The imperfections in New Jersey’s school funding formula and the constraints the state faces with district budget challenges were on display as the education chief made a case for Gov. Mikie Sherrill’s record-high education spending plan.
“The funding formula was groundbreaking when implemented, but it has now been nearly 20 years,” Education Commissioner Lily Laux said Wednesday as she testified before the Assembly budget committee. “We need to revisit how we account for at-risk students and multilingual learners and special education.”
Laux fielded three hours of questions. Republican and Democratic lawmakers took about a half-hour of that time debating among themselves a school funding system that pitted the state’s largest school district, Newark, against others that are set to lose funding.
About $1.38 billion in state aid is earmarked under Sherrill’s proposed budget for Newark, a $60.6 million increase.
Other large school districts would log the biggest state aid increases in the proposed budget, including Paterson with $37.1 million and Trenton with $24 million.
Wednesday’s meeting was among a series of budget hearings with department heads as lawmakers work with Sherrill’s office to adopt a budget by July 1, the constitutional deadline.
The Education Department’s proposed $22.5 billion budget includes $12.4 billion in school aid and marks a $222.6 million increase from the current fiscal year.
Guardrails were used to decrease year-to-year volatility in state aid, with a 3% cap on decreases and 6% cap on increases.
“We need to take a careful look at the funding methodology as we work to stabilize and modernize the formula,” Laux said. She wants to improve predictability so that school districts can plan more in advance and increase transparency on the factors that contribute to funding allocations, she said.
Credit: AP Photo/Mel EvansLaux said she was committed to working with stakeholders and lawmakers to update the funding formula, though she gave little detail on how she planned to achieve that over the next year.
Lawmakers, staunchly divided between party lines, argued over money.
“I haven’t seen too many issues as hot as education and its funding,” Assemblyman Gerry Scharfenberger (R-Middletown) said. “Schools across the state are in a financial free fall — there’s no way to sugarcoat that.”
School boards in recent weeks have proposed a variety of ways to close budget holes they foresee in the 2026-27 school year, including closing school buildings, laying off staff, cutting programs and even selling district-owned properties.
About 400 of the state’s 600 school districts would see more money in next year’s budget than this year, while 167 districts would see cuts, according to projected state aid figures.
“We have to not lose sight of the districts that are getting hurt, and the message to those districts is ‘your property taxes are not high enough,’” Scharfenberger said. “We just can’t keep going back to that same well, the taxpayers, to bail out the enormous jumps and gaps in budgets every year.”
He noted that districts from Cherry Hill to Jefferson have recently announced some drastic measures to reduce budget gaps in the upcoming school year.
“There are a variety of reasons for this and I certainly wouldn’t want the message here to be about continuing to raise taxes,” Laux said. “When we look at the whole system, we are seeing this happen on a very large scale — it’s not just a handful of districts that the system isn’t working for.”
Among the top reasons that districts are facing tough choices, she said, are enrollment declines and rising costs that outpace inflation for health care, transportation and energy.
Teachers and other public school staffers are facing steep increases for coverage by New Jersey’s health benefits plan, according to a report for the state Treasury Department. The program’s crisis “faces similar structural challenges that could throw it into an actuarial ‘death spiral’ if significant reforms to contain spending and cost growth are not implemented soon,” the report stated.
“This year’s budget, we had a short timeline” to consider real changes to the school aid formula that could address districts’ budgets, Laux said. She added that in the coming months she wants to go beyond “tweaks” to the formula and “actually look at substantively how we can ensure the formula works better and how we drive down costs” that are straining the system.
