New Jersey's Regressive Public School Funding

by Brian T. Lynch, MSW

New Jersey recently published the annual "Taxpayers Guide to Educational Spending". The headline in the Star Ledger was that school spending is up 5% over last year. This is hardly news given that inflation alone accounted for 1.7% of the increase.

Much of the remaining 3.3% increase in school spending is structural by design. Consider that new teacher salaries start low and increase annually as they gain experience. We also compensate teachers as they obtain higher educational degrees as a means of improving the quality of our teachers. Add to this the fact that the total number of teachers gradually increase as student enrolled numbers creep up a little every year. Then there is the higher than inflation increases in fuel costs that drive up the cost of student transportation each year. The retirement of higher paid teachers and administrators don't quite balance out these other factors.

What irks the public most about this 5% increase is really the story behind how we fund public education in New Jersey. It just seems unfair. And when you look under the hood, it really is unfair. Wealth based public school funding is regressive in nature. It favors the wealthy and disfavors the poor. What it costs to educate a child doesn't vary that much between wealthy and poor school districts, but the value of property and therefore the tax base varies a lot. In today's economy especially, the prosperity in wealthy school districts is growing rapidly relative to per pupil costs while property values in less prosperous school districts are in decline.

To understand the disparity of wealth based public education funding, let's take affluent Morris County as an example (located in the central most area of the Northern half of the State). Morris County has many wealthy school districts, such as Harding where the average home sells for over a million dollars. It also has districts like Wharton where the average home sells for a quarter of that amount, or about $251,000. Property values in Dover are a bit higher, but the median family income in the Dover school district is just $59,000 compared with $160,000 per year in Mountain Lakes. (Fig.1 below)

One way to gain some perspective on property based school funding is to compare what it costs to educate a student with what it costs to buy a home in the same district. In the eleven wealthiest districts of Morris County, home prices are 30 to 50 times more than the educational cost per pupil. Home values are just 16 to 18 times more than per pupil costs in the 12 poorest districts. As a general rule, the higher a district's property values, the lower the tax rates. The reverse is usually true in poorer districts. Districts with lower property values, and lower income levels, generally have higher tax rates. While the 11 wealthiest districts in Morris County pay a little more to educate children in their district, their property tax rates are about one-third less than in the 12 poorest districts. (Fig. 2 below)

The dramatic contrast between home values and per pupil costs is partially masked when just comparing tax rates because, in the suburbs, wealthier districts tend to have fewer households. Fewer household to share the tax burden mean higher tax rates to generate sufficient revenue. Despite this fact, tax rates in 8 or the 11 richest districts is among the lowest in Morris County. Only three of these wealthy districts have higher per pupil costs while three have among the lowest per pupil costs. This highlights the fact that education costs are similar across the county. The average district cost per pupil is $17,730, plus or minus $2,038. There are a few outliers in either direction.

Educational costs vary far less than home values from district to district, so families in wealthier districts have a far easier time affording public education than families at the lower end of the economic ladder. While New Jersey's State School Aid formula is supposed to help balance school funding across all districts, it does little to correct the underlying inequality and unfairness of wealth based educational funding.

Sources

Taxpayers' Guide to Educational Spending 2013: http://www.state.nj.us/education/guide/2013/
General Tax Rates : http://www.state.nj.us/treasury/taxation/pdf/lpt/gtr13mor.pdf
Average Home Sales : NJ Spotlight News @ http://www.njspotlight.com/stories/13/02/28/average-home-sales-prices/ For March 1, 2013
Median Income and # Households: http://www.njspotlight.com/stories/13/12/19/median-income/

Figure 1





Figure 2