January 2020 - An Update:
Jersey City Public Schools Funding Crisis
Based on the state funding formula, Jersey City Public Schools are currently $100+ million under-funded. Jersey City students, parents, teachers, and staff experience this under-funding everyday.
This is a structural deficit and a threat to our school system, our city, and our community. Get the facts, connect in community, help work towards solutions.
What is Jersey City's school funding crisis?
Based on the NJ education funding formula, Jersey City Public Schools are $100+ million under-funded, technically termed "below adequacy". This is primarily a local problem...we don't raise enough school taxes to fully fund our local schools. For years, the state of NJ has given Jersey City "extra" aid, termed "Adjustment Aid", to make up for this local shortfall. However, starting in Spring 2019, NJ began withdrawing Adjustment Aid - the first year's cut was over $25 million. We are due to lose over $150 million more in aid over the next several years. This means our $100+ million funding deficit will grow deeper each year, in cumulative terms, absent local action to fund our local schools.
What $100+ million "below adequacy" looks like today.
Public school advocates have been listening to and learning from each other, with the hope of understanding: what is the impact of underfunding? Parents, teachers, staff, and other stakeholders have identified common problems that we can tie to underfunding, including:
How is "adequacy" defined for budgeting purposes?
In 2008, NJ adopted a new school funding formula called "SFRA" or the "School Funding Reform Act." This formula drives our public schools budget.
SFRA bases "adequacy" on a weighted-average student formula, whereupon students are given higher "weights" depending on higher levels of need (and the need is supposed to drive the funding). General education students are given a base-weight. But then three main categories of students with greater levels of need are lifted up by SFRA: At-Risk (Lower Income), English Language Learners, and Special Education. Each school district's budget is "built up" by applying a weighted-average-student formula to the student population in that district. This "built-up" budget is termed the district's "adequacy budget".
2018 JCPS Enrollment
Students in JCPS who qualify for free or reduced lunch.
Students in JCPS who are English language learners (ELL).
Students in JCPS who have special education needs.
If we are underfunded, why did our state aid get cut by over $25 million in Spring 2019?
Because Jersey City currently gets too much in state aid. We are, technically, "over-aided" by the state but -- we are underfunded locally; not enough local property tax is directed towards our public schools.
The chart below is taken from this March 2018 Education Law Center report (I have added arrow call-outs to their chart for emphasis/explanation). The chart shows Jersey City's funding data for the 2018 school year - the bar on the left shows what *should* be happening if JCPS were fully funded and the bar on the right shows what is *actually* happening, and why we are under-funded. If Jersey City were fully funding all of its students, the schools budget would be $625 million, funded $255 million via state aid and $370 million via local tax dollars (shown in the bar on the left, below). But here's what's really happening (shown in the bar on the right, below): only $117 million of our budget is funded via local taxes. State aid is funding the formula-mandated $255 million PLUS another $125 million to help offset the local underfunding. This extra $125 million is called "Adjustment Aid", and, starting in 2019, NJ will start to withdraw Adjustment Aid a pace of $25 million per year over 7 years.
My property taxes are high, so why aren't we fully funding our schools?
Because your tax bill is used primarily to fund City and County government services. Jersey CIty's public schools receive the lowest allocation of property taxes. In 2018, the public schools received only 24 cents out of every $1 in property tax.
In many other municipalities in NJ, the schools receive the highest allocation of property taxes from local taxpayers. In Jersey City, it's the opposite. Jersey City - the municipality - receives the highest allocation of property tax, followed by the County, and then the Schools.
I created the Property Tax Dashboard below to enable taxpayers to view this dynamic (the data is from NJ's Division of Local Government services here). I have all 566 NJ municipalities included (you can drill into county and town). For each municipality, you can view taxes on a year-by-year basis from 1988 to 2017, broken out by City, County, and School tax levies (the "levy" is the portion of the government budget paid for with property tax). If you filter for Jersey City, you can see that in 2017, $237 million in local tax dollars were paid to the City, $128 million were paid to the County, and $119 million were paid to the Public Schools.
So...how can we direct more money to the schools?
The Board of Education must raise the school tax levy. The BOE can do this through its annual budgeting process, which starts in March 2020 and ends in April 2020. The Board of Education can (and should) leverage the power of the growing tax base to fund our schools.
What is the "school tax levy"? Who controls it?
The school tax levy is the amount in taxes raised to support the public schools. It is the purview of the Board of Education. The levy is often described in terms of its relation to the tax base. That relationship is the "tax rate". For example: in 2018, the school tax levy was $124 million. The tax base in 2018 was $34 billion. So the school tax rate ($124M / $34B) was 0.36%.
