years, then it expires) and incorporate the funds into local levy increases above and beyond the 2% cap.

The most thorough explanation of “Banked Cap” I’ve found online is at the blog NJ Education Aid. The NY Times wrote about Banked Cap in 2010 here when it was first enacted. And, the Education Law Center referred to Banked Cap in its April 2018 report about Jersey City, suggesting “the district [Jersey City Public Schools] could have raised an additional $4 million in 2018 to offset increases in health care costs.”

Q: How much Banked Cap does Jersey City have right now?

$5,341,051. 

That’s how much we could add, above and beyond the 2% cap, in 2018/19. But the Board of Education must vote to approve it. Unfortunately, the Board of Education did not reveal this amount to the public in its preliminary budget hearings. It sent a proposed budget to the county in early April 2018 without the banked cap incorporated. What’s more, that budget had more than 300 teacher and staff layoffs.

Banked Cap is a legitimate, and wholly appropriate, way for the Board of Education to raise available funds above the 2% levy cap.

Q: Will the Board of Education approve the Banked Cap?

We won’t know until they vote. It’s really important to pressure them to vote FOR the banked cap if you want them to approve it. Here’s their contact info:

And, sharing this call to action from PS #16’s Concerned Parents Association: “Call and sign up to speak in Public Comments (201) 915-6074 at any of the upcoming Special Meetings on the Budget:  The Jersey City Board of Education will hold the following Special Meetings on its 2018-19 Budget at 6 PM in Room 1R of 346 Claremont Avenue: (Best to call at least 24 hours in advance)

  • April 26, 2018
  • May 1, 2018
  • May 4, 2018
  • May 7, 2018″
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Brigid D'Souza

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