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4-29-14 High School Graduation Rates Improve, State Budget Shortfall Crisis
The Record - Report: More NJ students finishing high school, but wide gaps persist…“The federal government changed the method of reporting in 2012 and made it uniform across the country to allow for more consistent and reliable comparisons.The graduation rate is determined by taking the number of students who graduate in four years with a regular high school diploma and dividing that by the number of students who entered 9th grade. Adjustments are made for students who transfer in or out.”

NJ Spotlight - Analysis: $800 Million Budget Gap Leaves Christie With Few Choices...'With Treasurer Andrew Sidamon-Eristoff’s shocking announcement that New Jersey is facing an $800 million current-year budget gap, he and Gov. Chris Christie now face the daunting task of figuring out how to close such a substantial deficit when most of the state budget -- with the exception of a promised $1.5 billion pension payment --has already been spent...'

The Record - Report: More NJ students finishing high school, but wide gaps persist…   “The federal government changed the method of reporting in 2012 and made it uniform across the country to allow for more consistent and reliable comparisons.

The graduation rate is determined by taking the number of students who graduate in four years with a regular high school diploma and dividing that by the number of students who entered 9th grade. Adjustments are made for students who transfer in or out.”

 April 28, 2014, 11:33 AM    Last updated: Tuesday, April 29, 2014, 7:14 AM

By HANNAN ADELY

staff writer

Related: Click here for graduation rate disparities among North Jersey schools

New Jersey high school graduation rates continue to rise and to be higher than the U.S. average, but wide achievement gaps persist, according to a new report.

“Building a Grad Nation: Progress and Challenge in Ending the High School Dropout Epidemic,” released Monday, shows that 86 percent of New Jersey students graduated in four years, six points above the national average of 80 percent. New Jersey ranks among the top 11 states in graduation rate.

In New Jersey, education leaders said smaller schools, preschool in poor districts and extra support services were reasons for the rising rate.

Terry Corallo, spokeswoman for the Paterson school district, said the district’s graduation rates had improved due to a focused effort by administrators, under the High School Renewal Initiative, that included smaller school academies and early student interventions.

“Since 2009 — when Dr. Evans became superintendent — our graduation rate has gone from 49 percent to 72.1 percent,” she said. “That's a dramatic improvement and we are pleased, but our work is not done until we are closer to 100 percent.”

The report reflects improvements in nearly all groups, including poor and minority students, even as it continues to show wide achievement gaps both locally and across the United States.

In New Jersey, 75 percent of low-income students who entered freshman year in 2008 graduated in four years, as did 75 percent of blacks and 77 percent of Hispanics. The graduation rate for white students was 93 percent.

Across the United States, 72 percent of low-income students graduated on time, as did 69 percent of black students and 73 percent of Hispanic students. For white students, the graduation rate was 86 percent.

Despite the gaps, the authors report that gains in Hispanic and black graduation rates over six years are a key reason for the overall improvement across the nation.

“After the nation witnessed flat-lining high school graduation rates for three decades, rates have risen about 10 percentage points over the last 10 years,” the authors wrote. “Improvements have been driven by dramatic gains in graduation rates among Hispanic and African-American students. But it is in those same populations that some of the greatest challenges remain.”

Minorities were helped by the closing of “dropout factories, or schools where the senior class is at least 60 percent smaller than the freshman class three years earlier, according to the report. In New Jersey, there were 21 dropout factories in 2012, or three fewer than a decade earlier.

Other reasons for improvements included more awareness and attention to the dropout rate and reforms, including the creation of smaller schools and more intervention for at-risk students, according to the report.

The authors of the report touted news that the high school graduation rate was 80 percent for the first time in the United States, calling it a “remarkable achievement.”

The report was based on U.S. Department of Education statistics from 2012.

The Record did an analysis of the state’s reported graduation rates in December and found wide disparities between poorer and wealthier districts.

In school systems where less than 5 percent of the students live in poverty, the typical high school graduates 96 percent of its students, The Record found. But in districts where more than 25 percent of the students live below the poverty line, the typical rate is 74 percent.

Those numbers are reflected in both Bergen and Passaic counties. Overall, in more-upscale Bergen, the typical high school has a 95 percent graduation rate, while the figure drops to 88 percent in Passaic. Schools that graduate at least 97 percent of their students include Glen Rock, Northern Highlands Regional, Ramsey, Ridgewood and Emerson, while the rate sinks to less than 85 percent in Cliffside Park, Garfield, Lodi, Manchester Regional and several high schools in Paterson.

Richard Bozza, executive director of the New Jersey Association of School Administrators, said the improvements were due to many factors, including extra support services and a focus on college readiness. The state is also seeing the impact publicly financed, high-quality preschool in the poor districts, known as Abbott districts, he said.

