“Jersey City Public Schools are *Structurally* Underfunded”…What does this mean?

This started out as a Facebook post on my CivicParent Facebook page. I’ve turned it into a quick post, for posterity & to help explain some of the financial mechanics of Jersey City’s under-funding crisis.

“Jersey City’s public schools under-funding is a structural problem” – what does this mean, exactly?

Here’s one way to look at it: If Jersey City were a house, then NJ state education aid is like a central support beam in the middle of the house. A huge portion of that support beam is called “Adjustment Aid” which currently amounts to over $150 million….and ALL $150 million will be removed incrementally, in $25 million cuts per year, over the next 7 years. The structure itself cannot stand without requisite support…but in fact the support is going away.

A critical historical and contextual note: Adjustment Aid is technically excess aid that Jersey City has been receiving for the past 10 years. Here’s where this notion of “excess aid” arose: In 2008, the state of NJ implemented a wholesale change to its education aid formula … the old paradigm, often referred to as “the Abbott system” was replaced with the current paradigm, legally and colloquially known as the State Funding Reform Act of 2008, or SFRA.  In 2008 at the time of this paradigm shift, there was an acknowledgement that Jersey City could not, on its own, locally support its local share of education funding under SFRA. Our tax base at the time was too small; Jersey City was structurally under-funded back then. So the state created a special bucket of aid called “Adjustment Aid” that was intended as a stop-gap to help Jersey City (and select other municipalities) *adjust to* the new funding paradigm of SFRA.  For the past 10 years, JCPS was supposed to be adjusting to SFRA by proportionally increasing the local school tax levy. But…that hasn’t happened (which requires a whole separate write-up, as it’s admittedly complicated as to why).  Long story short, though, in 2018, the state finally pulled the plug and promised to remove ALL adjustment aid by the early 2020s, in multi-million increments each year. This planned, staged removal of “excess aid” is what has put the district, and by extension the city, into crisis mode with respect to how we are going to fund our local, public schools.

So the question is: how is the local community going to respond to this change?

Structural problems are not easy to solve…e.g. it’s harder to replace a support beam in the middle of your house than it is to replace a wood plank on the side of your porch. But…if wood is getting eaten by termites, you have to just do the right thing and fix the problem…right?

How is this possible, this seemingly unthinkable and unconscionable point we’re at, where our schools at risk of catastrophic under-funding? Is this really happening.

YES, it’s happening.

Here’s some data to illustrate:

1) In 2017, Jersey City’s total tax levy (the amount collected by taxes) was about $485M, of which:

50% went to the city
27% went to the county
24% went to the schools

A quick note: when you pay your property tax bill to the city, the city takes your bill and splits it up among (a) Municipal (aka City) services, (b) County services, and (c) Public Schools. We consume these services every day…

  • City services include police, fire, parks, and roads;
  • County services also include parks and roads, but additional services too like the Hudson County Jail and County Sheriff and Prosecutor; and
  • Public Schools include all public schools including public charters.

Jersey City’s property tax allocation among City/County/Public Schools shows us that taxpayers are paying more to the CITY then they are to county or local schools. 

2) Now let’s look at Jersey City’s property tax trends over time, from 1998 to 2017.

Jersey City’s public property tax data is charted using two views below, which I took from my NJ Property Tax Dashboard. Two observations to note:

  • Jersey City’s tax base starts to appreciate markedly in 2005; this is our city’s tax wealth going up. Around this time, the portion of property tax paid to the city starts to increase over the portion of property tax paid to the public schools or county.
  • Our school tax levy has remained anemically steady compared to municipal tax levy from 1998-2005. We can see that, despite the rise, fall, and rise again of Jersey City’s tax base value (which in 2017 is the largest tax base in the entire state), our school tax levy has remained anemically flat.

