Midway through Jersey City’s “S2” state aid cuts: assessing the fiscal landscape.

It has been nearly four years since NJ passed the “S2” law, leading to state aid cuts to Jersey City. In this post I want to assess the fiscal landscape of the public schools using nine years of user friendly budget data, with particular focus on:

• where the district is with state aid reductions (and what still lies ahead with respect to aid cuts),
• where the district is with local income increases, with a focus on school tax and the payroll tax, and
• a dive into expense, i.e. what are we collectively investing in?

I have several interactive visualizations  woven throughout this post to help readers access and unpack the data, which is from nine years of "user friendly budgets" available here on the NJ Department of Education website. I combined three files to obtain nine years of revenue and expense data. You can view my combined datasets in Tableau here. You can also see an example of this data on the JC BOE website from the 2021 user friendly budget.

REVENUES

The revenue-side of the last few years has been complicated but I've attempted to summarize major movement in five broad points. Each bullet point corresponds to a numbered dot on the corresponding line chart. I found looking at the actual data really clarifying to understand what has unfolded and where we now seem to be heading.

1. In June 2018, the state legislature passed the "S2" law which altered the state aid paradigm to Jersey City. S2 triggered two big changes: (a) state aid to Jersey City would start to decrease but (b) the Jersey City Board of Education would be permitted to raise its local school levy to make up for the aid cuts (prior to S2, the school board was "capped" at 2% levy increases per year).
2. S2 kick-started the rapid withdrawal of "Adjustment Aid." This was a lump-sum bucket of funding that had been put in place in 2008 when SFRA was enacted. In 2019/20, the state decreased adjustment aid by $32 million but the BOE raised its local levy only $12 million that year, in effect failing to cover the loss of adjustment aid. Districtwide layoffs ensued and hundreds of teachers and other staff were laid off.
3. Layoffs, continued S2 cuts, and intense public pressure to locally fund spurred Jersey City to invest more in its public schools. Shortly after S2 was passed, the payroll tax - a special tax allowed by the state and intended only for Jersey City to help backfill the state aid cuts - went into effect. The payroll tax has since capped out at about $86 million per year (there is only so much available payroll to tax in Jersey City). The other source of local revenue was the school tax levy; the JC BOE - under the leadership of Franklin Walker and facing intense public pressure - increased the levy by $141 million from 2019/20 to 2021/22.
4. State aid cuts will continue at a rapid clip as Jersey City has begun to lose "Equalization Aid."  This is a bucket of aid that is calibrated based on "moving target" factors including tax base value and aggregate resident income. Equalization aid decreased $53 million from 2020/21 to 2021/22 and is expected to drop precipitously over the next few years - possibly down to zero; this is driven by Jersey City's incredibly rapid tax base growth and the impact that growth is having on SFRA's formulaic logic: as tax base growth goes UP, equalization aid goes DOWN.
5. Jersey City Public Schools will increasingly rely on school board funding of the local school levy. The Jersey City BOE will face another budget season with state aid cuts in play. While the federal government recently announced the state aid cuts may need to be stalled (due to a maintenance of equity clause in NJ's acceptance of federal ARP funding), the aid cuts remain a "when," not "if," question mark -- meaning Jersey City Public Schools' funding paradigm remains increasingly, and more urgently, reliant on local funding. The cuts ahead may be worse, and may unfold more rapidly, then what we've already seen.

Some additional, important context includes:

• Jersey City has the 49th lowest school tax rate out of 565 municipalities in NJ.  The pressure to raise that rate will likely continue from the state. I will have a post out soon showing this data in context.
• The state will not release its aid numbers until early March 2022, when the governor shares his draft 2022/23 budget. That leaves the local school board with one to two weeks to finalize its 2022/23 schools budget; the BOE must submit its draft budget to the county by around March 22nd.
• The district has a new acting superintendent in Dr. Norma Fernandez, who will present the BOE with the 2022/23 schools budget. The school board also has a new president in Gerald Lyons.
• The district continues to recover from the COVID-19 pandemic. The pandemic came on the heels of chronic, systemic underfunding that will arguably take years to recover from.

I took a look at the revenue categories from the 2013 through 2021/22 user friendly budgets and graphed them below. Numbers are summarized to the millions to allow a focus on materially larger items.

For a more nuanced, specific dollar-value look, you can filter by revenue item on the interactive Tableau visualization below:

Before we dive into "what changed" on the expense side, let's first anchor around where most of the expense is going on an annual basis.  I have two charts to help illustrate the total budget in broad brushstrokes.

First, let's order expenses from largest to smallest; we can see 45+ expense line items in the budget, but a few at the top jump out as larger than the rest:

And now let's group the top four expenses together and then group all the remaining into "All Other":

We can see with this view that:

1. About two-thirds of total expense is bucketed into a few "big ticket" items - those are colored red, blue, brown, and green in my charts and account for $541 million (67%) of the total $814 million budget in 2021/22.
2. The remaining one-third of total expense is sprinkled into a many "littler ticket" items which I'm labeling as "All Other Expense."

What I've done below, mostly as a way to crack this open and make some sense of it, is focus mostly on the "big ticket" (the colored) items. But, the other expense is obviously important too. You can dig into all of this using a Tableau expense visualization at the bottom of this post.

How have these expense changed since 2013?

Let's now look at how these various categories of expense have changed from 2013/14 through 2021/22.

1-School Based Budgets.

