$89M Maintenance of Equity to JCPS & the Eventual “Fiscal Cliff”

I wanted to share some thoughts around the $89 million "maintenance of equity" funds that Jersey City Public Schools received this week.  The quick highlight, if I could make one, is: yes, this $89 million is indeed a windfall...but we are still facing a fiscal cliff and we all have to be aware of that cliff now, not six months from now when the BOE is debating its next budget.

I want to, in this post, aim to put the "maintenance of equity" funding into context with the broader paradigm of "S2" state aid cuts still playing out in Jersey City. I'm going to use 3 pictures to show the connection.

Shown in the graph are the "S2" state aid cuts, enacted in 2018, which will remove most, if not all, "equalization aid" to JCPS within the next few years. I don't want to write a lot about S2 here because I've already written a lot about S2 over the past few years, including:

• A Picture of State Aid Reduction in Jersey City
• Midway through Jersey City's S2 State Aid Cuts, Assessing the Fiscal Landscape 
• Putting Jersey City's Low School Tax Rate into Perspective
• You can also check out my "JCPS Funding" landing page here.

What is important to note here is: this is the paradigm JCPS is still in. This is the paradigm the $89 million is wrapped in. This paradigm started in 2018, and now it's 2022. This timeline is important, which leads me to Picture #2.

In 2020 the pandemic happened. In 2021, the federal government responded to the harms caused by COVID with millions of federal COVID-19 aid that was shared with states across the country; attached to that federal aid was a "maintenance of equity" provision. The basic gist of the provision is the federal government saying to a state like NJ, "Hey, here's this federal aid that we know you need for local school districts...but if you want this federal aid, you cannot turn around and then cut your state aid to those same school districts..." In short -- equity must be maintained -- hence "maintenance of equity."

Long story short: NJ accepted the federal aid, and by extension NJ also accepted this provision.

So fast forward to the most recent budget cycle (2022-23) and the state of NJ *did* cut Jersey City's state aid.  So the Education Law Center and Jersey City Together's fight was to force the state to give it back, which required the federal government stepping in to enforce the maintenance of equity provision. The news on the federal government stepping in was reported last spring, and just this past week the actual funds were redistributed (funds are summarized by district here). The chart to the right shows $89 million* of state aid being returned to Jersey City (the green line). This was reported as a windfall by the Jersey Journal, an appropriate term, because some of the S2 cuts have effectively been reversed. But here's the fine print: this windfall is temporary, and will soon be consumed by much larger cuts.

The $89 million was the good news. But here's the bad news, which may not be as clear, or as obvious, which is why I'm writing this post: maintenance of equity does not displace or otherwise stop "S2" from happening. Jersey City is still set to lose most if not all of its equalization aid in the next few years. What's more, we're still on the same 5-year timeline that started in 2018.  In short, Jersey City Public Schools is facing a fiscal cliff in the years ahead, and the cliff is now going to be even steeper than before because the $89 million we just received will be part of the aid that eventually does get cut when S2 continues to play out. This is why Danielle Farrie of the Education Law Center said on Thursday:

[the $89 million] will not relieve the city from paying its “local fair share,” the amount the state believes local taxpayers should kick in for their school budgets...

Here is a write-up on "equalization aid" from a Jeff Bennett's "NJ Education Aid," a blog focused almost exclusively on state aid (as a topic). Mr. Bennett is also a former South Orange/Maplewood BOE trustee member. His post is a detailed dive into why equalization aid going to continue to decline.

But the "bad" news is not all bad...because the $89 million could help JCPS transition out of S2 with less potential disruption than if those funds weren't available. Dr. Farrie also said:

"These [maintenance of equity] funds will help slow the transition of state aid cuts under S-2 (the state school aid funding formula in effect since 2018) in the coming years, providing a longer timeframe for the city to raise the required revenue, preventing cuts to essential programs and services, and ensuring that Jersey City finally reaches adequate funding levels,” Farrie said.

So "maintenance of equity" stalls - does not stop - S2. It also gives the district this brief reprieve to take a proverbial breath and plan for the final few years of the offramp from S2. And planning is needed. Because we should expect potentially even more draconian state aid cuts in the years ahead as the state removes the planned state aid per the "S2" schedule -- which will include the $89 million the state was forced to give back.

Wrapping up

So this is all complicated (I find it so, at least) but it's also so important.  In my opinion, what we really need in the months ahead - before the BOE budget cycle starts again in March - are district administration and BOE trustees helping the public understand this offramp from "S2." How the $89 million will help can be part of the discussion. I recall last May, when the BOE debated its 2022-23 schools budget, some trustees calling for earlier discussions around the budget. I think that is a wonderful idea, and the time for those discussion is now.

* I'm going to defer to the expert at the Education Law Center for information about the math on how the $89 million was computed. The math and the underlying policy logic is complicated, nuanced, and not within the scope of this post.