A second point here. Jersey City’s tax levy mix is very different from many suburbs, which invest more into their schools than they do into their municipalities, i.e. City Hall & City services. Take, for instance, Montclair, a small-ish city in Essex County:

Or Westfield, in Union County:

Part of the difference in allocation between Municipal/County/Schools is because these other towns are smaller with less infrastructure, but part of that is simply a choice to invest in public schools. For instance…If you compare Jersey City to a suburb like Montclair or Westfield, you can see the funding mix is different. In those towns, the schools receive the lion’s share of the tax levy. That’s why many people move to those suburbs – ** because of the public school system ***.

3) The reason Jersey City taxpayers have *been able* to pay so much LESS for local schools is because the state has, for many years (10 years), been giving us EXCESS state education aid called “Adjustment Aid”. This is the support beam in the middle of the house I mentioned earlier.  The Education Law Center wrote about this aid in its March 2018 report, “Understanding Adjustment Aid in New Jersey School Funding: A Case Study of Jersey City.”

4) This funding imbalance – the municipality getting the lion’s share of taxes (not to mention all the PILOT fees which are another chunk of $$$ which I’m not even really hitting on but does have an impact), means Jersey City – the municipality – was able to grow at a faster clip over the past 10-20 years. However *if* the city had been forced to share taxes with the schools in a measure similar to Montclair or Westfield, the municipality might not have grown QUITE SO QUICKLY. Our city budget might not now be so big, and our municipal bills might not now be so high. Consider: the city tax levy went from $145M in 2007 to $237M in 2017 — an increase of 63%. Add to that about $125M in PILOTs in 2017, and you can see that city spending is up, up, up…

All of this is to say: local property taxes have disproportionately supported CITY growth, not SCHOOLS growth. The state, after all, was over-subsidizing Jersey City’s public schools, which effectively allowed this fiscal imbalance to fester for years.

But let’s not forget: city and BOE leadership, as well as state forces that maintained some control over our school system, have known about but not planned for, the removal of this $150M support beam called Adjustment Aid. Everyone has technically been on notice about this: Dr. Lyles, the BOE, the Mayor, and the Council. And, state officials who formerly served in a monitoring capacity over our public schools.  Whether or not these individuals truly understood the implication of that notice is another matter…but it’s been public for 10 years that Adjustment Aid – the support beam provided by the state – would eventually GO AWAY.

5) NOW…in 2018/19, and beyond, the support beam is finally GOING AWAY. The state subsidy – what has kept our local house house standing this entire time – is going away. Trenton voted in Spring 2018 to remove $150+ million in Adjustment Aid over the next 7 years. Starting with a TWENTY-FIVE MILLION DOLLAR CUT in Spring 2019.

6) Now Jersey City must figure out how to replace the support beam called Adjustment Aid – and it has less than 6 months to figure out how to keep the house from falling in. This is a HUGE, STRUCTURAL CHALLENGE. Another fact to underscore the size/scope of this challenge: Our current local school tax levy is about $125M. We are about to lose $150M in Adjustment Aid from the state. Meaning: we have to MORE THAN DOUBLE local funding support over the next 7 years to make up for the cuts in state aid.

7) Similar to the Revaluation, which caught some by surprise when, seemingly all of a sudden their taxes doubled, there is a lack of information from the city about how big this change is going to be. We are hearing about the payroll tax, and implications of that, but in reality the payroll tax isn’t going to be nearly big enough to make up for the support beam going away. The payroll tax is just 1 part of a larger solution that still has to be formed.

The public needs to be aware this change is coming — it won’t be just 1 year of adjustment. It’ll be 7 years of adjustment, and a structural adjustment at that …. away from the state funding the majority of our schools budget towards local taxpayers – residents & businesses alike – funding our school system.

This 7-year adjustment will be like trying to replace the central support beam in a house…while we’re still living in the house. It’s a structural change, it’s required, it’s the right thing to do for the long-term, and with enough community engagement, communication, and involvement, we may be able to do it.

Learn more here: https://civicparent.org

View the property tax dashboard on CivicParent here:https://public.tableau.com/…/CivicParentNJPropertyTaxesDash…

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