The largest bucket of expense is called “School Based Budgets” which represents a huge pot of funding allocated to the district’s 39 schools.  School based budgets are highest now ($332 million) then at anytime in the past 9 years (which reflects recent, needed investments by the board of education). School based budgets were lowest in 2019/20 ($272 million), the same year as the districtwide layoffs.  In the last three years, school based budgets have increased by $60 million, reflective of successive years of investment made by the local board of education despite the aid cuts imposed by the state.

I should note, this line item is a large, top-level amount and I could not find more detail about SBB expense in the budget itself (in terms of a finer set of line items detailing the expense). But ... we can see "school based budget" expense reference in the Comprehensive Annual Financial Reports" ("CAFR") -- the 2020 CAFR for Jersey City is here.

2-Charter Schools.

This bucket of expense is “pass-through funding" to charter schools. In NJ, the funding "follows the child" so this money represents resident Jersey City children attending charter schools located in Jersey City, Hoboken, and other surrounding areas. I do not understand this line item in great depth, but it's clearly growing year on year, having increased from $47 million in 2013/14 to $104 million in 2021/22. An important point here: the total budget for Jersey City's 39-district school should be viewed as the bottom line number ($814 million in 2021/22) less this charter funding. This is critical nuance when citing the aggregate $814 million budget number. Charter school details are included in the annual budget presentation here; I've included a list from the budget below for ease of reference:

3-Personal Services - Employee Benefits

Employee benefits are tracked separately from salaries. I do not understand this item in much depth but recognize it as essential to employee compensation (in addition to salaries) which factors into attracting and retaining educators to work in this district.  This item has gone up year on year, from $36 million in 2013/14 to $55 million in 2021/22. 

4-Operation and Maintenance of Plant Services.

The final larger bucket of expense worth noting is “Operation and Maintenance of Plant Services,” which includes "all expenditures associated with keeping the physical plant open, comfortable, and safe for use, and keeping the grounds, buildings, and equipment in effective working condition." (you can read more about this category at the NJ Dept of Education's "Taxpayer Guide to Education Spending" landing page, under Indicator #10). Most of Jersey City's schools are nearing or exceeding 100 years old. The majority of these buildings lack potable water fountains and many have been reported to have crumbling infrastructure, evidenced in part by recent COVID-19 federal ESSER reports in Board Docs that show one-time federal funds being used to replace a roof at least one school, purchases of air purifiers for classrooms, and major electrical repairs. It's worth noting here that the state of NJ is supposed to be managing major capital repairs as Jersey City is an "SDA district"; the SDA however is notoriously dysfunctional and not fulfilling its obligation to Jersey City. Capital repairs have been an approximate $50 million annual draw on the budget, with the exception of the 2018 to 2020 time period when it dipped as low as $36 million.

5-"All Other Expense" is, in the aggregate, a large amount (the gray line on the graph) but it's comprised of dozens of areas of expense including: 

• PreK Education - this is funded entirely by the state, thus it’s a “wash” for local taxpayer purposes. ($70+ million in 2021/22)
• Regular Programs - Instruction ($30 million in 2021/22)
• Child Study Teams ($15 million in 2021/22)
• General Administration ($15 million in 2021/22)
• IDEA Part B (Handicapped) ($11 million in 2021/22)
• There is a big spike in Other Expense in from 2019/20 to 2020/21, then another decrease in 2021/22; this appears to be mostly COVID-19 related.

To summarize and recap, here is a view of these top-5 expenses, plus the other expenses, in 2021/22:

Interactive Data Visualization

The visual below, including the filter by expense area, is intended to help readers dig a bit more into this data. You can pick any of the expenses listed above and see how the expense changed from 2013 to 2022.

We need more insight into per-school investments, including teaching staff, mental health services staff, and water infrastructure.

My hope in sharing this data is that others will engage in this budget data and endeavor to understand the investment being made in our public schools. The "user friendly budgets" use government accounting parlance that makes reading through some of this somewhat "unfriendly."  In my view, the public would be well served with:

• clearer, "plain language" explanations of expense from district officials as to what some categories are for (e.g. an explanation of what is included in "School Based Budget" expense)
• additional metrics to show school-specific investment at the classroom level, like student-to-teacher ratios or school-specific CITs, counselor, or social workers headcount. 

We are in need of more staff, particularly teachers and paras, mental health professionals, and specialists like CITs and special education teachers. We also need infrastructure improvements like working water fountains. While the budget data points to these investments, more nuance and context -- like student-to-teacher ratios data per school and a basic list of schools and the status of water fountains at each - could help the public better understand the investment in personal terms. It is important that these dollars be traced to personal impact, which is at the classroom and school building level.

---

PUBLIC DATA OVERVIEW

Here's a brief overview of how I brought 9 years of data together for this post. Using the user friendly budget links at this page on the NJ DOE site, I downloaded

• the 2021/22 district data (this gave me 2019/20, 2020/21, and 2021/22 data)
• the 2018/19 district data (this gave me 2016/17, 2017/18, and 2018/19 data)
• the 2015/16 district data (this gave me 2013/14, 2014/15, and 2015/16 data)

Each of these UFB files contains a 3-year view. This 3-year view is what is presented the public when a user friendly budget is shared on a district website (like this file from the JC BOE). I took the equivalent of three files and combined them into one dataset for purposes of visualization within this post.

I tied out my dataset total revenue and expense with the totals in each year's reports. I also spot checked the larger balances for accuracy. I have provided access to all source data so that readers can dig into this on their own. And finally, a note: I do my best to scrub errors, omissions, etc from my work. But if you do notice an issue please let me know here.