Christie Budget Would Strain NJ Schools And Local Governments, Rating Agency Says

TRENTON -- Schools and local governments will feel the pinch in Gov. Chris Christie's final budget, a rating agency said Monday of the $35.5 billion spending plan.

The budget includes just $16.1 million in new direct aid for schools, and the vast majority of schools won't see any increase from this year's levels. They do benefit from indirect aid, in which the state picks up the tab for debt service and teacher retirement benefits. Those supports would increase by more than $500 million from this year to next.

Local governments won't fare much better, S&P Global Ratings said, as they'll receive just $1.7 million, or 0.11 percent, more than the current budget. 

Fitch Ratings kept the state's credit rating unchanged despite "woefully underfunded" pensions.

Both are limited by state law on how much they can increase property tax levies from year to year. There are, however, some exceptions. Property taxes and state aid are their primary sources of income.

But school districts that are seeing enrollment growth will likely struggle most, analysis said.

New Jersey school districts with booming enrollment have been hit especially hard during Christie's tenure because the governor has regularly awarded flat state aid. Even if Christie had followed the formula, a cap implemented by state lawmakers would restrict some districts from seeing the full increase in aid they are owed under the formula.

"The proposed budget holds kindergarten-grade 12 aid to schools flat to fiscal 2017 levels for most aid items, except for charter school aid, host district support aid and school choice aid," S&P said. "Therefore, districts experiencing enrollment increases could face budgetary pressure as state aid effectively declines on a per pupil basis."

Christie spokesman Brian Murray said the S&P report bolstered the governor's argument that the state needs to get pension and health benefits under control.

"More than $670 million of new state money is going to subsidize pension and benefit payments, nearly $500 million for teachers alone," Murray said in a statement late Monday. "That is why the Governor's call to examine ways to buttress these pension systems with additional assets and reforms should be a top priority between now and June 30."

S&P said it doesn't expect Christie's budget, as proposed, to move municipalities' credit ratings, but funding for schools is more unsettled.

The governor wants to rewrite the school funding formula, under which 31 low-income districts receive more than half of the roughly $9 billion in direct state aid. Those district are guaranteed high levels of state funding by a state Supreme Court decision. 

Dropping his own controversial plan, Christie in his February budget addresse issued a challenge to Democrats who control the Legislature to work with him to come up with a new funding scheme.

What progress, if any, they've made is unclear.

"Changes that result in significant loss of state aid revenue could place pressure on a district's fiscal position, particularly those with limited reserves," S&P said. 

Original Article