State aid plunges, tax hikes capped: Big layoffs might be forced on Jersey Shore schools

Lacey Township Public Schools officials are facing hard questions. Do they wipe out entire programs and cut integral student services to make up a $7 million gap in a school budget?

Lacey schools and a number of neighboring districts — all which have faced years of declining state aid — are now struggling to manage a collective, snowballing financial crisis. Schools in Jackson, Brick, Toms River, Plumsted and elsewhere are debating which of their programs to cut and which to preserve.

In Trenton, legislators are acknowledging the crisis facing these districts and are looking to fix the problems of a school funding system that has directed more state aid to some of New Jersey's fastest-growing urban schools while cutting aid to wealthier suburban districts.

In Lacey, Superintendent Vanessa Pereira and her staff are looking at ways to reduce spending and close the budget gap in a district that serves their more than 3,700 students. Without some emergency intervention from the state, the district will have to cut another 57 jobs before September, stop buying certain office supplies, reduce courtesy busing and eliminate some guidance counseling and special education services.

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Next school year, "we're talking class sizes in the 40s," the superintendent said. "We are talking about a pay-to-participate (setup) for all athletic programs, the elimination of all co-curricular activities, and the list goes on."

In February, Lacey administrators learned their state aid would decline by $3.2 million for the 2024-25 school year. New Jersey has slashed funding to Lacey schools from nearly $21 million in the 2018-19 school year down to less than $7.3 million. As a result, the district has already cut 141 positions, eliminated freshman sports, cut electives for middle- and high school students, and have put off building maintenance and overdue technology upgrades.

Pereira said the district is running out of costs to cut.

"It just really leaves us (administrators) … sitting here scratching our heads," she said. "What's next? Because cutting an additional $7 million out of my budget is just beyond ridiculous."

Local tax increases can't cover the gap

Because state law limits local tax levy increases to no more than 2% a year, Lacey schools can only raise local taxes by an additional $1 million this year. Despite the plan to raise taxes, the district's operating budget will actually shrink by $535,338, according to its website .

When school leaders questioned the New Jersey Department of Education about the possibility of a loan, they were told that was not an option, Pereira said.

Other schools in the region are facing similar problems. Overall, state aid to districts in Ocean County will decline nearly 6.7% in the 2024-25 school year from the current year. In Monmouth County, state aid will drop about 2.9%.

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"Toms River Regional School district certainly believes that the state school aid formula is fatally flawed for too many districts," Toms River School District Superintendent Michael Citta and Business Administrator Bill Doering said last week in a news release. "The formula needs to be significantly revamped and state aid funding losses need to be addressed immediately, before irreparable harm is done to the students these districts are entrusted to educate."

"The state fails to provide the necessary funds to ensure that our district has the necessary resources to meet the needs of our students," Brick Township Public Schools Superintendent Thomas Farrell said in the news release. "Some districts, such as Brick, are simply running out of time. We need to save these districts from falling off the financial cliff."

In Trenton, legislators are acknowledging the problem and putting forward a variety of proposed fixes.

Last week, Republican Assembly Leader John DiMaio submitted a bill ( A-1125 ) that would allow schools to raise taxes over the state mandated 2% levy cap in certain circumstances. In addition, the bill would increase funding to 340 New Jersey school districts, many of which have faced years of state funding cuts.

DiMaio said the plan would cost $1.3 billion and be funded through state income taxes, but would lower property tax bills an average of $874 in its first year. The bill is before the Assembly Education Committee.

Earlier this month, the state Assembly passed a similar bill, A-4161 , which also restores funding to some schools that have faced cuts and allows districts to exceed the tax cap, under particular conditions.

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How capping tax increases failed New Jersey's schools

Back in 2010, New Jersey lawmakers passed a 2% cap on tax levy increases as a way to limit the state's high property taxes. In the years since, this law has hampered the efforts of school districts to keep pace with costs that have exceeded 2% annually: salaries, health insurance costs, transportation, gas, energy and construction costs, to name a few.

At the same time, New Jersey began to change its distribution of state aid away from purportedly wealthier suburban taxpayers toward long underfunded, fast-growing urban districts.

Yet many of these suburban districts found themselves unable to close the resulting holes left in their budgets, because the aid cuts far surpassed what the state tax cap law would allow them to raise from local property taxes.

Allowing school districts discretion to exceed the 2% tax levy cap is necessary to maintain services into the future, said Susan Young, executive director of the New Jersey Association of School Business Officials, an organization that represents the professionals tasked with balancing district budgets each year. Officials had not fully considered the impacts of the 2% tax levy cap when the school funding formula changed in 2018 and significant cuts in state aid began, she said.

"The problem is that when you ran the formula, and it said perhaps that your community should pay 4% more in that year, this (tax cap levy) law came along that said school districts could only raise the tax levy 2%," Young said. "So there are districts that … can never get to where they need to be, because they're restricted by (tax cap) law."

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Then, the pandemic struck. Schools rushed to buy expensive technology for students to learn and stay connected with teachers remotely. When schools eventually reopened and conditions returned to a more normal state, inflation reached decade-high levels. New Jersey's year-over-year inflation rate in March was 3.4%, down from a four-year peak of 6.7% in June 2022, according to the federal Bureau of Labor Statistics.

Yet school administrators are still working under a 2% tax cap law written a decade before the pandemic launched a new era of economic instability.

In January, the Association of School Business Officials prepared a report that recommended, among other things, to reflect the current Consumer Price Index within the state's school funding formula calculations. The report also urged lawmakers to allow districts to exceed the 2% tax levy cap until they raise taxes up to their "local fair share" of their budgets, as defined by the state Department of Education.

"You're expecting schools year after year after year to just survive … at a maximum of a 2% increase," said Young. "That (2% tax levy) cap should have been eliminated a long time ago."

New Jersey real estate compounds the school funding problem

New Jersey's ballooning real estate prices have been a boon for recent sellers, but they have created financial turmoil for school districts trying to balance their budgets. The state aid formula considers property values within a school district's boundaries when determining a community's wealth and its "local fair share" of school funding, or how much local taxpayers should contribute to their schools.

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The sudden rise in home prices since the pandemic has led to unpredictable swings in the funding formula, said Timothy Purnell, executive director of the New Jersey School Boards Association. Because real estate reassessments do not happen yearly, but once every few years, a community that has a lot of new construction or a town-wide property revaluation can suddenly find itself losing large amounts of state aid for schools.

"This year, what we're seeing in particular is … districts unexpectedly seeing funding cuts, or seeing funding cuts that are much larger than what they expected," Purnell said. "Such volatility makes it especially difficult to manage school district budgets."

The School Boards Association is encouraging state leaders to change the school funding formula to take a three-year average of property values, rather than use a one-year snapshot in time. The result would be less volatility in state aid, Purnell said.

"(If) you have your homes reassessed in a particular town, you're really hit hard," he said. "And that may be beyond what you budgeted for."

Purnell also wants to see more aid from the state for school security and transportation. Schools need more transportation assistance than what they are currently receiving, not just to bring students to and from school, but for athletics programs and afterschool activities, he said.

The current funding system has resulted in situations where "you'll see districts cutting freshman sports programs … or extracurricular activities," Purnell said.

"The end result is without some relief from the state, in the form of direct financial tax cap flexibility, or some combination of two (tax cap flexibility and additional state aid), these districts are going to have no other choice but to make really difficult decisions," he said.

Jeff Bennett, a former school board member who runs a New Jersey school funding blog , said the state should move away from using local residents' income as a variable in the school funding formula .

"You're basing a district's tax base on something the board of ed can't tax," said Bennett, who posts about school funding on X, formerly known as Twitter, under the name @StateAidGuy .

Bennett said using residents' income in the formula hurts communities like Trenton and Camden, where the income-to-property value ratio is low, but benefits Jersey Shore communities where expensive summer homes are associated with no income because homeowners live elsewhere. Bennett believes Jersey Shore communities have been underpaying their "fair share" toward their schools for years and have received an advantage by having high property values but lower income communities as a result of vacation rentals, he said.

"Somebody has a million-dollar vacation home in Belmar or Toms River or Brick … who knows where they live?" said Bennett. "They could live in West Orange. They could live in Morristown. They could live in New York. Wherever they live year-round, that's where their income is attached. So towns at the Jersey Shore can have very low local fair shares."

The income factor in the formula also "makes state aid much less predictable, and much more complex," he said.

Bennett said the state should remove the income variable and rely more heavily on property value to determine a community's wealth and ability to pay.

But can New Jersey taxpayers afford to pay more in property taxes just because the value of their homes increased substantially? Housing prices across the state were up 13.7% in March from the previous year, according to the real estate website Redfin.

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"You're looking at an inflated number," said Young, of the New Jersey Association of School Business Officials. "Part of the problem is it (the funding formula) is assuming that if you own a home, that you have the ability to pay. … Just because I could now sell it (a home) for double what it's assessed at, doesn't mean I have any more in my pocket to pay the property taxes."

Without finding some way to send more money to certain schools that have faced millions of dollars in cuts, experts say educators are left with hard choices. Will districts close schools or have classrooms with 40 or more students? Will they eliminate sports or counseling services? Will electives and arts education disappear?

The school funding formula "was done a very, very, very long time ago," said Young. "We're in a different educational environment now. … We need to go back to the drawing board and determine what really are the cost components to educate students? And then how does that flow through the formula?

"We think the bones of it are fairly good," Young said. However, "it's a different world, and we need to take fresh look at it."

Exactly which elements of New Jersey's school funding system will eventually be tweaked or how they will be changed remains unclear. For the time being, schools around the Jersey Shore are urging their residents to contact elected officials to push for immediate relief.

In Lacey, the plea for help is posted on the school website.

"We need decision-makers to understand what this would mean for our district," school administrators wrote in a website popup . "Please partner with us to ask for a solution to save our district."

Legislators say they are listening.

Amanda Oglesby is an Ocean County native who covers education and the environment. She has worked for the Press for more than 15 years. Reach her at @OglesbyAPP, aoglesby@gannettnj.com or 732-557-5701.

This article originally appeared on Asbury Park Press: State aid plunges, tax hikes capped: Big layoffs might be forced on Jersey Shore schools