“These kids are starting to come through and everyone understands that it’s critically important to get kids off to a good start,” he said.

The achievement gap, he said, will remain a challenge because of larger issues related to poverty. The schools can address those barriers by expanding services to include health and social services, among other changes, he said.

“Building a Grad Nation” was written by a group of education nonprofits that includes America’s Promise Alliance, Civic Enterprises, Alliance for Excellent Education, and Everyone Graduates Center at the School of Education at John Hopkins University.

The federal government changed the method of reporting in 2012 and made it uniform across the country to allow for more consistent and reliable comparisons.

The graduation rate is determined by taking the number of students who graduate in four years with a regular high school diploma and dividing that by the number of students who entered 9th grade. Adjustments are made for students who transfer in or out.

Writer David Sheingold contributed to this report. 

Star Ledger - Christie may cut budget to close growing shortfall, Treasury says

By Salvador Rizzo/The Star-Ledger The Star-Ledger
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on April 29, 2014 at 6:00 AM, updated April 29, 2014 at 10:12 AM

TRENTON — New Jersey’s budget shortfall will grow to a staggering $807 million at the end of April, state officials announced Monday while warning of a fiscal emergency that could force Gov. Chris Christie to make deep and unexpected cuts to several programs.

The state Treasury, in a rare announcement last night, said the Republican governor is bracing for a tough financial blow when the month wraps up tomorrow. Despite the setback, Christie "will take any and all actions necessary" to find the money to shore up his $32.2 billion budget — even if it means slashing property tax rebates or other programs, Treasury indicated.

An early look at major tax revenues by Treasury officials showed the state will be $600 million short of Christie’s estimates for April.

The April surprise, combined with the shortfall accumulated through the first nine months of the budget year, will widen the hole in the state budget to at least $807 million, Treasury estimated. The fiscal year ends June 30.

Although Christie revised his revenue estimates two months ago, he still overshot the amount of money he thought would come in April from the state income tax, which represented 85 percent of the month’s revenue shortfall, Treasury reported. That could put property tax rebates in jeopardy as they are funded by the income tax.

In recent years, Christie has delayed paying out property tax rebates, kicking them from one fiscal year to the next to balance his budgets. Other governors have slashed rebates in hard times.

State Treasurer Andrew Sidamon-Eristoff said he would scour the budget for savings that would help close the $807 million gap.

It could be a tall order for the treasurer, considering that he already announced back in February that he had identified $694 million in "fund lapses," or programs that did not end up spending all their budgeted amounts.

If needed, Sidamon-Eristoff said, the governor would take the extraordinary step of cutting back funds that are already committed.

"The state will take any and all actions necessary to offset the reductions in anticipated revenues, including the identification of additional lapses and savings opportunities, as well as the exercise of the full range and scope of executive authority, including, but not limited to, reserving (or) impounding budgeted appropriations," Sidamon-Eristoff said.

Typically, April is one of the best months for reaping tax dollars. As residents file their yearly tax returns by April 15, the state cashes a huge amount of checks.

But that was not the case this year. The Christie administration said states across the country had a hard time predicting April revenue because of a series of changes Congress made to the federal tax code last year.

State officials said their estimates were blown off course by the "fiscal cliff" agreement struck by Washington lawmakers last year, which imposed higher tax rates on wealthy earners. New Jersey underestimated how many of those wealthy earners would move their income around to take advantage of the lower tax rates, officials said.

"Typically, a significant portion of April income tax receipts come to the state in the form of physical checks mailed by extremely high-income taxpayers," the Treasury said. "These payments, which are not normally received until some days after the April 15 deadline for final settlements and extensions, are heavily affected by swings in capital gains and business income, which are volatile and difficult to predict prior to processing."

In Connecticut, a top aide to Democratic Gov. Dannel Malloy warned its April revenue would be $300 million short because of the "fiscal cliff."

"Connecticut is not the only state to feel this impact," the aide, Benjamin Barnes, wrote to Connecticut lawmakers in a letter Monday. "A survey of preliminary data from states with similar tax structures and high net worth taxpayers shows that final payments in April are down between 10 and 30 percent."

The early warning was rare as N.J. Treasury officials usually wait a few weeks after the month ends to provide a revenue update. State officials said they made the announcement early because of the severity of the circumstances. Christie administration officials were reaching out to Democratic leaders Monday to find the best way forward.

The treasurer will testify next month before the Assembly and Senate budget committees at hearings on Christie’s proposed $34.4 billion budget for the fiscal year that begins July 1.

Assembly Speaker Vincent Prieto (D-Hudson) called the April shortfall "everyone’s problem to solve."

