New ELC Report: Fix the Contradiction in the Local Share to Improve School Funding in NJ
New Jersey’s property tax cap, a law aimed at minimizing annual increases in residents’ property tax bills, is a major obstacle to achieving adequate local funding in hundreds of districts across the state.
New Jersey school districts are expected to comply with two laws that are in direct opposition: one law requires districts to raise taxes to meet their local funding obligation under the state’s school finance formula, the School Funding Reform Act (SFRA), and the other restricts the amount of local revenue that can be raised through the school tax levy. Many districts face severe local funding deficits but have been unable to close these gaps because of the property tax cap.
The Education Law Center report released today, A Roadmap for Improving New Jersey’s School Funding Formula: Modifying the Property Tax Cap, highlights the inherent conflict between the SFRA’s local funding requirements and the state’s property tax cap. The report shows how the tax cap contributes to vast disparities in educational opportunities for thousands of New Jersey students.
Local funding gaps disproportionately affect the state’s low wealth communities and communities of color. In both the state’s poorest school districts and those that serve significant majorities of Black and Latino students (>75% student population), school districts are raising an average of $1,600 per pupil less than what is required by the SFRA.
The only way to erase these funding deficits is to increase local revenue. However, even if these underfunded majority Black and Latino or low-income districts increased their levy to the 2% limit every year, it would take an average of 24 years just to reach their current local share.
The consequences of the tax cap have been even more severe in recent years as many school districts have faced state aid reductions under the S2 amendments to the SFRA. In some circumstances, districts cannot even make up their state aid losses within the cap, never mind close persistent local funding gaps. S2 partly acknowledged this inconsistency by providing the former Abbott districts with a waiver allowing them to raise taxes to meet their local share, but that provision expires this year. This spring, Legislators temporarily extended this relief to other districts experiencing state aid cuts, allowing them to increase taxes to a maximum of 9.9% for one year only.
The inherent contradiction between the desire to keep property taxes down while also requiring school districts to shoulder a significant portion of the funding required for an adequate education must be addressed immediately to ensure that all students are provided with meaningful educational opportunities.
Education Law Center recommends the following:
- Provide a permanent waiver of the property tax cap so that districts that are raising less than their proposed Local Fair Share (LFS) can raise taxes by the amount necessary to make up the difference. Districts taxing above their LFS would still be subject to the cap.
- Require school districts that are below adequacy and below their LFS to raise their school levy by a minimum percentage each year to ensure progress towards adequate funding levels, unless they can demonstrate that their spending levels are sufficient to deliver the New Jersey Student Learning Standards.
- Commission a study of the LFS, which should include an examination of how the existing property tax cap affects school districts’ ability to adequately fund their schools. The study should also explore other modifications to the LFS formula so that it more accurately reflects districts’ ability to raise taxes and to reduce year-to-year volatility in local funding expectations.
“While we understand the desire to keep New Jersey’s property taxes in check, we cannot do so at the expense of public school students,” said Danielle Farrie, ELC Research Director and report author. “School districts must be provided the tools they need to raise the local share that our school funding formula requires. And if lawmakers believe that those local funding obligations are either unfair or unrealistic, then they must take steps to address how those funding obligations are calculated.”
RELATED STORIES:
THE GOOD, THE BAD AND THE MISSING: EDUCATION FUNDING IN NJ’S FY25 STATE BUDGET
ELC TO THE STATE OF NJ: THIS IS THE HOW AND WHY OF REVIEWING THE CURRENT SCHOOL FUNDING FORMULA
Press Contact:
Sharon Krengel
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skrengel@edlawcenter.org
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