Property Tax Break? Sweeping Change In How NJ Pays For Schools Is Now Law

The decades-old debate in New Jersey over how to fairly fund public education took another turn Tuesday when Gov. Phil Murphy signed into law the first major revamp of the state’s modern school funding formula since it was enacted in 2008.

The law envisions a massive redistribution of state aid over seven years from districts with shrinking enrollment or growing tax bases to those with booming populations and large numbers of high-need students. Taxpayers could get relief or an added burden, depending on which type of district they live in.

The law also relies on the state pumping more money — well over $1 billion, by some estimates — into schools over that period to bring all districts to “full funding,” a target that has proved elusive in recent years due to the Great Recession and defects in the formula that Tuesday’s bill signing is meant to fix.

"The budget is the first step in getting us to fully and fairly funding our public schools," Murphy, a Democrat, said at a bill-signing ceremony at Cliffside Park School No. 3, referring to the $8.5 billion in direct aid for school districts included in the budget he signed July 1. That is a $351 million increase over last year.

"And now today we’re going to keep moving the ball downfield by instituting the first broad reforms to the SFRA in a decade to ensure these investments are fairly and equitably getting to our school districts," Murphy added, using an acronym for the School Funding Reform Act, the state's school funding law. 

The signing ceremony came two weeks after the Murphy administration released updated state aid figures for the upcoming school year. Those numbers are the first step in implementing the law signed Tuesday and indicate the types of changes districts can expect over the next seven years.

In total, 391 districts received more aid than last year, 14 saw no change and 172 experienced a reduction. Those that lost money have until Aug. 1 to cut staff or programs or take money out of surplus.

While aid is mostly increasing statewide, four counties will see overall decreases: Cape May, Hunterdon, Ocean and Sussex. 

Jersey City lost the most aid in absolute terms, at $3.5 million. Murphy on Tuesday signed a separate bill, A-4163, authorizing a payroll tax there of up to 1 percent to help make up for the loss in aid.

Winners and losers

Use the table to see how your district will be affected in the upcoming school year. Story continues below.

The changes to the School Funding Reform Act were championed in the Legislature by Senate President Stephen Sweeney, D-Gloucester, and followed years of activism by parents, students, teachers and officials in districts that considered themselves “underfunded.”

The Murphy administration initially opposed the changes but reversed itself under pressure from lawmakers. The new law represents a compromise.

"It’s been a long effort; it’s been an exhausting effort," Sweeney said at the news conference, where he received a standing ovation.

The "underfunded" designation stemmed from the fact that those districts received millions less in state aid than the law said they should, while other “overfunded” districts received far more.

Those distortions were created by two provisions in the law that capped funding to districts with increasing enrollment and protected districts from funding cuts even if they lost students or experienced other demographic changes.

As Sweeney explained Tuesday, those provisions were meant to be temporary.

“The problem was we couldn’t undo it once it was done,” he said. “Until now.”

The revised formula Murphy signed Tuesday eliminates those provisions. Extra aid to overfunded districts — roughly $600 million — is intended to be phased out over seven years, while the state is also supposed to ramp up total funding during that time to bring all districts to full funding by 2025.

That plan, however, requires at least $1 billion in additional state spending and could be sidetracked by any number of economic or political developments.

The phase-out of extra aid began this year with a 5 percent overall reduction. It is set to be followed next year by an 8 percent reduction, then 10 percent, 14 percent, 18 percent, 21 percent and 24 percent in subsequent years. 

Some of that money, including $32 million in the current fiscal year, will be shifted to the most underfunded districts. 

County vocational schools are exempted because they don’t have the ability to raise taxes. The law also contains special provisions to reduce the impact for districts in unique circumstances. For example, former Abbott districts — those deemed by the courts to require special attention from the state — are authorized to raise local taxes above the 2 percent tax levy cap to compensate for any reduction in state aid.

The New Jersey Education Association, the state’s largest teachers' union and a key Murphy ally, was initially against the state's taking aid away from some districts to give it to others, saying it pitted districts against each other.

But in a statement Tuesday, the union praised Murphy for signing the school funding bill.

“For too long, New Jersey’s schools have been underfunded and ignored, forcing schools to survive on nothing more than slogans and empty promises,” NJEA President Marie Blistan said. “Gov. Murphy continues to stand up for public education and the people that dedicate their lives to educating our youth.”

The law was also met with approval from both sides of the political aisle.

"A child should never have to pay the price for the state’s inability to meet their needs," Sen. Kip Bateman, R-Somerset, said in a statement. "Fully funding our schools is not a waste of taxpayer money — it’s a fair and appropriate investment in the very people who will shape our future."

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