2. Analysis of New Jersey School Funding Formula Prepared by: Jesus Buitrago Dawn Cuccolo Matthew Dimter Marian Enny Sydonie Harris

3. The New Formula $7.8 billion will be distributed for K-12 education for the 2009 fiscal year, an increase of approximately $530 million. $7.8 billion will be distributed for K-12 education for the 2009 fiscal year, an increase of approximately $530 million. All districts are guaranteed at least a 2% increase in aide during the first year. No districts will see a decrease in total state aid during the first 3 years. Future decreases in aid would occur if districts face declines in enrollment. All districts are guaranteed at least a 2% increase in aide during the first year. No districts will see a decrease in total state aid during the first 3 years. Future decreases in aid would occur if districts face declines in enrollment. Only one representative model for determining adequacy budgets for all districts is used. Only one representative model for determining adequacy budgets for all districts is used. A per-pupil adequacy budget that represents what each district should spend is used to make calculations. A per-pupil adequacy budget that represents what each district should spend is used to make calculations. New Jersey State League of Municipalities

4. There is a base amount for elementary school students ($9,649) but this amount increases as students go up into grade levels because it is more expensive to meet students’ needs as they progress through school. There is a base amount for elementary school students ($9,649) but this amount increases as students go up into grade levels because it is more expensive to meet students’ needs as they progress through school. Additional weights are added to the basic formula for at-risk students, students with limited English proficiency (LEP) and special education students. A combination weight exists for students who are both at-risk and LEP. Additional weights are added to the basic formula for at-risk students, students with limited English proficiency (LEP) and special education students. A combination weight exists for students who are both at-risk and LEP. To encourage full-day kindergarten programs the new formula includes state funding for all at-risk 3- and 4- year-olds to attend full-day preschool. The proposal would also fund any 3- or 4-year-old, regardless of income, who lives in a district with the DFG designation “A” or “B” or those in “CD” districts that also have an at-risk concentration of at least 40%. To encourage full-day kindergarten programs the new formula includes state funding for all at-risk 3- and 4- year-olds to attend full-day preschool. The proposal would also fund any 3- or 4-year-old, regardless of income, who lives in a district with the DFG designation “A” or “B” or those in “CD” districts that also have an at-risk concentration of at least 40%. New Jersey State League of Municipalities

5. Fund Allocation The formula includes two types of aid: wealth- equalized and categorical. The formula includes two types of aid: wealth- equalized and categorical. Wealth-equalized aid: is distributed based on each district’s ability to gather enough local revenue. Both a community’s property wealth and combined income are used to determine the local ability to pay. This portion of the funding formula is applied uniformly to all districts. Then funds are distributed based on each community’s ability to pay relative to that of all others in the state. Wealth-equalized aid: is distributed based on each district’s ability to gather enough local revenue. Both a community’s property wealth and combined income are used to determine the local ability to pay. This portion of the funding formula is applied uniformly to all districts. Then funds are distributed based on each community’s ability to pay relative to that of all others in the state. Categorical aid: is distributed regardless of a district’s ability to raise local revenue. These amounts are “typically determined by multiplying the cost factor for a particular category by the number of students that qualify for the aid.” Categorical aid: is distributed regardless of a district’s ability to raise local revenue. These amounts are “typically determined by multiplying the cost factor for a particular category by the number of students that qualify for the aid.” State of New Jersey Department of Education

6. Fund Allocation These are the four categories that are wealth equalized. When combined, they create the “adequacy budget.” *Adequacy Budget = (Base Cost + AR Cost + LEP Cost + Comb.Cost + Spec Ed Census) x GCA 1) The base amount for elementary, middle, and high school students: Grade Level Base Cost Weight Elementary School (Elem) $9,649 1.00 Middle School (MS) $10,035 1.04 High School (HS) $11,289 1.17 Vocational Schools $14,789 1.31 State of New Jersey Department of Education

7. Fund Allocation Base Cost = 9,649 x [Elem Enr + (MS Enr x 1.04) + (HS Enr x 1.17)] For County Vocational Districts: Base Cost = 9,649 x [Elem Enr + (MS Enr x 1.04) + (HS Enr x 1.17)] x 1.31 Where: AR = At-Risk (includes students that are eligible for free and reduced priced lunches) LEP = Limited English Proficient Comb. = Combination (an LEP student who is also eligible for free or reduced-priced lunch) Spec Ed Census = The special education census-based costs that will be wealth-equalized GCA = Geographic Cost Adjustment (Index in Appendix B) Enr = Enrollment

