State Continues to Fund School Projects in Suburbs, While Leaving Poor Districts Stranded

Newark, NJ – November 1, 2007

State support for school building projects in New Jersey’s high wealth and middle income suburban districts continues to increase, even as the State refuses to fund numerous stalled building projects in poor districts, according to an Education Law Center analysis released today.

The suburban districts are tapping into a funding formula in New Jersey’s School Construction law, known as “Section 9.” Section 9 requires the State to provide aid for a portion of the ongoing interest payments on local school construction bonds. Section 9 aid is appropriated each year by the Legislature from the Property Tax Relief Fund in the State Budget.

Only non-Abbott districts able to obtain voter approval for local bonds to finance school construction projects can access the Section 9 formula. Under Section 9, the State must fund debt service on at least 40% of the eligible project costs, even in high wealth districts, with less affluent districts receiving even higher levels of aid. Abbott districts are not eligible for Section 9 aid.

An analysis of budget data from the non-partisan Office of Legislative Services shows the State was obligated for $36 million in Section 9 debt service aid in FY2006. The State’s Section 9 obligation grew to $39 million in FY2007, and jumped to almost $50 million in FY2008. The data also show a number of suburban districts are receiving over $1 million in Section 9 aid annually to pay debt service on school construction projects, including Cherry Hill, Evesham, Middletown, Freehold Regional, Lenape Regional, West Orange and South Brunswick.

“It is a cruel irony that the State school construction program, enacted to address long-standing facilities needs in poorer districts, now only funds projects in more affluent and middle income suburban districts,” said David Sciarra, ELC Executive Director. “While the Legislature continues to fund world-class school buildings in our suburbs, it stubbornly refuses to authorize additional funding for over 100 stalled and desperately needed building projects in urban districts.”

In July 2005, non-Abbott districts were informed they could no longer receive grants for facilities projects because the State School Development Authority (SDA) had spent all of the $2.6 billion authorized for grants in 2000. However, those districts were advised they could apply for debt service aid under Section 9 for their projects instead.

An analysis of referenda passed with access to the grant program from 2001 through April 2005, and the debt service aid option between September 2005 and September 2007, shows that high wealth districts have reaped significant State support for major facilities projects and will continue to do so through ongoing Section 9 debt service. In contrast, poorer districts have been largely shut out because many have high tax rates and cannot pass bond issues, or have little or no bonding capacity. And the separate program for Abbott districts has been out of funds since July 2005.

The data show that only 16% of the 19 poorest, non-Abbott districts — those in the State’s District Factor Group A — are able to obtain state funding for facilities. In contrast, 80% of in the highest wealth districts — DFG J – can access state funds for their projects.

In addition, a data display  on the total per student state and district potential spending on school facilities projects initiated from 2001 thru Sept. 2007 shows that non-Abbott DFG A and B districts, among the poorest, will spend only 40% of the amount spent by DFG I and J districts, the state’s wealthiest. Further, non-Abbott DFG A and B districts will receive about $500 less in state aid per student than in more affluent districts.

70 major projects have been completed in Abbott districts, with 29 more presently under construction. However, when the initial allocation of $6 billion for Abbott district was depleted in July 2005, the State stopped work on over 100 approved projects. ELC, on behalf of the Abbott school children, is now asking the Court to direct the State fund for 27 of those projects ready for bid, and 91 additional projects that are stalled but in the development pipeline.

Education Law Center Press Contact:
David G. Sciarra
Executive Director
voice: 973 624-1815 x16

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