New Jersey’s school finance law, adopted in 2008, implements a school funding formula that is a national model for ensuring all students have the resources needed to achieve rigorous academic standards and graduate college and career ready. The finance law – the School Funding Reform Act (SFRA) – contains a unique feature: a requirement for the Commissioner of Education to conduct a three-year analysis of how well the formula is working to meet student need and, based on that analysis, recommend to the Legislature adjustments to the education costs, aid amounts and other cost components of the formula for the subsequent three years. This analysis and the recommended adjustments must be presented to the Legislature in a document from the Governor called the Educational Adequacy Report (Report).

Last year, Governor Christie did not issue the Report, even though the three-year timeframe had expired. Since this Report may be presented in the coming weeks, legislators, advocates and parents concerned about maintaining the SFRA formula need to be prepared to quickly respond. To assist in this effort, ELC has prepared the following Q&A.

What is the School Funding Reform Act?

The School Funding Reform Act (SFRA) is a law enacted by the Legislature in 2008 that establishes the formula for determining the level of state aid and local funding needed to educate all New Jersey public school children. In a 2009 ruling in the Abbott case, the SFRA formula was carefully reviewed by the NJ Supreme Court and found to provide sufficient funding to meet the “thorough and efficient” requirement in the NJ Constitution.     

What is the Educational Adequacy Report?

The SFRA includes a provision requiring evaluation of the formula every three years; based on this evaluation recommendations may be made for adjustments to the costs, weights and aid amounts in the formula for the following three years. The evaluation and recommendations for formula adjustments must be presented in a formal report called the “Educational Adequacy Report.” The SFRA sets forth the specific elements of the formula that may be adjusted every three years.

Who prepares the Educational Adequacy Report?

The Governor and Commissioner of Education conduct the evaluation and prepare the Report, including any recommendations for formula adjustments. 

What parts of the formula can be adjusted?

The SFRA allows adjustments to the following elements of the funding formula every three years: the base cost per pupil, the additional costs or “weights” for at risk (low-income) pupils and English language learners, preschool per pupil amounts, the cost coefficients for security and transportation aid, the State average classification rate for general special education and speech only students, the excess cost for general special education services and speech only services, and the extraordinary special education aid thresholds.

For example, the base cost per pupil is currently set in the SFRA at $9,649. To calculate the additional aid for at risk pupils, the base cost is increased by 47% for those students. These costs and additional “weights” can be adjusted in the Educational Adequacy Report based on evidence of how the adjusted levels will meet the needs of New Jersey’s public school students.  

What parts of the formula cannot be changed through the Adequacy Report?

The fundamental structure of the formula cannot be changed through the Report, including the method of calculating cost components and student enrollments. Any changes to these structural components of the formula can only be made by amending the SFRA statute through the normal legislative process.

How do the Governor and Commissioner recommend formula adjustments?

The Governor and Commissioner submit their recommendations for formula adjustments in the Educational Adequacy Report to the Legislature. The Legislature then has 90 days to determine whether to accept or reject the recommendations in the Report.

What happens if the Legislature agrees with the recommendations?

The recommended adjustments to the formula are automatically adopted for the three successive fiscal years if the Legislature does not pass a concurrent resolution objecting to the recommendations within 90 days. 

What happens if the Legislature does not approve of the recommendations?

If legislators are not in agreement with any part of the Adequacy Report, the Legislature must adopt a concurrent resolution within 90 days advising the Governor and Commissioner of their specific objections to the Report. The Governor then directs the Commissioner to submit a revised Report that addresses the Legislature’s objections. The Commissioner has 30 days to submit the revisions.

What did the Supreme Court say about the Adequacy Report in the Abbott case?

The Supreme Court made clear that the three-year evaluation and adjustments to the formula are a critical element of the SFRA. The Court specifically stated that it was approving the SFRA formula “in the good faith anticipation of a continued commitment by the Legislature and the Executive [Governor] to address whatever adjustments are necessary to keep SFRA operating at its optimal level.” The Court also based its approval of the SFRA on the mandate for a “retooling of SFRA after its reexamination” every three years. The Adequacy Report is so important that the Court ordered the State not only to complete the three-year evaluation, but also to conduct an evaluation that is “meaningful and relevant” so that the formula “continues to operate optimally” in future years.

The Commissioner released an “Education Funding Report” in early 2012. Is that report the same as the Educational Adequacy Report required by the SFRA?

No. The Commissioner in February 2012 issued an “Education Funding Report,” which contained many recommendations on school funding. Some of these recommendations are within the scope of the Adequacy Report, but many others are not (See this chart analyzing the proposed changes in the Education Funding Report and their relevance to the Educational Adequacy Report.). For example, the Commissioner recommended structural changes to the SFRA formula, including a new definition of “at risk” (low-income) pupils, a new method for calculating student enrollment, and modifications to “hold harmless” aid. These changes can only be made by the Legislature amending the SFRA statute. After issuing the Education Funding Report, the Commissioner informed the Legislature that it was not the Educational Adequacy Report required by the SFRA and that he would be issuing the Adequacy Report sometime in late 2012.   

What happens if the Commissioner fails to submit the Adequacy Report to the Legislature?

If no Adequacy Report is submitted, the current base cost, weights, and other aid amounts defined in the SFRA remain in effect and must then be used to calculate aid to districts in the annual State Budget.


Press Contact:

Sharon Krengel
Policy and Outreach Director
973-624-1815, x 24

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Press Contact:
Sharon Krengel
Director of Policy, Strategic Partnerships and Communications
973-624-1815, x240