NJ School Funding Changes Leave Jersey City With Tough Decisions Ahead

Jul 13, 2018

New Jersey Senate President Steve Sweeney has spent years pushing for school funding reform.
Credit Phil Gregory / WBGO

Restructuring New Jersey’s school funding formula has been a longtime plan for Senate President Steve Sweeney.  His plan increases the total amount of state aid to schools, but also changes the amount of aid districts receive.  

“Trying to find a solution to end the unfairness going on in this state.  Actually, the injustice where you have two classes of kids; the haves and the have nots,” Sweeney said.

It’s great news for large urban school districts like Newark and Paterson.  Even better for some smaller districts that will double or triple the amount of state aid in their budgets. 

“Districts that are entitled to increases in state aid, they are accelerating the pace of that increase for some districts and slowing it down for others,” said Danielle Farrie, research director at the Education Law Center.  ELC filed the Abbot v. Burke lawsuit that ultimately led to increased state aid for thirty-one school districts.

“The biggest change would be that they are reducing aid levels in some districts," Farrie said.  " About 200 districts across the state, who are receiving what is called adjustment aid under the formula, an aid that would keep their aid levels flat.  This year those districts are going to start to see continuous cuts in their state aid over the next seven years.”

Farrie says Jersey City is expected to see the largest cuts, even though it’s the second most populated city in New Jersey.  

“They’re sort of in this bizarre Catch-22, where the state is looking at them and saying ‘you have become significantly wealthier.  You have a larger property tax base and a growing income base in the city.  You should be able to use some of that revenue to support the schools.  But at the same time, the state has also limited Jersey City’s ability to raise taxes.”

That changes to some extent with the new school funding formula moving forward.  Former Abbot districts will temporarily have their two percent property tax cap lifted to help generate revenue. 

Business owners in Jersey City could feel the impact as well.  In an office tucked away between the skyscrapers located at the Exchange Place waterfront, Hudson County Chamber of Commerce President Maria Nieves says she has received numerous phone calls from Jersey City businesses.  They’re concerned over the potential of a one-percent payroll tax.  

“In the seven years I’ve been with the chamber, this issue more than any others has generated the most concern and from all types of businesses,” said Nieves.

The new revenue would be used to make up for lost state aid in city schools.

NJ Governor Phil Murphy signs FY 2019 budget, agrees with lawmakers on retooling how the state distributes school aid.
Credit Phil Gregory / WBGO

“We are opposed to this employer payroll tax of one percent.  Primarily because it is going to be a drag on economic growth and development in Jersey City, which has been a real driver for the state of New Jersey over the last twenty years, in terms of growth and development.”

Nieves says it will affect all businesses, big and small, and believes a payroll tax could be a deal breaker for some businesses that might have considered locating to Jersey City.

“If they’re a restaurant or a hotel that works already with very low operating margins, they’re going to have to consider how they generate additional sales.  If it’s a college or a university which is a non-profit, also subject to this tax, they’re going to have to ask themselves how they raise additional funds from their donors or the students that pay tuition, to pay for this additional tax.”

In the 1980’s Newark implemented a payroll tax on its businesses, but Nieves says Jersey City’s financial situation is much different.

“Newark was having a great crisis with regards to its general operating budget and they had to find a fix.  Over thirty years you can imagine and understand that a tax like that becomes very much entrenched into the ecosystem.  It then becomes very hard to figure out how you make up such a substantial part of a cities revenue.  What we would like to have happen here is to not have to face that type of situation at all in Jersey City by not having the tax imposed in the first place.”

Lawmakers have suggested the school funding formula adjustments could have districts funded at one-hundred percent in about seven years.  Rutgers University Education Finance professor Bruce Baker points to the School Funding Reform Act of 2008 to say a projected timeline is unrealistic.

“Anytime we’re talking about year-to-year legislative budgeting and passing the buck five to seven years down the line really is kind of ridiculous.  It’s hard enough with three-year phasing.  We look back at the original adoption of the SFRA, they were looking at a three-year timeline to get it close to whole, and that’s when the economy tanked.  It’s hard for any legislature in any given year to obligate the legislature the next year to follow through, no less four, five, to six years down the line.”

While some New Jersey school districts are celebrating much needed additional state funding, some will have tough budget decisions to make moving forward.