"We’re now going to have to roll up our sleeves and get to work solving this without damaging the valuable programs needed by residents," Prieto said in a statement.

Last month, the Wall Street rating house Standard & Poor’s downgraded New Jersey’s debt rating, citing a pattern by Christie of overestimating revenues, among other reasons.

 

NJ Spotlight - Analysis: $800 Million Budget Gap Leaves Christie With Few Choices

Mark J. Magyar | April 29, 2014

 

With Treasurer Andrew Sidamon-Eristoff’s shocking announcement that New Jersey is facing an $800 million current-year budget gap, he and Gov. Chris Christie now face the daunting task of figuring out how to close such a substantial deficit when most of the state budget -- with the exception of a promised $1.5 billion pension payment -- has already been spent.

The need to close such a large budget shortfall with just two months remaining in the fiscal year gives Christie little choice but to take on Senate President Stephen Sweeney (D-Gloucester) and the Democratic legislative leadership in a showdown over pension funding that Christie has been talking about for months, but would have preferred to put off until next year.

The battle of wills could pit Christie’s willingness to take unilateral action to reduce state pension payments against Sweeney’s threat to shut down the government if Christie fails to make the pension payments required under legislation he signed into law in 2011.

The plunge in income tax payments by wealthy taxpayers that was this year’s “April surprise” will require not only $800 million in almost immediate cuts in the current Fiscal Year 2014 budget, but also substantial reductions in both projected revenue and spending in the upcoming FY15 budget bill.

“The problem is not next year, it’s this year,” said David Rousseau, a former Democratic state treasurer. “The question is where you find the money to make up such a significant shortfall when you’re so close to the end of the fiscal year.”

With just two months left to go in the fiscal year, most of the $32.6 billion allocated for this year’s budget has already been spent, and Sidamon-Eristoff had to resort to such an array of fiscal gimmicks to fill an earlier $694 million budget gap in March that Standard & Poor’s downgraded New Jersey’s credit ranking for the second time on Christie’s watch. If there were easier spending cuts to make, Sidamon-Eristoff would already have used them then.

Sidamon-Eristoff will comb state accounts for additional cuts, but it will be hard to find big savings in what’s left of the state’s operating budget, and this year’s homestead rebates, municipal aid, and most school aid has already been paid out.

The only large budgeted appropriation that has yet to be spent is the $1.582 billion payment to the pension system that the state is expected to make in the last week of June -- a payment that was already cut retroactively by $93.7 million from the originally budgeted $1.676 billion as part of Sidamon-Eristoff’s earlier budget cuts.

The simplest solution for the Christie administration would be to create a “one-shot” budget saving by canceling a portion of the pension payment or more likely pushing part of the $1.582 billion payment -- as much as is needed to fill the $800 million gap after Sidamon-Eristoff uses up other available savings -- out of the current fiscal year that ends June 30 and into the following fiscal year.

This would be similar to the one-shot budget savings that Sidamon-Eristoff used to fill an FY2012 budget gap by pushing back the payment of $392 million in homestead rebates from May 2012 to August 2012, making the rebate payments part of the FY2013 budget.

Just as Christie argued that the three-month delay in rebate checks was relatively inconsequential, he could contend that delaying $600 million, for example, of the pension payment by a couple months each year would have a relatively small impact on the pension system’s overall unfunded liability. As with the homestead rebates, the deferred portion of the pension payment would have to be delayed in future years as well to avoid creating a doubled burden in a future budgets.

Christie has been setting the stage politically for a cut or deferral of the state’s pension payments since January, complaining vociferously in speeches, town hall meetings, and on radio broadcasts that rising pension, retiree healthcare, and debt-service costs have been eating up 94 percent of the annual increase in state revenues and preventing the state from investing in K-12 education, colleges, drug treatment, and other needed programs.

The governor has threatened to take unilateral action if Democratic legislative leaders do not force public employee unions to contribute more toward pensions and retiree healthcare. But Senate President Stephen Sweeney (D-Gloucester) and other Democratic legislative leaders have told Christie they expect him to honor his agreement to keep adding some $600 million a year more to the pension system each year until the state reaches the actuarially required funding level of $4.8 billion in FY18.

Yesterday’s announcement that an unexpected drop in April income tax revenues had produced an $800 million FY14 budget gap not only jeopardizes that pension payment schedule for the current budget year, but possibly for future budget years as well.

The $700 million plunge in income tax revenues that makes up most of the deficit is due not to unexpected weakness in the New Jersey economy, but to the fact that the wealthiest New Jerseyans pushed more taxable income than expected into 2012 to avoid an increase in the top federal income tax rate from 35 percent to 39.4 percent that took effect January 1, 2013, which reduced the taxable income for 2013 they would have paid this month.

Ironically, it was that rush of wealthy taxpayers cashing out before the federal tax hikes and cashing in on a bull market that produced an “April surprise” last spring that sent state income taxes soaring $400 million above projections and bailed out Christie’s FY13 budget, which until then had been running well in the red. This year, the drop in expected FY14 budget revenue from $32.6 billion to $31.8 billion will undoubtedly require Sidamon-Eristoff to lower next year’s $34.4 billion revenue forecast by some portion of that $800 million decline, and force additional cuts in the FY15 budget as well.

Sidamon-Eristoff said he would announce the “specific changes” he would be making to the FY15 budget when he testifies before the Assembly and Senate budget committees on May 21 and 22. His announcement of the projected $800 million shortfall, however, left little doubt that he regards it as the executive branch’s prerogative and responsibility to close the current-year budget gap, and that the governor’s powers include cancelling or postponing scheduled appropriations.

“The State will take any and all actions necessary to offset the reductions in anticipated revenues, including the identification of additional lapses and savings opportunities, as well as the exercise of the full range and scope of executive authority, including, but not limited to, reserving and/or impounding budgeted appropriations,” Sidamon-Eristoff said.

In a nod to the bond-rating agencies that have criticized the state’s surplus as insufficient, Sidamon-Eristoff said that the state would not cut the $280 million surplus it plans to take into FY15 in order to balance the FY14 budget. Rumors of the budget shortfall circulated within Statehouse circles a few hours before the Treasury Department issued its late afternoon press release, with one source describing the revenue drop as “catastrophic.” Rousseau characterized it as “very challenging,” noting that the magnitude of the shortfall didn’t approach the budget deficits faced by Democratic Gov. Jim McGreevey, who took office after 9/11, and Gov. Jon Corzine, whose revenues plunged in 2009 in the depths of the Great Recession.

Assembly Speaker Vincent Prieto (D-Hudson) yesterday said the treasurer’s announcement “is very concerning news that re-emphasizes the need for everyone to put their catchphrases and slogans aside and work together to find a solution.

“This is everyone's problem to solve, and we're now going to have to roll up our sleeves and get to work solving this without damaging the valuable programs needed by residents,” Prieto said.

Prieto’s statement did not criticize Sidamon-Eristoff for missing the mark on his revenue targets, as Democrats have repeatedly done in the past. While David Rosen, budget officer for the nonpartisan Office of Legislative Services, projected four weeks ago that state revenues would come in $216.6 million lower in FY14 and $309.4 million below administration forecasts in FY15, his estimates also missed the impact of the income tax plunge.

“This isn’t an issue of Treasury overestimating revenues for political purposes. There’s no politics involved,” emphasized Rousseau, the budget analyst for New Jersey Policy Perspective who has been a frequent critic of both Christie and Sidamon-Eristoff. “OLS and Treasury both agreed that about $250 million in income tax was shifted into 2012 to avoid the fiscal cliff. They were both wrong, but so was everybody else. Connecticut just announced that it’s facing a $400 million shortfall too.”

Just a few hours before Sidamon-Eristoff issued his press release, Connecticut Democratic Gov. Daniel P. Malloy yesterday announced that the loss of about $330 million in expected income tax revenue would force him to cancel a planned $55-per-person tax refund and eliminate a planned $100 million payment into his state’s pension system.

Both the New Jersey and Connecticut income tax dives -- which are expected to be matched by similar reductions in income tax collections by the federal government, New York City, New York State, and other affluent states -- stemmed from a similar underestimate of the impact of wealthy taxpayers trying to avoid higher federal income taxes going into effect in 2013.

Treasury Department officials said the “full scope of the unanticipated revenue shortfall was only detected in the course of tabulating collections after the April 15 income tax deadline.”

“Typically, a significant portion of April income tax receipts come to the State in the form of physical checks mailed by extremely high-income taxpayers,” Treasury explained in a press release. “These payments, which are not normally received until some days after the April 15 deadline for final settlements and extensions, are heavily affected by swings in capital gains and business income, which are volatile and difficult to predict prior to processing.

“New Jersey’s highly progressive income tax is notoriously volatile due to its extreme reliance on a relative handful of taxpayers" Treasury continued. "In recent years for example, just 400 taxpayers have accounted for almost 10 percent of New Jersey’s Gross Income Tax, the top 1 percent of state income taxpayers accounted for almost 40 percent, and the top 10 percent of all income taxpayers accounted for approximately 70 percent of total income tax revenues.”

While corporate and sales tax revenues are also expected to be down for April, $700 million of the total $807 million shortfall is attributable to the decline in income tax revenues, Treasury officials said.