Under Gov. Phil Murphy’s new budget plan, 393 school districts would see state aid increase and 75 would see it fall. (Danielle P. Richards for New Jersey Monitor)
Gov. Phil Murphy’s new $58.1 billion budget plan proposes changes to New Jersey’s school funding formula that would cap changes to most types of school aid, shift how the state calculates special education assistance, and give more funding to districts that raise taxes above the state’s 2% property tax cap.
In all, 393 school districts would see their state aid increase in the coming fiscal year under Murphy’s plan, 75 districts would see it decrease, and aid would be flat in seven districts. A total of 65 districts would see aid increase by more than 6% because of heightened support in certain categories of state aid.
“For the last eight years, Gov. Murphy has ensured the public education system remains at the forefront of his priorities for New Jersey, and this budget is no different,” Education Commissioner Kevin Dehmer told reporters Wednesday. “All told, more than $22 billion is included in the budget to support our schools and our educators.”
Murphy’s plan would limit reductions to four categories of school aid — equalization, transportation, special education, and security aid — to 3% of the aid the district received under those categories in the prior budgetary year, with increases capped at 6%.
Steep swings in state aid have harried some New Jersey school districts in the years after Murphy in 2018 signed legislation phasing out adjustment aid that was meant to keep districts whole as the state implemented a school funding formula enacted a decade earlier.
The phase-in under that bill, called S2, completed its final step in the current fiscal year. Education officials have said districts are now unlikely to face dramatic shifts in annual aid, though aid levels will continue to vary with changes in enrollment and other factors.
To further lessen the chance of steep swings, Murphy’s budget plan — which will be reworked by the Legislature before a June 30 deadline — calls for state officials to calculate aid levels using a multi-year average of district property valuations and incomes.
“By averaging multiple years of data rather than using just the most recent data point, year-over-year school aid changes will be less sensitive to annual changes in local wealth measures,” the commissioner said.
Changes to certain aid categories would remain uncapped under the governor’s proposal. Four districts would see their total state aid reduced by more than 3% because of changes to aid categories not subject to the caps, according to figures released by the Department of Education Thursday.
Among those, Cape May City would see the largest reduction as a share of its total aid. That district would see its total aid reduced by $444,752 — a 27.3% decrease — because of a reduction to its military impact aid, which is awarded to districts with students whose parents are on active duty in the nation’s uniformed services.
The changes proposed to the funding formula are to be made through the state’s annual budget and would be effective only for the fiscal year that runs from July to June, unless they are codified by separate legislation or repeated in the next governor’s first budget, the commissioner said. Murphy, a Democrat, leaves office in January after serving two terms.
His budget plan would allow districts that are spending below their local fair share — the amount of school funding a district must supply locally — to raise their local tax levies above the state’s 2% cap on property tax growth. The state would provide additional funding to districts that do so.
Murphy has proposed a $20 million funding pool for districts that exceed the 2% cap, though Dehmer suggested the program could see changes as lawmakers negotiate the budget over the coming months.
“Those details, that’ll be worked out as we go along,” Dehmer said. “And districts would have to demonstrate that they are eligible and meet those requirements to get the additional state aid.”
It is not immediately clear how far these districts would be allowed to raise levies without seeking approval from voters.
Other proposed changes would shift how the state calculates special education aid to require the department uses actual special education student enrollment to determine aid levels rather than a statewide average, as called for under the state’s current census-based model.
Some factors used to determine state funding levels — like teacher salaries and health benefit costs — are also getting an update.
“Across the board, all the parameters in the formula were upped to better reflect current costs,” Dehmer said.
As elsewhere in the budget, the Department of Education faces some uncertainty over federal funding in the coming fiscal year.
The department anticipates roughly $1.1 billion in federal aid for the fiscal year that begins July 1. While that amount is a relatively small portion of the more than $22 billion set aside for education in Murphy’s budget proposal, its loss could still force cuts or tax hikes at the district level.
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