More than you ever wanted to know about school state aid

NB: 1. I am a member of the Hillsborough Township School Board. Opinions expressed here are solely my own and do not express the views or opinions of the Hillsborough Township School Board.
2. It is very important for the community to express their support or opposition to the referendum and its impact on the school district and taxpayer by voting on Tuesday, March 12, 2019.

3. This is my personal assessment of the referendum and should not be construed as instructing the community on how to vote.

In addition to being a member of the Hillsborough Township School Board, I also volunteer as an officer of the Somerset County School Boards Association (SCSBA) and serve on the New Jersey School Boards Association (NJSBA) Delegate Assembly, Legislative Committee, Strategic Planning Committee and was invited to join the Finance Committee.

On Saturday, March 9, 2019, I spent the morning and early afternoon learning more about school funding (aka state aid) from the NJSBA Governmental Relations staff.

The top 3 factors influencing a district's state aid are: a) number of students b) make-up of the district (i.e. English as a second language, free/reduced lunch, etc) c) wealth of the district.

The state uses these factors to calculate the "adequacy budget" (*1) which is the minimum amount a district would need to spend to provide an adequate education for every pupil in the district.

Then, the state calculates what the local district can afford and state aid is supposed to cover the remainder. Except the state does not fully fund the formula and is about $600M to $1B short.

That means, while the state's goal is to give each district its calculated state aid, in reality, each district is getting funds on a pro-rated basis of the total available school aid. That is why I said, while implementing FDK is a creative idea to lose less state aid, it is not a guarantee from the state and could wind up being a very expensive mistake.

Hillsborough is losing state aid because of part c) - the state says our income has increased by ~33% over the last ~ 7 years. In fact, ~ seven years ago, Hillsborough was considered $13M underfunded! This volatility is difficult to react to, and my colleague Gregory Gillette suggested proposing to NJSBA that they advocate for a different formula that takes a rolling average over the last 5-10 years when considering a district's wealth. I brought this up at Saturday's Legislative Committee and the idea was well received.

According to the district's projections, Hillsborough was supposed to lose $695,046 for the 2019-20 school year. Based on Governor Murphy's proposed state aid numbers, Hillsborough will lose $526,434 (*2). The proposed loss is less than the estimated loss, at a difference of $168,612, which is a good thing. But it further shows that our estimates are just estimates and not guarantees.

Finally, I also proposed at Legislative Committee that NJSBA advocate that any district that is losing state aid and has the desire to increase the tax levy beyond the 2% cap be allowed to take a waiver to increase the levy for the amount of decreased state aid. The governmental relations team said they have been talking to Senator Sweeney's office and Sweeney's staff recognize parts of S-2 in light of the tax cap had unintended consequences. NJSBA staff said it’s possible there could be movement this session, so that is hopeful, but they couldn’t guess how realistic.

Hopefully this explains why Hillsborough gets the aid it does compared to neighboring towns. If you would like to know even more, check out the NJ Spotlight article on the subject (*3).

Footnotes:

(*1) Adequacy Budget (AB) = (BC + AR Cost + LEP Cost + COMB Cost + SE Census) x GCA where

- Base Cost (BC) is per pupil amounts weighted by grade level

- At Risk (AR) is at or below 185% of poverty guidelines

- Limited English Proficiency (LEP)

- Combined Cost (AR and LEP)

- Special Education Census (SE) - 2/3

- Geographic Cost Adjustment (GCA)

Local Share Calculation = (EQVAL x PVR x 50%) + (INC x INR x 50%)

(N.J.S.A. 18A:7F-52)

where

- EQVAL is the district's equalized property valuation

- PVR is the statewide property value rate

- INC is the district's income

- INR is the statewide income rate

Equalization Aid = Adequacy Budget - Local Fair Share

There are other areas of state aid such as special ed, transportation, etc.

(*2) NJ DOE 2019-20 State Aid Summaries:

https://www.state.nj.us/education/stateaid/1920/

(*3) NJ Spotlight article on School Funding:

https://www.njspotlight.com/stories/18/07/25/explainer-everything-you-need-to-know-about-school-funding-in-nj/

Things to Consider on the Referendum

NB: 1. I am a member of the Hillsborough Township School Board. Opinions expressed here are solely my own and do not express the views or opinions of the Hillsborough Township School Board.

2. It is very important for the community to express their support or opposition to the referendum and its impact on the school district and taxpayer by voting on Tuesday, March 12, 2019.

3. This is my personal assessment of the referendum and should not be construed as instructing the community on how to vote.

This is the statement I would have read at the March 4, 2019 Board of Education meeting if the meeting had not been cancelled.

