When New Jersey established a new school funding formula in 2008, state lawmakers promised that no school district would lose money right away.

The concept, known as hold harmless, ensured that every school district received increased state aid in the first year before potentially seeing a decline in funding based on future enrollment and demographic changes.

But the hold harmless aid that was supposed to disappear in some districts is still being doled out today, even as other districts remain chronically underfundedbased on the state's formula.

Now, two state lawmakers say they're working on a potentially controversial bipartisan plan to change how that money — more than $500 million — is allocated.

"The hold harmless provision was meant to make sure there was no losers," state Senate President Stephen Sweeney said. "It absolutely created losers."

Sweeney (D-Gloucester) and Sen. Jennifer Beck (R-Monmouth) are finalizing a plan that they say would make school funding more equitable. Beginning in 2017-18, the proposal would gradually phase out hold harmless aid for districts that don't need it and reallocate that money to growing districts that are underfunded, Beck said.

The districts that would receive less hold harmless money are already "above adequacy," meaning they spend more money per student than the state's funding formula says is needed for a thorough and efficient education, Beck said. Those districts should be able to adjust their budgets, especially if their enrollment has dropped, she said.

"The bottom line is that we as a state have not allowed our methodology for funding to keep up with what's actually happening at a district," Beck said. "If you've lost 100 students and the state of New Jersey is giving you the same state aid as you had five years ago... there should be some cost savings along the way."

Per-pupil spending varies widely in New Jersey with some districts spending well beyond what the state formula deems necessary and others struggling to come close to their target for adequacy.

In Sweeney's legislative district, the spending ranges from a high of 149 percent of the adequacy number in Lower Alloways Creek to a low of 73 percent at Kingsway Regional, according to the nonpartisan Office of Legislative Services.

"The disparities among districts is just, it's remarkable," Sweeney said.

Sweeney said he won't divulge the specifics of the plan until it's finished. But the proposal will likely leave some school districts unhappy, he said.

"We are making sure that we get it right before we unveil it for one reason: It will be controversial," Sweeney said. "It will be fair, but you are going to have people, some happy, some unhappy."

The funding formula enacted in 2008, called the School School Funding Reform Act (SFRA), allocates money to districts based on enrollment and other factors. Extra money is given for students who require additional resources, such as special education students, English-lanague learners and students from low-income families.

The chasm between districts that could be considered overfunded or underfunded according to that formula stems from the fact that the state hasn't had enough money to follow it, said John Donahue, executive director of the New Jersey Association of School Business Officials.

Instead of fully funding the formula, which would adjust aid each year and give increased state dollars to schools with a growing enrollment or demographic changes, the state has either kept school funding flat or provided a small across-the-board increase in most years, Donahue said.

Because of that, the schools where enrollment grew the most didn't see their state aid increase as much as it should have, Donahue said.

"They will never catch up," he said.

Most New Jersey lawmakers represent both school districts that are in need of more state funding as well as those that are getting hold harmless money they don't need, Beck said. She thinks it should be easy to explain to local residents why money needs to be diverted.

The New Jersey School Boards Association agrees that funding should be fair and some districts have been shortchanged, spokesman Frank Belluscio said. But the organization needs to hear the full details of the proposal before it takes a stance on it, he said.

"NJSBA does not want the rug pulled out from under those districts that are now spending above adequacy," Belluscio said.

The lawmakers will release the plan as soon as its finished, Sweeney said.

"I think it's going to help go a long way to be fair to all districts, not just some," Sweeney said.

[Original Article]