NJ’s school funding formula needs to change, education chief says • New Jersey Monitor

New Jersey’s school funding formula should be changed to be more predictable and transparent following years of steep aid swings that have spurred school closures in some districts, state Education Commissioner Lily Laux told the Assembly Budget Committee Wednesday.

Lawmakers should also consider a broader examination of how the formula determines funding levels for districts given the changes they’ve faced to their needs since New Jersey enacted the formula in 2008, she said.

“This question of how we are looking at what schools really need is one that I think requires all of us to look carefully to say, are there better ways to do it,” she told the panel.

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In New Jersey, school districts are responsible for raising a part of the money that funds their schools, via local taxes. The size of that local fair share is determined by property values and income levels in the district, among some other things, and state aid fills the rest of what a district needs to provide students a thorough and efficient education, a constitutional requirement in New Jersey.

Gov. Mikie Sherrill has proposed a record $12.4 billion in formulaic school aid for the coming July-to-June fiscal year.

But in recent years, the phase-out of another type of state funding called transitional aid that began in 2018, combined with reevaluations and a pandemic surge in housing prices, led to steep swings in aid in some districts.

Though Laux said she’d give New Jersey’s funding formula a passing grade, she added that it has become outdated.

“The implementation and the reality of how it supports our schools today is something that needs another look,” she said.

Lawmakers have for years eyed changes to the formula, but so far those changes have been relatively limited.

They have, at times, allowed certain school districts to exceed the state’s 2% cap on property tax hikes to close funding gaps.

Budget language in the current year budget, maintained in Sherrill’s spending proposal, caps decreases in most categories of state aid, with increases capped at 6%. Other budget provisions require that the formula use a rolling three-year average of property values and provide special education aid based on actual enrollment, rather than a statewide average.

Apart from shifts in formulaic aid, New Jersey school districts have faced fiscal uncertainty in part over soaring health benefit costs, and premiums on the School Employees Health Benefits Program are expected to rise by double digits again this year.

In some cases, rising costs have prompted school closures.

“In West Milford, the state aid has been cut in half — 80% of the school tax burden is on property taxpayers,” said Assemblyman Mike Inganamort (R-Morris).

That Passaic County district last week announced it would close the Paradise Knoll Elementary School, which enrolled just under 200 students in the 2024-2025 school year. It will be the second West Milford elementary school to close in the last three years.

Broader changes to the school funding formula could not be made this year because of the short time Sherrill’s administration had to draft a budget, Laux said (Sherrill, a Democrat, took office on Jan. 20). The formula was enacted in statute, and changing it would require legislation.

Laux’s questioning was derailed after committee members sparred over funding for poorer urban districts like Newark.

“The top 10 school districts get $4.4 billion. That’s 7% of the entire budget, so we really have to look at this,” said Assemblyman Gerry Scharfenberger (R-Monmouth), adding, “We just want to make sure everything is being spent wisely, we’re getting the outcomes that the investment is calling for.”

Urban districts with large enrollments and home to families with lower incomes receive larger amounts of state aid than their suburban counterparts.

Democratic lawmakers said the additional funding is needed because of the unique challenges faced by those districts.

“If it weren’t for the school lunch program, these kids would not eat. Many of the children in my city, Camden, where I still live today, don’t have both parents. Some of them — many of them — are being raised by their grandparents,” said Assemblyman Bill Spearman (D-Camden). “Parents have been killed. Parents are incarcerated. Parents are on drugs. These aren’t problems that suburban districts face at the same level.”