Here are a few things to consider whether or not you support the referendum:

1) The $8.1M tax levy proposal in the March 12, 2019 referendum ONLY covers full day kindergarten ($3M) and maintaining the status quo ($5M). This is a permanent tax increase. In the future, there will be additional tax levy proposals to address aging infrastructure and to build a new high school.

FDK has a $3M start-up cost for the first year (staffing, modular classrooms - note, K students will be in the main building; support staff / specials are proposed for the temporary classrooms). The expectation is that by increasing our student head count via FDK (half day K students are counted as 0.5 student), the district will lose less state aid. However, this is not a guarantee. Another scenario could be the district spends $3M on FDK and does not get its expected aid, thereby putting the district in worse financial shape.

Finally, permanent space for FDK requires more space, either with a new high school or building expansion. This is another big assumption. The referendum only mandates that FDK be implemented in the first year. Future boards could decide to allocate the money elsewhere. While not likely, it's possible. All these reasons together are why I said the plan is poorly designed and why I voted no to linking FDK to the status quo part.

However, if all the pieces fall into place perfectly, the upside is the district gets FDK and loses less state aid (which means in Year 2, it wouldn't need the $1M state aid portion of the $5M status quo part.)

2) The $5M status quo part is made up of approximately

- $1.9M fund balance replenishment (the district is required to keep 2% of its budget in reserve; was semi-depleted in the last year for HVAC, increasing special ed costs, etc.)

- $1M estimate of state aid reduction each year for a total of $5.3M over 6 years - the state aid loss varies from year to year, some years are more than $1M, some years are less than $1M

- $2M estimate of health care premium increases, salary increases, other insurance increases, E-rate revenue decrease, etc.

Because the 2019-2020 budget is projected to have a $5M deficit, it is true that reductions will need to be made if the referendum does not pass. Because the school board did not introduce a tentative budget, it is only speculation where the cuts would come from.

My personal opinion is that the district's mission is education, so any cuts should come from areas that do not directly impact student learning. Also, I would immediately introduce a resolution to go back to voters to ask again for funding. But I would ask for it in a "staggered" fashion, not $5M or nothing. Instead, I would propose $1M allows us to do X, another $1M allows us to do X and Y, etc.

Unfortunately, because of election deadlines, the earliest the board could hold another referendum is in September 2019, so the 2019-2020 budget (which is finalized in May 2019) would necessarily include reductions.

If the referendum passes, that gives the district some breathing room. However, to be sustainable into the future, the district will need to re-evaluate its priorities in light of costs that are increasing faster than the board's ability to raise the tax levy. This referendum plugs a hole, it does not solve the problem.

3) Consider the impact over six years - state aid is projected to decrease by a total of $5.3M over the next six years. If the referendum is approved, the district will gain $48.6M in revenue from the local tax payer to fund FDK and maintain the status quo, beyond the normal 2% tax levy growth plus exemptions.

*******3/11/19 EDITED TO CLARIFY -

State aid is expected to decrease by $5.3M over 6 years but it is cumulative. As an example, if our current state aid is A dollars, and in Year 1, we are projected to lose X dollars, and in Year 2, we are projected to lose Y dollars, that means our actual Year 1 aid is (A-X) and our Year 2 aid is (A-X-Y).

Based on current projections, the total state aid loss over 6 years for status quo (HDK) vs. implementing FDK is actually $20M. Thank you to Licia Gaber-Baylis and Jeff Consentino's discussion on how the aid is calculated for allowing me to clarify this.

*******

Also note, the tax levy for the current 2018-2019 budget is $95.5M, so this $8.1M tax levy represents an 8.4% increase in the local tax levy. See the user friendly budget page 2:

https://www.htps.us/UserFiles/Servers/Server_791028/File/Hillsborough%20Township%20Public%20School/Board%20of%20Education/Budget/userfriendlybudget1819.pdf

4) Finally, rate-ables have not been certified for Hillsborough or Millstone, so while there are estimates for tax impact on the "average" home, it has the feeling of asking for a semi-blank check.

5) In conclusion, I hope this perspective shows there are more things to consider than what is presented through official channels and supporters / opponents of this proposal.

Your vote is important. Please vote on Tuesday, March 12. Thank you.

Jean's referendum notes

I was the lone no vote on the referendum when the BOE voted back on January 7, 2019:

http://www.millstoneboro.org/wp-content/uploads/2019/01/hb_boe_special_election_resolution.pdf

I wanted the referendum posed as two questions and you read my prepared remarks on this blog:

http://jeanforboe.blogspot.com/2019/01/prepared-remarks-january-7-2019.html

I encourage everyone to review information provided by the district here:

https://www.htps.us/cms/One.aspx?portalId=791117&pageId=16757836