8. Adequacy Budget 2) The weights for at-risk & LEP students, and county vocational districts. The AR weight ranges from 0.47-0.57. The LEP weight is 0.52, while the combined one is 0.125 AR Cost = 9,649 x [Elem AR Enr + (MS AR Enr x 1.04) + (HS AR Enr x 1.17)] x AR weight District AR Percentage AR Weight Less than 20% AR 0.47 Between 20% and 60% AR (AR% x 0.25) + 0.42 Greater than or equal to 60% AR 0.57 LEP Cost = 9,649 x [(Elem LEP Enr) + (MS LEP Enr x 1.04) + (HS LEP Enr x 1.17)] x 0.5 Combination Cost = 9,649 x [Elem Comb Enr) + (MS Comb Enr x 1.04) + (HS Comb Enr x 1.17)] x (AR Weight + 0.125) State of New Jersey Department of Education

9. Adequacy Budget 3) Two-thirds of the census-based costs for the general special education category. 4) All of the census-based costs for speech. The census-based method is used to fund a large portion of special education costs. The average excess costs are $10,898 for general special education and $1,082 for speech. The general special education cost is multiplied by the State average classification rate (14.69%) and district enrollments. The census-based cost for general special education is pro- rated. Only two-thirds of this portion is included in the adequacy budget. The census-based method is used to fund a large portion of special education costs. The average excess costs are $10,898 for general special education and $1,082 for speech. The general special education cost is multiplied by the State average classification rate (14.69%) and district enrollments. The census-based cost for general special education is pro- rated. Only two-thirds of this portion is included in the adequacy budget. The speech excess cost is multiplied by the State average speech classification rate (1.897%) and district enrollments, and the entire cost is funded in the adequacy budget. The speech excess cost is multiplied by the State average speech classification rate (1.897%) and district enrollments, and the entire cost is funded in the adequacy budget. Spec Ed Census = (Total Enr x 14.69% x 10,898 x 2/3) + (Total Enr x 1.897% x 1,082) (Special Education Cost x 2/3) (Speech Cost) State of New Jersey Department of Education

10. Categorical Costs Categorical costs - There is also funding for the following categories: 1)75% of “extraordinary” special education costs 2) One-third of the census-based costs for the general special education category 3) Security costs 4) Transportation 5) Preschool 6) Debt service & Benefits Payments 7) School Choice Aid State of New Jersey Department of Education

11. Categorical Costs Special Education: The need to was recognized to enhance fundsThe need to was recognized to enhance funds Funding for 75% of the cost over the threshold amount for educating students is provided.Funding for 75% of the cost over the threshold amount for educating students is provided. The threshold for extraordinary costs will be $40,000 for students placed in in-district placements, and $55,000 for students in separate facilities.The threshold for extraordinary costs will be $40,000 for students placed in in-district placements, and $55,000 for students in separate facilities. Spec Education Categorical Aid = Total Enr x 14.69% x $10,898 x 1/3 x GCA18 Extraordinary Aid = [(Actual In-District Cost - $40,000) + (Actual Separate Cost - $55,000)] x 75% State of New Jersey Department of Education

12. Categorical Costs Security: This new formula recognizes the need to increase funding in this area.This new formula recognizes the need to increase funding in this area. Every student generates a security cost of $70.Every student generates a security cost of $70. Each at-risk student generates an additional security cost that increases as at-risk concentration increases, up to a maximum of $406 per at-risk student (in districts where at least 40% of students are AR).Each at-risk student generates an additional security cost that increases as at-risk concentration increases, up to a maximum of $406 per at-risk student (in districts where at least 40% of students are AR). Security Aid = (Total Enr x 70) + (AR Enr x AR Security Amount) x GCA19 AR Security Amount for Districts with: Less than 40% AR Concentration = AR Percent x 1015 Greater than or equal to 40% AR Concentration = $406 State of New Jersey Department of Education

13. Categorical Costs Transportation: No changes were made to the funding of transportation from the previous formulaNo changes were made to the funding of transportation from the previous formula Regular Transportation Aid = (Reg Count x 383.88) + (Reg Count x 10.50 x Reg Avg Dist) Special Transportation Aid = (SE Count x 2,675.77) + (SE Count x 5.10 x SE Avg Dist) Prorated Transportation Aid = (Regular Transportation + Special Transportation) x 81.4876%21 Where: Reg Count = Number of students eligible for regular transportation, including aid-in-lieu Reg Avg Dist = Average distance from home to school for students eligible for transportation SE Count = Number of students receiving special transportation SE Avg Dist = Average distance from home to school for students receiving special transportation State of New Jersey Department of Education