This data is viewable in the first post in this series, which is here.
As broader context about the "levy", consider that our property tax bills help support three local governments:
a) the public schools
b) the county government
c) the city government
Each of these local governing bodies is administered and governed separately. As such, each establishes its own "levy" which is the amount raised in property taxes to help fund the services provided by that government. The Board of Education determines the school tax levy as part of its budgeting process each year, in the March to April timeframe.
How bad is Jersey City's school tax levy shortfall?
The situation is dire. Jersey City underfunds its own local, public schools by more than $270 million - annually - per the School Funding Reform Act of 2008 ("SFRA").
The chart below is from the Education Law Center, a NJ-based education policy think tank, and the data is based on SFRA data from 2018. SFRA is the funding formula used by the state to determine how much each school district should receive - if fully funded - in both local property tax ("local share") and state aid. The chart shows that in 2018, Jersey City's school tax levy *should* have been $398 million (blue bar on lower left), but instead it was *actually* $124 million (orange bar on lower left). This difference between the orange and blue bars is the $270+ million "local levy gap." And, looking at the chart on the lower right, we can see that this local levy gap has existed for at least 10 years, and has been growing wider over the past six years.
This gap represents structural, fiscal imbalance in Jersey City. The gap is driven in large part by the sharp year-on-year increases of Jersey City's "local share."
What is "Local Share" ... and why is it increasing in Jersey City?
Local share is how much a community *should* be spending to fully fund its local schools. Local share is meant to be funded with the local school tax levy.
Local share is defined within SFRA and is based on tax base value and district (ie aggregate resident) income. Jersey City's local share is increasing because Jersey City's tax base value and district income are increasing. As the Education Law Center chart below shows, Jersey City's tax base value and district income have been going up for at least the last 5 years:
Local share is a critical concept in this discussion. Because as local share goes up, SFRA-computed state aid goes down. SFRA is arguably very complicated, but a key takeaway here is this inverse relationship between increasing local share and decreasing state aid. You can read more about SFRA and local share at the NJ School Boards Association site here. I've also included links to additional articles about local share at the bottom of this post.
To bring this back to Jersey City:
- Jersey City is growing rapidly. That growth is reflected in tax base and income growth. Residents may see this in the form of escalating home values, increased rents, new restaurants and cafes moving into the community, and so on.
- Jersey City's growth is causing "local share" to grow.
- As "local share" grows:
- SFRA reduces state aid ("equalization aid" to be specific)
- It is incumbent upon the local community to address the balance of funding with the local school tax levy. This is where local leadership and advocacy to fully fund our schools comes into play.
A very complicating, and arguably confusing, wrinkle exists in all of this. Jersey City currently receives MORE state aid than SFRA says it should. This is due to a confluence of factors, some of which I wrote about here. However, Jersey City's excess state aid is due to be fully withdrawn over the next 5-6 years (we saw the first reduction of this aid last year, in the form of a $27 million/year reduction), which makes the school tax levy an increasingly urgent issue to address.
"Local Share" (explained below)
School Tax Levy
Local Levy Gap
Do we really need to raise the school tax? Isn't there another solution?
Can't we just 'cut the fat' or get private grants and donations to fix this problem?
These ideas are not without merit as standalone ideas to better Jersey City Public Schools. But they are not enough to address this funding crisis. We must consider the full scope and size of Jersey City's annual $270+ million local school tax levy gap. Case in point: how many grants would need to be won, and what work would be required to obtain them, to see recurring, year-on-year revenues of even $50 million? $100 million? $250 million?
Public schools are designed to be locally funded by a school tax levy, which is a recurring source of revenue that draws from the entire tax base, ie the entire community. The idea is, "if everyone gives a little, it all adds up to a lot." In this way, public schools are like fire departments, police departments, and public libraries. They are public goods that must be supported by public tax dollars.
What about the payroll tax? Won't that fix this problem?
No, the payroll tax is only a partial solution. The payroll tax is designed - by law - to help cover the shortage created by the state aid cuts; it will not be able to cover the full scope of Jersey City's local underfunding.
What about abatements? Can't the schools just get some of the abatement funds?
No...abatements are contracts and not available to the schools unless the city decides to share those funds.
The city's 2018 spending habits weren't limited by the $247 million city tax levy; the city also had access to $137 million in abatement funds* (none of which were shared with the schools). Abatements are contracts between the city and third parties (like developers and residents who own abated condos). So the schools do not have access to those funds, absent the city allocating them.
