Some School Funding Cuts are Restored, But the NJ Legislature’s Work is Not Done
Last week Governor Phil Murphy signed two bills offering some support for school districts facing state aid reductions in the FY25 state budget. Though the budget is not yet finalized, the Governor has proposed full funding of the state’s school aid formula, the School Funding Reform Act (SFRA), for the first time. But even with full funding, and as a result of Senate Bill 2, an amendment to the SFRA, nearly 200 districts are slated to see their state aid decline.
As they did last year, the Legislature and the Governor enacted last minute legislation to walk back some of the proposed cuts and mitigate some damage as school districts face deadlines to certify their budgets and notify staff when their positions are not being renewed.
The first bill (A4161/S3081) appropriates $44.7 million to return 45% of school districts’ proposed state aid reductions. The bill also allows school districts with proposed FY25 state aid levels less than their FY21 aid levels to increase property taxes above the 2% cap without voter approval. The tax increase is limited to the difference in FY21 and FY25 state aid or a 9.9% increase over the FY24 tax levy, whichever is lower.
The second bill (A4059) gives districts losing state aid additional time to submit their budgets so they can make modifications based on the restored state funding and any additional tax levy.
While these two bills provide some relief for school districts, the Legislature must take additional steps to mitigate harm to districts facing state aid reductions in FY25 and beyond and to benefit students across the state.
First, the Legislature must increase the amount of Stabilization Aid in the FY25 budget. The Governor’s proposed budget includes just $5 million, down from $20 million in FY24. With many school districts facing even greater challenges balancing their budgets this year, an adequate level of Stabilization Aid could prevent staff layoffs and help maintain programs. The final FY25 budget should restore the full $20 million, and the Department of Education should ensure distribution of this aid near the start of the school year.
Second, the Legislature must include in the FY25 budget additional funding for Extraordinary Special Education Aid, an aid category that reimburses districts for high-cost special education placements. Despite increasing special education costs, Extraordinary Aid has been flat funded at $420 million since FY23. In FY24, districts were reimbursed for only 72% of their eligible expenses. The reimbursement rate for FY25 is likely to fall even further without an increase.
Third, the Legislature must include an appropriation in the FY25 budget to allow the New Jersey Department of Education to conduct an in-depth Educational Adequacy Report (EAR). Due in early 2025, the EAR allows the Governor and Commissioner of Education to recommend to the Legislature changes to the cost components of the SFRA.
ELC has outlined specific recommendations for how the SFRA can be improved through the EAR. However, a successful EAR is dependent on consultation with school finance experts and meaningful stakeholder engagement. The Legislature must include an appropriation in the budget for these crucial activities to occur.
“We appreciate the steps taken by the Legislature and Governor Murphy to restore some of the devastating cuts proposed for school districts in FY25,” said Danielle Farrie, ELC Research Director. “However, we still have a way to go to ensure that all students in New Jersey have access to the resources, programs and services they need to succeed. We implore the Legislature to make these additional improvements for FY25 and then to turn to the increasingly important task of revising and updating the 16-year-old SFRA so that it meets the current needs of students across New Jersey.”
Related Stories:
ELC TO THE STATE OF NJ: THIS IS THE HOW AND WHY OF REVIEWING THE CURRENT SCHOOL FUNDING FORMULA
RECALIBRATION OF NEW JERSEY’S SCHOOL FUNDING FORMULA IS LONG OVERDUE
AN ADVOCATE’S GUIDE TO THE EDUCATIONAL ADEQUACY REPORT
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