14. Categorical Costs Preschool: Districts are required to offer high quality preschool to all three- and four-year-olds in the A and B District Factor Group (DFG) districts and to all three- and four-year olds in CD districts where the concentration of at-risk students is 40% or greater. Districts are required to offer high quality preschool to all three- and four-year-olds in the A and B District Factor Group (DFG) districts and to all three- and four-year olds in CD districts where the concentration of at-risk students is 40% or greater. All other districts will receive state funds and be required to offer high quality preschool programs to all at-risk three- and four-year-olds. This expansion will be phased in over time, with the goal of reaching at least 80% of the eligible population in all districts within six years. All other districts will receive state funds and be required to offer high quality preschool programs to all at-risk three- and four-year-olds. This expansion will be phased in over time, with the goal of reaching at least 80% of the eligible population in all districts within six years. Preschool Aid = [(In-Dist Enr x $11,506) + (Provider Enr x $12,934) + (Head Start Enr x $7,146)] x GCA State of New Jersey Department of Education

15. Categorical Costs Debt Service Aide & Benefits Payment Debt Service Aide & Benefits Payment No changes were made under the new formulaNo changes were made under the new formula School Choice Aide: School Choice Aide: N.J.S.A. 18A:36B-13, which allowed inter- district public school choice expired. N.J.S.A. 18A:36B-13, which allowed inter- district public school choice expired. Nonetheless, school choice aid will be provided to ensure that choice districts are adequately funded for these students.Nonetheless, school choice aid will be provided to ensure that choice districts are adequately funded for these students. School choice students will be counted as resident students of the choice district they attend. These receive aide as resident students.School choice students will be counted as resident students of the choice district they attend. These receive aide as resident students. State of New Jersey Department of Education

16. District Aide In order to determine a district’s aide, it wealth must be calculated through equalized valuation and aggregate income as they are applied in CEIFA (the older formula). In order to determine a district’s aide, it wealth must be calculated through equalized valuation and aggregate income as they are applied in CEIFA (the older formula). The Department sets the statewide property rate and income rate. For FY 2009, the property value rate is set to approximately 92.7 cents per $100 of equalized valuation. For FY 2009, the income rate is approximately 4.55%. The rates are applied to each district’s equalized valuation and aggregate revenue to determine each district’s ability to support their adequacy budget (local fair share). The Department sets the statewide property rate and income rate. For FY 2009, the property value rate is set to approximately 92.7 cents per $100 of equalized valuation. For FY 2009, the income rate is approximately 4.55%. The rates are applied to each district’s equalized valuation and aggregate revenue to determine each district’s ability to support their adequacy budget (local fair share). State of New Jersey Department of Education

17. District Aide The wealth-equalized portion of a district’s aid is then calculated by subtracting the LFS from the adequacy budget. The wealth-equalized portion of a district’s aid is then calculated by subtracting the LFS from the adequacy budget. LFS = (Eq Val x Prop Val Rate x 50%) + (Aggregate Income x Income Rate x 50%) Where: Eq Val = District’s total equalized valuation Prop Val Rate = Property value rate for FY 2009 is 0.0092690802, or about 92.7 cents per $100 of equalized valuation Income Rate = 0.04546684 The final calculation of a district’s aid allocation is : The final calculation of a district’s aid allocation is : State Aid = (Adequacy Budget – Local Fair Share) + Categorical Aids

18. Changes in Formula One model is used to calculate funds. It contains a base cost and adds weights to different components of the formula in order to make adjustments One model is used to calculate funds. It contains a base cost and adds weights to different components of the formula in order to make adjustments Increased funding for special education, but aide is also dependent on district wealth. Increased funding for special education, but aide is also dependent on district wealth. Increased funding for LEP students Increased funding for LEP students Increased funding for AR students Increased funding for AR students A geographic cost adjustment is used to reflect educational cost differences amongst counties A geographic cost adjustment is used to reflect educational cost differences amongst counties Increased funding for security Increased funding for security Requiring and funding full day preschool programs. Requiring and funding full day preschool programs. No change in transportation funding No change in transportation funding No change in debt aide and benefits payment No change in debt aide and benefits payment School choice aid programs remain in place. School choice aid programs remain in place.

