The Controversial NJ School Funding Deal, Explained

TRENTON -- As New Jersey's budget deadline approaches, millions of dollars in state funding hangs in the balance for local schools.

A deal cut between New Jersey's top Democrats would boost the state's overall school spending, but reduce state aid to some districts in a controversial plan that hinges on approval from Gov. Chris Christie. 

But Republican lawmakers have denounced the plan, and the governor is insisting that Democrats get onboard with his own contentious initiatives, leaving budget talks in limbo. 

Meanwhile, districts set to lose state aid are protesting the Democrats' proposal, a compromise put forth by Senate President Stephen Sweeney (D-Gloucester) and Assembly Speaker Vincent Prieto (D-Hudson).

The deal could still fall apart before the budget is passed. If not, here's what to expect from the agreement. 

What does the deal mean? 

The proposal wouldn't constitute a major change for most districts right away, but the long-term impact could be much more significant.

In the short term, the deal would add a small amount of new school funding: $100 million for K-12 and $25 million for pre-K for the 2018-19 school year.

It would also immediately reallocate $46 million in existing school aid, shifting funding from districts considered overfunded by the state to districts considered underfunded.

Long-term, the proposed deal is the first step in a plan to increase school funding by a projected $1.6 billion, which should take at least five years to implement, Sweeney said. And the $46 million diversion is just the beginning of a Democratic plan to reallocate more than $600 million in existing aid, the most controversial aspect of the deal. 

Will this affect my property taxes? 

It won't right away because districts have already set their tax rates for the upcoming school year, said John Donahue, executive director of the New Jersey Association of School Business Officials.

But the deal could have an impact in future years, depending on where you live, Donahue said. 

Districts with growing enrollment could see more state dollars while those losing students could get less state aid. Districts could also gain aid if their tax base is weakening or lose state funding if there's a boom in development. 

Just because a district gains or loses state aid doesn't mean it will automatically raise or lower taxes, though, Donahue said.

Will students be affected? 

Students might not notice anything different, but there would likely be some impact if a district's state aid changes substantially in the next few years. 

Budget cuts could be the first change in districts that lose aid, while districts that gain state dollars might be able stave off potential cuts or implement new programs, Donahue said. 

Why is this happening? 

The state has consistently shorted its school funding formula under the Christie administration, so most districts are considered underfunded. State school aid hasn't been adjusted to account for districts' enrollment and demographic swings, leaving growing districts especially at a disadvantage.  

What exactly is the state's formula for funding schools? 

The formula is actually a series of formulas designed to answer two key questions: How much money does each district need to spend to provide a quality education, and how much of that money should come via state aid? 

The calculation starts with a base cost for an elementary school student that increases for older students. The formula also awards extra money for students who historically require extra support, including students from low-income families and those learning to speak English as a second language. 

Once it's determined how much a district needs to spend, the formula considers a district's wealth and its ability to generate revenue through property taxes.

A wealthy districts with a strong tax base is expected to cover a higher percentage of its school costs through local revenue. 

Why is the state reducing aid to some districts? 

When the current funding formula was passed in 2008, some districts would have lost money in the first year, a politically undesirable situation, Sweeney said. 

So, lawmakers created a category of funding called adjustment aid, better known as "hold harmless" funding. Essentially, money was awarded to those districts solely so that they did not lose any state aid and their lawmakers could support the school funding proposal. 

Designed as a temporary measure, the aid has remained in the budget ever since. Now, Sweeney says those districts should be able to adapt to less state funding.

Without reallocating the hold harmless funding, the state would need to come up with another $600 million to fully fund its formula. 

How will the state pay for increasing school funding? 

This part isn't entirely clear.

Sweeney has said the plan is dependent on a proposed tax on earned income above $1 million, which should generate at least $600 million a year. He also wants to add $100 million in new funding annually over the next five budgets.

That's a combined $1.1 billion, or about $500 million less than needed. Lawmakers will have to find a way to find the remaining funding in future budgets, Sweeney said.

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