A "levy" is the amount raised in property tax to fund a government budget. Typically, a levy is one of multiple sources of revenue that fund total expense.
In 2021, Jersey City is poised to both fully fund its schools and also enter a new paradigm with respect to property tax. Let's review what's happening based on four key insights; we'll use the graph below as a pictorial guide through the fiscal nuance. The chart below shows year-on-year change to Jersey City's state education aid (the gray line), the school levy (the dark red line) and the city levy (the blue line).
(1) Since 2018, the state of NJ has reduced $155 million of education aid to Jersey City. This was state-driven pressure to increase the school tax in Jersey City.
(2) In 2019, Jersey City's board of education was slow to react to the state pressure; in the face of a $27 million state aid cut, the BOE raised the levy only $12 million. As a result, 100+ districtwide layoffs ensued.
(3) However, in 2020 and 2021, Superintendent Franklin Walker introduced bold budgets with significant levy increases of $53 million and $89 million, respectively. Following Mr. Walker's lead, and under intense pressure from school advocates with Jersey City Together, the BOE passed the levy hikes.
(4) In June 2021, the city reacted to the higher school levy by lowering its own levy by $66 million. Lowering the city levy - and the city tax - mitigated the school tax increase in the total property tax computation.
If we zoom out, we can see the property tax paradigm shifting in Jersey City; for the first time since at least 1998, a majority of Jersey City property tax bills will fund the schools, not the city. The 2021 school levy is now $278 million. The proposed city levy in Mayor Fulop's 2021 budget is $213 million. Whether or not this paradigm shift will hold beyond this year is an unknown; but the fact it has shifted this much in 2021 is notable.
Let's walk through each of these insights, step by step. At the bottom of this post is a walk through the tax math for anyone interested in tracing the public numbers to a sample home.
1) In 2018, Jersey City's education aid started to decrease in significant annual increments.
In 2018, the NJ legislature began phased cuts in state aid to Jersey City, thereby cutting off a major revenue source to the schools. The purpose of the cuts was to compel the local community to start paying more in school tax, i.e. to increase its school levy. This action by the state, while rooted in legitimate local underfunding, was both draconian in terms of timeline and also a whipsaw reversal of previous policy; from 2010 to 2018, Jersey City had been prevented from raising its school levy (ie school tax) by more than 2% per year (with exceptions for allowable "banked cap").
In 2018-2019, facing the new aid cuts, the Jersey City BOE had two choices:
(a) keep school tax anemically low and cut the schools budget (resulting in staff layoffs) or
(b) vote for very large "catch-up" school tax increases.
2) In 2019, the Jersey City BOE did not increase the school levy sufficiently enough to replace state aid; layoffs ensued.
In 2019, the first major aid cut took place -- $27 million in one year. The BOE raised the levy that year by only $12 million, leaving a net funding deficit that forced the board to cut its budget and layoff over 100 teachers.
3) In 2020 and 2021, Superintendent Walker invested in the school levy and lead the BOE towards full funding.
In 2020 and 2021, driven by the leadership of Superintendent Franklin Walker and under intense pressure from advocates with Jersey City Together, the BOE raised the levy significantly; $53 million in 2020 and $89 million in 2021. [Full disclosure: I am a member of the JCT education team.]
I should note here too: the payroll tax was an additional, critical source to achieve full funding. I am not focusing on the payroll tax here because it is not a property tax.
4) In June 2021, Mayor Fulop introduced the 2021 budget with a city levy that is $66 million lower than last year.
In June 2021, Mayor Fulop introduced his 2021 budget and it included a $66 million levy decrease. The entire budget is down too, from $682 million in 2020 to $620 million in 2021. It's worth noting that to achieve this levy cut, the city is relying on about $78 million of one-time federal American Rescue Plan monies. [Jersey City was allocated $146 million in total by the federal government; ARP funding expires in 2024.]
The city levy decrease is significant because it effectively counters the school levy increase, thereby helping the city mitigate the impact of a total property tax hike. And, because this nuance is easily conflated, I'll add:
- Mayor Fulop announced that the city budget would "cut taxes" -- he was referring to city tax
- This city tax decrease will counter the school tax increase, mitigating a total tax increase with respect to schools and the city (note: county tax is a third component of total property tax, but is not a focus of this post)
I illustrated this tax math for a sample home at the bottom of this post.
What this all means: the property tax paradigm has shifted in Jersey City, at least for now.
The school levy increases over the past two years were like a fiscal tectonic plate that shifted slowly (2018, 2019), and then with a sudden jolt (2020, 2021); lots of energy was required to move it (state aid cuts, 2019 layoffs, community advocacy, BOE votes), but once in motion, the paradigm shifted.