But the abatements need not be the focus in terms of obtaining public funds for the schools. The school tax levy can, and should, be the focus. Because the Board of Education does not need permission or action from the city to raise the school tax levy.
* $137 million in PILOT fees are found in the 2018 User Friendly Budget, "UFB 6-Tax Abatements" tab.
How does the local school tax levy get increased?
The Board of Education can raise the school tax levy as part of its annual budgeting process, which happens in the March/April timeframe.
Generally speaking, to increase the local school tax levy, two things need to happen:
- District administration needs to put forth a budget that increases spending to meet the level of need that exists.
- The Board of Education needs to approve that budget, and in doing so, needs to mandate that more school tax be collected to help fund the needs.
When we identify the needs, we can then make the case for funding the needs. Last year, the following needs were identified as common concerns held by many parents throughout the district.
Why is this so hard; why won't the Board of Education just increase the school tax levy to meet the needs of our kids?
Tax hikes are generally unpopular. As such, with any tax hike, it is imperative to provide a transparent rationale for the hike so that the public will support and understand why the increase is needed. BOE officials are under political pressure to not raise taxes too high, absent support from public schools stakeholders.
When school officials feel constrained to an existing tax expense paradigm (which includes a disastrously low school tax levy coinciding with state aid cuts), the process becomes about "austerity" and "doing more with less." This results in cutting services (eg laying off teachers, slashing supplies budgets) to "balance the budget" within a palatable tax expense paradigm for residents.
But a second factor exists, too: Jersey City's school tax levy is much smaller, as a starting base, then the city levy. In 2018, public schools received only 24% of local property tax dollars, or $124 million. The city, however, received 48% of local tax dollars, or $247 million.
When we look at the public spending habits of Jersey City as a whole, the city has a clear advantage in terms of owning the largest share of the tax funding pie.
For the district to claim a larger share of the property tax pie, the city must either (a) give up some of its "piece" of funding (ie cut spending) and/or (b) grow the pie itself (which can happen via tax base growth and/or an overall tax rate hike). Either way, it is the BOE, not the city, that must fight against the status quo, to claim more tax dollars. On this front, the BOE - both the administration and the elected trustees - need public support to help in that fight.
This is an uphill battle for funding, as many parents and public schools stakeholders have learned in the past year. In a real sense, this is about disrupting the existing paradigm, and forcing a new paradigm to take shape.
Won't a school tax levy hike mean more taxes overall?
Not necessarily. A school tax levy hike could be mitigated by a few factors, including cuts to city spending.
Consider an example: let's say the Board of Education *increased* its levy by $25 million because that amount was required to fund the needed number of teachers and other critical school staff, facilities repairs, after-school programming, and so on. This $25 million school tax levy increase would force a public process on the city's part to either (a) decrease its spending or (b) keep city spending as-is and pass on a total spending increase to taxpayers.
Last spring I heard some Board of Education trustees express concern about tax hikes for Jersey City residents. This concern is legitimate, but so is the systematic underfunding of our schools that hurts are kids. Board of Education trustees have a responsibility and mandate to fund the schools to the need required. Another legitimate concern I've heard is the impact if the city were to cut spending. For instance, we need police, fire, and other essential services.
So -- let's have this public dialog. What do we need to fund? What do we want to fund? What are our priorities, as a community? This is why a community dialog is so important, and why parents and public schools stakeholders must be vocal about the needs, to ensure they have a seat at the table in terms of how public dollars are allocated.
Jersey City: Will we fund our schools?
This is a difficult but ultimately necessary, and public, conversation to have.
Parents, teachers, administrators, and public schools advocates have a part to play here; we must be transparent about the needs, so that we can demand funding for those needs. Parents have an outsized role to play, given the self-interest we have for our children. That self-interest is self-evident to taxpayers, and helps compel the need for funding. Like:
- "My son needs water but is not getting it in school because the water fountains are broken."
- "My daughter struggles in math because of a learning disability but her math support teacher was placed back in the classroom due to teacher layoffs."
- "My son has special needs and his IEP mandates that a paraprofessional be with him throughout the school day. But due to staffing cuts, the para cannot be with him at all times."
- And so on.
Elected officials can be compelled by organized advocacy. But...we must organize and then advocate.
Local share - articles for further reading:
The Highs & Lows of Local Share in New Jersey, State Aid Guy. January 2019.
In Five Years, Jersey City Will be Ineligible for Equalization Aid, State Aid Guy. January 2019.
Explainer: Everything You Need to Know About School Funding in NJ, NJ Spotlight. July 2018.
Role of NJ Department of Education, from the NJ Department of Education.
School Tax Infographics: