Coffin’s Corner for Education

Education’s Trojan Horse: the School Funding Formula Proposal

By: Stephen Coffin

As an adjunct professor, I teach a school finance course in which the students develop an understanding of school funding and budgeting. The students learn how a school district's budget is the financial representation of its educational plan which can not be implemented effectively without the proper allocation of financial and human resources.  Education, therefore, is the same as every other enterprise in that educators need the appropriate tools to do the job properly.  Also, the students are required to present ways of cutting property taxes without harming education while properly funding our schools in order to pass the course.  Because every student has met this requirement, it underscores the questions as to why the Governor’s proposed school funding formula does not. 

Our schools need proper funding that not only fully meets the needs of all students but also advances rather than ‘levels down’ education.  Unfortunately, the Governor’s proposed school funding formula would result not only in reductions to non-mandate protected programs such as regular instruction as well as in larger class sizes but also in the ‘leveling down’ of quality education. The proposal would seem to adversely impact education in many ways including: 

• A newly defined “per-pupil adequacy cost" that seems to be approximately $10,200 per pupil, which would be $1,220 or 11% below the current foundation funding level. If the State of New Jersey would base financial aid decisions on this lower level, it would tend to reduce financial aid because the cost basis for determining need would be reduced. In addition, the primary cost-drivers for schools are increasing rapidly. This would tend to limit aid in all districts regardless of actual needs and ‘level down’ education. 

• Districts designated as wealthy would tend to lose entitlement aid for at-risk children, particularly special education as these and other categorical financial aid funds would be subjected to the “wealth-equalizing local share calculation."  This comes at a time when the costs for special education are skyrocketing due primarily to state and federal mandates. 

• Many if not most districts seem to face reductions in special education financial aid based on the proposal’s requirements that would reduce a school district's headcount for the aid calculation to the extent that its classification rate is above the state average. 

• Any school funding formula must be supported by recurring and dependable revenues in order to be a reliable source of financial aid yet these revenues are missing from this proposal.

• It is also very difficult to envision how the State of New Jersey would provide any incremental school funding especially given the estimates of an operating budget deficit ranging from $3.0 to $3.5 billion as well as the voters' apparent lack of support for higher taxes as highlighted by the defeat of the recent stem cell funding initiative.

• It seems as if larger classes in regular education would result as districts might be forced to shift existing resources to meet special education mandates.  However, the findings of Tennessee’s Student Teacher Achievement Ratio (STAR) project, Wisconsin’s Student Achievement Guarantee in Education (SAGE) project and Indiana’s Project Prime Time have shown that students taught in small classes enjoy significant and lasting educational advantages. The research also demonstrates that having a smaller class size not only increases student achievement but also helps to minimize the achievement gap among different groups of students. Would it be surprising if the larger class sizes resulting from this proposal caused test scores to decline and, therefore, led to the enforcement of some of the more stringent penalties of the No Child Left Behind (NCLB) Act?

Perhaps one of the most disruptive aspects of the Governor's ‘the money follows the student funding formula’ approach could erupt if a district suddenly lost numerous ‘highly funded’ pupils during the year.  In this scenario, how might the newly created Executive County Superintendent require adjustments to the district's previously approved budget and spending authority?  Would the Executive County Superintendent mandate an immediate increase in local property tax levies or the issuance of bonds or deep cuts in non-mandate protected programs to make up for the sudden loss in funds that ‘followed’ the students to another district?  It would seem that the affected district would develop and seek the Executive County Superintendent’s approval for a new budget.  Yet, how can a school district realistically implement an educational plan supported by the proper level of financial and human resources if significant revenues can be allocated suddenly to other districts during the school year? 

The provisions of this proposal when combined with the 4% tax levy cap and an inflation rate of 4% as well as the ever increasing costs of state and federal mandates will most likely reduce the overall quality of education. Perhaps the greatest irony is that too many of New Jersey’s school districts are forced to spend much more to meet the requirements of unfunded and under funded mandates than they receive in total financial aid from all sources.

Stephen Coffin is an Adjunct Professor of school finance, holds the New Jersey School Business Administrator Certificate of Eligibility, and has an MBA in finance as well as a Masters in Public Administration. He welcomes your comments at coffinscorner@aol.com