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Press briefing presented by Ad Hoc School Finance Discussion Group, Reock.
I.
State Aid for Schools and Property Taxes Press Briefing Notes10/5/05
Ernest C. Reock, Jr.
Center for Government Services
732-932-3640
reock@aesop.rutgers.edu
(1) Three basic state aid laws in past 30 years:
1976-77 to 1990-91…..Chapter 212
1991-92 to 1996-97…..Quality Education Act (QEA)
1997-98 to date……….CEIFA
Not always implemented
(2) State aid a surprisingly stable part of state budget – See Table 1
(3) Have used three sources for info:
a. State appropriations acts or budget messages (drawbacks-can’t tell where aid is going; two-year time lag for actual expenditures)
b. State aid notifications to districts (drawbacks-not comprehensive; one-year time lag for actual state aid)
c. County abstracts of ratables for tax data (On DCA website).
Not used:
d. DOE Comparative Spending Guide – Focus on spending categories.
(4)
(from 2005-06 budget message)
Aid going to
Other Aid: Capital Facilities Aid…..$ 306,218,000
Pension Aid………...…. 1,311,521,000
Non-public Aid……….. 103,118,000
Sub-Total 1,720,857,000 (19% of total)
(5) Table 2 - State Formula Aid in 2004-05 (from state aid notifications for 2005-06).
(from 2005-06 state aid notifications)
Shown in Table 2…………….. 6,348,730,299 (71% of total)
Very simplified description:
a. Basic Structure: Foundation Formula for CCSA (largest component)
i. Set T & E Amount per Pupil (Amount necessary to meet CCS)
Originally $6,720 in 1997-98 set by Legislature.
Up-dated every two years by Commissioner of Education
Interim year adjusted by CPI.
ii. Multiply by enrollment
Statewide 1,250,000 x $6,720 = $8,400,000,000
iii. Decide how much of this should be paid by local taxpayers.
Traditional way is for Legislature to set a tax rate (or millage rate), and subtract this from the T & E budget in each district, with the balance being the State aid to be paid. (Some wealthier districts would get no aid.)
This has drawback (from state standpoint) that it is open-ended. (Depending on property values, State aid may go up or down uncontrollably.)
Instead, in CEIFA. Legislature said 1997-98 total CCSA will be $2,620,000,000, and this “cap” will be raised every year by the growth in enrollment and the CPI.
Using this “cap”, the Department of Education calculates two “multipiers:
A property multiplier.
and
A personal income multiplier.
They determine what “multiplier” would have to be applied to the property in every district to result in the total state aid being the amount that is authorized under the “cap”.
And, they would determine a similar “multiplier” would have to be applied to the income in every district to get the same result.
Then, each of the two “multipliers” is cut in half and applied to the property value and personal income in each district. The result is that half of the statewide total of the local share is calculated according to property value and half according to personal income. The balance between the two will vary from district to district.
Poor districts will get larger amounts of aid; wealthier districts will get less, and a lot of districts will get nothing.
Raising the T & E amount per pupil will not generate more state aid; it will merely change the distribution of aid.
In general, an increase in the T & E amount will give more aid to the poorest districts, less aid to the moderately wealthy, and some wealthier districts that formerly got aid will get nothing.
(7) In addition to CEIFA, there are many other formulas that send aid to varying groups of districts. (See Table 2)
(8) Why is CEIFA different from earlier state aid laws? Why so many formulas?
1. No large pot of new money available (in contrast to 1976 and 1991, when there were income tax increases).
2. New money makes it possible to submerge variations among school districts in a richer basic state aid formula.
3. Result in CEIFA was collection of additional formulas to take care of special groups of districts.
(9) CEIFA implemented for five years, then state aid freeze starting in 2002-03 with small across-the-board increases in some years:
1. Consolidated Aid in 2003-04 ($130,000,000)
2. Additional Formula Aid in 2004-05 ($90,000,000)
(10) Abbott IV Decision in May 1997:
1. Led to Abbott Parity Aid by footnote in 1997-98 Appropriations Act (Not in CEIFA)
2. Definition of Regular Education Budget in Appropriations Act footnote.
3. Abbott V to X deal largely with Abbott Supplemental Aid (non-formula).
A. School Budgets
Chart 1 – Regular Education Budget per Pupil in Current Dollars (4-Way)
Comment: Movement of Abbott Districts from lowest to near top.
Chart 2 – Regular Education Budget per Pupil in Constant 1989 Dollars
Comments: Decline during 1990s, now more than recouped.
Budgets move closer together.
B. State Aid
Chart 3 – State Aid per Pupil in Current Dollars
Comment: Continuing low level of aid for Pensions.
Chart 4 – State Aid per Pupil in Constant 1989 Dollars
Comment: Decline in aid for Pensions until last three years.
Chart 5 – State Formula Aid per Pupil in Current Dollars
Comment: CEIFA moves Other Poor Districts above state average.
Chart 6 – State Formula Aid PP in Constant '89 Dollars
Comment: Recent decline in aid for all but Abbott districts.
C. Property Taxes
Chart 7 – State Average Equalized Property Tax Rates, '70-2004
Comment: Trend mirrors enrollment, with recent decline.
Comments: Abbott districts go from highest tax rate to lowest.
Tax rates move further apart.
Chart 9- School Property Tax Levy per Pupil in Current Dollars
Comment: Abbott districts stable; others rise.
Chart 10 – School Property Tax Levy PP in Constant 1989 Dollars
Comments: Steady decline in Abbott district
Decline in I & J districts in 1990s,
then rise recently in all but Abbott districts.
_____________________________________________________
II.
Media Briefing on
School Budgets/Handout
Wednesday, October 5, 2005
(Presented by Mel Wyns)
Basic Information
- Prepared in State prescribed format
- Shows both revenues and proposed expenditures (appropriations) organized by fund:
General Fund (Fund 11)-includes capital outlay items-spending for the general operations of the district
School-Based Funds (Fund 15) (Abbott Districts Only) (Restricted Spending)-school based funds cannot be used for general operations.
Special Revenue Funds (Fund 20)-includes Federal Funds-Used to account for spending when the revenue source is restricted only for specific types of spending
Debt Service Fund (Fund 30)
- Contains three years if budget date, last completed school year, present school year and budget for the next school year-excludes teacher pension and social security costs
- Includes supporting documentation and projected enrollment-supporting document 9 reflects State limits on district surplus, supporting document 14 shows administrative costs as defined under State administrative cost limits
- Once a district submits its budget to the
Classroom vs. Other Costs
- General Operating Costs include Total Classroom Instruction Costs, Support Services Costs and Other Costs
Per Pupil Spending for all major cost categories are also included in the school budget
- DOE Considers Total Classroom Instruction Costs as the most important costs category-on average these costs represented 59% of total budgeted spending in 2004-2005 and Support Services Costs represented on average 15.1% of all budgeted spending. Administrative costs represented on average 11.4% of all budgeted spending. Other costs including operations and maintenance costs represented on average 14.5% of all budgeted spending.
Revenues vs. Spending
- Revenues are shown for State, Local, Federal and Other Sources
- Spending is shown for Non-restricted items (Fund 11) restricted items (In Fund 20)-major restricted spending items are spending for Early Childhood Programs, Bilingual Education Programs and spending for Federal Programs for most federal revenue Sources-i.e.-NCLB and IDEA funding
Regular Education Budget
- Important for Abbott Districts (mostly Poor Urban)-Per pupil regular education budget must be equivalent on average to the Per pupil regular education budget in the District Factor Group I and J districts (“Wealthy Suburban”)
- Defined by certain State and Local revenue sources (including the local general fund school tax levy)
- Excludes the State Categorical Aid revenue sources
Special Student Needs
- Costs for All Special Education Programs, Early Childhood Programs and Bilingual Education Programs are shown in the Appropriation Section of a Districts Detailed Budget-Special Education Categorical Aid is not restricted
- In Abbott Districts the Costs for Supplemental Services required under the Abbott decisions are not readily identifiable
Sources of School Finance Information
- Comparative Spending Guide-shows spending per pupil for three school years for 15 categories and sub-categories
- District’s Comprehensive Annual Financial Report (CAFR)-(Audit)
- DOE Website-(Finance) and
________________________________________________________________________
III.
10-5-05 PRESS BRIEFING on STATE AID to SCHOOLS/Reock Group
Notes re: Regular Operating Districts: School Construction
(Presented by Lynne Strickland,
Recent history of school construction & state support prior to Ch. 72 [PL2000]:
Aid for school facilities handled via debt service aid that was linked to a district’s state aid entitlement for foundation/core curriculum aid:
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DEBT SERVICE AVERAGE PRIOR TO 'EFCA' CHAPTER 72 | |||||
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(Districts Grouped by |
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No. of |
Debt Service % |
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Groupings |
Districts |
Before S 200 |
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0 to 39.9% |
429 |
11% |
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40% to 54.9% |
82 |
47% |
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55% to 99.9% |
32 |
61% |
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Abbott Districts |
30 |
58% |
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Non Abbotts |
543 |
19% |
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Prepared by |
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Of those districts in the top grouping, 239 districts were deemed to wealthy by state formula [local fair share] to receive any basic aid. With rare exception, these districts did not receive any state support for school construction needs during the 90’s, nor did they receive aid for regular education programs. Their source of revenue relied solely on local levy. Another approximately 200 districts received some basic aid, to a high end of 40%.
The School Construction law, set at minimum of 40% ‘eligible costs’ for all school districts statewide, has proved to be the most significant property tax relief program available to all communities throughout the state. [GSCS website ‘www.gscschools.org’]
COST PER SQUARE FOOT (cpsf) UNDER Ch 72:
This was recognized as relatively a very low figure at the time [$138]; it has grown [$149] yet is still low compared to actual statewide cpsf, now clustering around $190-200. Regional costs differences do vary, normally cpsf are less costly in south NJ.
PROGRAM RENEWAL DISCUSSION
At the time, the was spoken acknowledgement that the 8.6B designated to this program would not suffice, however, in order to get legislation moving and passed, that issue was back-burnered to be debated another day.
‘Another day’ is here and advance preparations have not put in place – or even defined - yet. While all districts are in limbo, the discussion is just beginning in earnest, and under great stress. This crisis was foreseeable and somewhat avoidable but for the political worries, which are the integral part of policy-making, especially when such large sums are involved.
Warning shots re: the pot running dry were fired but were vague as to how much funding really remained for regular operating districts and the process on how to deal with the final distribution of what does remain is still not defined.
NEGATIVES: State and local officials credibility, local taxpayer burdens, bond ratings, competing needs and divisiveness community-by-community.
IS THE WELL AS DRY AS DEPICTED? Questions remain, some are:
Even thought the SCC on 10-3-05 that there was only $60M remaining, the DOE and the SCC are still ferreting out what encumbrances are still active, which will affect that total. Any active encumbrance should mean there is literally more funds available, but how much? Another possible free up of some funds centers on how the SCC has accounted for Buena Regional’s $14.4M state share. Since Buena is a 55+% district, it is administered by the SCC by law and its funding has to be in the form of a grant. Did the SCC account for that sum outside the $60M? This appears probable since its rendering of final monies available it separately noted $233M attributed to the 55+% districts.
SOME CURRENT FACTS/QUESTIONS:
GRANT AGREEMENT ISSUES [There may be more money available] - Re: remaining funds – “still trying to sort out how much funding remains” regarding the grant agreements remaining/how many are there and how much has been committed.
- encumbrances – in the past DOE approves and sends out to SCC, then SCC approves from its end and sends to local district usually prior to the referendum[that timing practice is apparently more recent] . The SCC has a 180 day policy/6 months where they allow their grant agreements to be held by the district. After the 180 days, if the SCC has not heard from the local district, they send a letter to the districts with a 30 day warning/will rescind the offer. The status of these is still being checked.
DEBT SERVICE FOR EDA BONDING:
The money to pay for the bonding fees is allocated to the DOE budget labeled ‘state aid facilities planning’ but the DOE does not literally administer any payments. The EDA secures the bonds, and the SCC gets the money to pay for the bonds and then distributes it. There is another line in the DOE budget for approx. $119M for FY06 that is directed to projects prior to Ch. 72.That line decreases each year now.
DEBT SERVICE SUGGESTED BY STATE TO SUPPORT FUTURE FACILITIES NEEDS: UNRELIABLE HISTORY
e.g., PARI Report “School Facilities: A Challenge for NJ” [ELC website] notes that from 1992 – 1998 debt service was never fully funded, and slid anywhere from 49.7% to 71.7% of entitlement.
The state has offered no definition of how this might work and past history reveals it is unpredictable and unstable aid, and also did not apply to approximately 44% of all regular operating districts in the state. An open public debate as to how the address the future of facilities aid needs to occur now.
______________________________________________________________________________
IV.
The
(Presented by Joan Ponessa,
Finance Committee Press Briefing
The
n
nDeference to districts for particularized needs
nPriority determination for projects
nState management and construction
n100% funding for approved costs from State
Educational Facilities Construction and Financing Act (EFCFA)
n
nProject approval at schematic stage
nManagement and construction for Abbott districts under EDA
n$6 billion for Abbotts; $2.6 billion for non-Abbotts
nEnergy efficient school buildings
Funding Level for School Construction
nDOE’s original estimate from 1999 Abbott plans was $7.3 billion
nOriginal estimate based on $125/square foot, now over $200
nOriginal estimate did not include all-day preschool, inflation, land, relocation, TCUs, swing space, SCC administration, or PMFs
nLegislature assumed most projects would be renovations; new construction would only be for “unhoused” students
Executive Order No. 24
nEstablished Schools Construction Corporation
nRequires Schools to be High Performance, including new technologies to promote energy efficiency
nRequires Schools to be Community Centered
nRequires Use of 21st Century Practices to Enhance Learning and Accommodate Modern Teaching Techniques
Current Problems with EFCFA
nSCC not authorized – currently operating under Executive Order #24
nNo recognition of predevelopment costs- feasibility studies, land acquisition, relocation, remediation, conceptual design
nCost per square foot is unrealistic
nFunding allocation is not sufficient
Problems with EFCFA (continued)
nMakes no provision for leveraging community development
nDistricts play minor role
nConflicts of interest for Attorney General’s office
nFacilities Efficiency Standards, especially the “grossing factor” are too rigid
nRequires limited role for municipalities
Implementation Problems
nAbbott districts are cut out of the design process for their own buildings
nProblems in finding appropriate sites for schools
nLack of cooperation of some municipal governments for obtaining land
nLack of funds now leading to reduction in quality
nOn time, on budget! Where is quality?
Lack of Information
nThe most basic information concerning the program is not available from SCC
nList of completed projects, list under construction, where located, size of building, architect, construction company, acreage, number of classrooms, students?
nLand acquired, cost, residents and businesses relocated?
n
Status of
n30 projects completed; 43 under construction
n69 additional projects funded by SCC
nOn hold -110 in design, 97 in predev., 134 ready for development (info from State’s filing to Supreme Court)
Costs of Program Delay
nDirect program costs – inflation, contract settlements, attorneys’ fees, renegotiation of contracts
nLayoffs of professionals and construction workers
nDisruption of educational programs
nDestruction of urban neighborhoods
2005
nDemographic and enrollment projections
nCost estimates for additional projects
nInventory and building deficiencies
nEducational programs in district
n No school “models” required using
Critical Changes for 2nd Round of
nPlanning is a more holistic, comprehensive approach -school buildings should contribute to the attainment of the district’s educational goals and objectives;
nEmphasis is placed on the review of current and future educational programs, including a review of the district’s delivery of special education services;
nAn assessment of preschool provider buildings is required; and
nCreative options such as campus schools; multi-story buildings; shared use buildings, including housing and commercial; and green space shared by multiple schools are encouraged.