In 2021, schools are fully funded and the school tax hike will be mitigated by a city tax decrease. Taken in isolation, these are net positives for the schools and taxpayers. What I think remains to be seen is: what happens in 2022 and beyond, when
- the Nov 2021 municipal election has passed (and thus the political concern about tax hikes is not so acute),
- the ARP funds expire and are no longer available to help sustain the city levy at this lower amount, and
- the schools are still experiencing state aid cuts, thus likely needing more school levy increases (state aid cuts will continue until 2025)
These are pressing long-term questions; community can and should be vigilant with both the BOE and city budgets and with demands for transparency into how these local funds are invested.
Interpreting tax facts
A final note. Sometimes, in press releases and news reports, our three local taxes are reported in isolation, as in "school tax will go up $X." I've seen this conflated, or mistaken for, total property tax. To clarify:
1) The BOE increased school tax, but not property tax overall.
2) Mayor Fulop is proposing to decrease city tax, but not property tax overall.
3) The BOE tax increase and the city tax decrease are netted together in the total property tax determination. This year, the combined school plus city tax amount may be about the same as last year; it's just the allocation of each tax that has shifted. See my sample home tax math below for more on this.
4) Finally, a note on the county. Depending on the county budget, total property tax may go up or down if the county increases or decreases its levy this year. That change is not contemplated in this post.
Bonus Content: Looking ahead to the city budget
In writing this post I sought feedback and was asked:
- What is being cut from the 2021 budget that we were funding in 2020?
- Is the 2021 city levy cut sustainable?
- What will happen when the federal American Rescue Plan ("ARP") aid expires (in 2024) - will the city need a higher levy again?
These are good questions looking forward towards the city budgeting process which will unfold in the coming weeks. In the meantime, here is a quick highlight of how city revenues are shifting from last year to this year:
- the city levy, as noted above, will decrease by $66 million
- ARP COVID-19 federal aid will increase by $50 million
- All other funding sources will decrease by $43 million
Net change to total budget = - $61 million
I'll be looking at the city budget in more detail in the coming weeks. Stay tuned.
Learn (and prove out) the tax math: trace the public data from 2020 to 2021 down to a sample home.
To trace this school and city levy movement down to a sample home, we have to do a bit of tax math. The steps are straightforward:
- Compare the tax levies - this year vs. last year.
- Compare the tax base (assessed value) - this year vs. last year.
- Compute the tax rate each year (for both the schools and city) - this is #1 / #2 (levy / tax base).
- Compute your tax expense for last year vs this year. Multiply each rate times your assessed value. For assessed value, I'm going to use $461,925 because that's the "average" assessed value cited in the 2021 BOE budget.
- Compare 2020 tax to 2021 tax.
Note, there is some nuance here related to the schools budget being on a fiscal year and the city a calendar year...so, take these numbers as an approximate lens into how things are shifting. I'm using city levy data through 2020 from the NJ DCA website, the 2021 city levy data from the proposed budget on the city website, school levy and tax base data from Public Board Docs, and state aid data from the Education Law Center.
School board budgets by Fiscal Year
Each fiscal year ("FY") represents July-December of the first year and January-June of the second year.
- FY (fiscal year) 2010 levy: $102,313,254 (source: Education Law Center District Data Profile)
- FY 2011-12 levy: $104,359,519 (source: Education Law Center District Data Profile)
- FY 2012-13 levy: $106,446,709 (source: Education Law Center District Data Profile)
- FY 2013-14 levy: $108,336,848 (source: Board Docs)
- FY 2014-15 levy: $109,961,901 (source: Board Docs)
- FY 2015-16 levy: $112,161,139 (source: Board Docs)
- FY 2016-17 levy: $114,404,361 (source: Board Docs)
- FY 2017-18 levy: $116,692,448 (source: Board Docs)
- FY 2018-19 levy: $124,367,357 (source: Board Docs)
- FY 2019-20 levy: $136,504,704 (source: Board Docs)
- FY 2020-21 levy: $189,234,798 (source: Board Docs)
- FY 2021-22 levy: $278,019,494 (source: Board Docs)
State Education Aid (K-12) by Fiscal Year
All data below except for the 2021-22 state aid is from the Education Law Center's District Data Profile page.
Each fiscal year ("FY") represents July-December of the first year and January-June of the second year.
- FY (fiscal year) 2010-11 state aid: $391,023,629
- FY 2011-12 state aid: $417,859,149
- FY 2012-13 state aid: $417,85,149
- FY 2103-14 state aid: $417,859,149
- FY 2014-15 state aid: $418,471,290
- FY 2015-16 state aid: $418,471,290
- FY 2016-17 state aid: $418,779,890
- FY 2017-18 state aid: $410,404,292
- FY 2018-19 state aid: $406,904,282
- FY 2019-20 state aid: $379,711,659
- FY 2020-21 state aid: $324,393,336
- FY 2021-22 state aid: $255,025,656