19. Adequacy Budget

20. ADEQUACY BUDGET State aid distributed through foundation formula State aid distributed through foundation formula Calculations based on a per-pupil adequacy budget Calculations based on a per-pupil adequacy budget Spending on student to achieve NJ educational standards Spending on student to achieve NJ educational standards

21. Base Amount Calculated for elementary school-$9,649 Calculated for elementary school-$9,649 Increased for middle, high, and vocational school Increased for middle, high, and vocational school Increased expenses needed as students progress through school Increased expenses needed as students progress through school

22. Grade Level Base Cost Weight Elementary School $9,649 1.00 Elementary School $9,649 1.00 Middle School $10,035 1.04 Middle School $10,035 1.04 High School $11,289 1.17 High School $11,289 1.17 Vocational Schools $14,789 1.31 Vocational Schools $14,789 1.31 Adequacy Budget = Adequacy Budget = (Base Cost + AR Cost + LEP Cost + Comb.Cost + Spec Ed Census) x GCA (Base Cost + AR Cost + LEP Cost + Comb.Cost + Spec Ed Census) x GCA Base Cost = 9,649 x [Elem Enr + (MS Enr x 1.04) + (HS Enr x 1.17)] Base Cost = 9,649 x [Elem Enr + (MS Enr x 1.04) + (HS Enr x 1.17)]

23. Additional Weights Increases to basic formula Increases to basic formula At-Risk students (students eligible for free or reduced lunch) At-Risk students (students eligible for free or reduced lunch) Limited English Proficiency (LEP) students Limited English Proficiency (LEP) students Special Education Students Special Education Students Combination weight calculated for At-Risk and LEP students Combination weight calculated for At-Risk and LEP students

24. Additional Challenges High concentration of poverty in a district High concentration of poverty in a district At-Risk weights increase as poverty weight increases At-Risk weights increase as poverty weight increases 49% of NJ students eligible for free or reduced lunch reside in non- Abbott districts 49% of NJ students eligible for free or reduced lunch reside in non- Abbott districts Providing full-day Kindergarten Providing full-day Kindergarten

25. Adequacy Budget Cost Differentials Cost differences throughout the state Cost differences throughout the state Adjusted by geographic cost index Adjusted by geographic cost indexResource NJ DOE www.state.nj.us/education

26. Special Education Funding 100% of Special Education funding included in adequacy budget and equalized 100% of Special Education funding included in adequacy budget and equalized Special Education Funding split between categorical aid and equalized aid. Special Education Funding split between categorical aid and equalized aid.

27. Special Education Census Use statewide average classification rate multiplied by district enrollment multiplied by statewide average excess cost of special ed students Use statewide average classification rate multiplied by district enrollment multiplied by statewide average excess cost of special ed students Portion included in the adequacy budget, remainder paid through categorical aid (aid independent of wealth) Portion included in the adequacy budget, remainder paid through categorical aid (aid independent of wealth)

28. Special Education Funding currently funded through a pupil weighting system currently funded through a pupil weighting system children are assigned to “tiers” that are based on categories disability children are assigned to “tiers” that are based on categories disability districts receive State categorical aid based on the number of students in the district in each tier districts receive State categorical aid based on the number of students in the district in each tier

29. Special Education Funding District receive $310 for children under tier I for up to four related services District receive $310 for children under tier I for up to four related services Districts receive $3,260 for each child in tier II (mild disability), Districts receive $3,260 for each child in tier II (mild disability), $5,975 for each child in tier III (moderate disability) $5,975 for each child in tier III (moderate disability) $13,037 for each child in tier IV (any student with a disability receiving intensive services). $13,037 for each child in tier IV (any student with a disability receiving intensive services).

30. Special Education Funding State also reimburses districts for a portion of the costs associated with educating children with extraordinary needs State also reimburses districts for a portion of the costs associated with educating children with extraordinary needs defined as those whose education costs exceed $40,000 defined as those whose education costs exceed $40,000 This amounts to approximately 23% of the districts $40,000 per child This amounts to approximately 23% of the districts $40,000 per child

31. Approach to Special Education Funding Approach recognizes lack of correlation between disability category and cost. Approach recognizes lack of correlation between disability category and cost. Reduces incentive to over-classify students. Reduces incentive to over-classify students. Increases categorical aid to districts for extraordinary costs and compensates districts that have a higher percentage of children with greater and more expensive needs. Increases categorical aid to districts for extraordinary costs and compensates districts that have a higher percentage of children with greater and more expensive needs. Provides predictable level of special education funding. Provides predictable level of special education funding. Minimizes administrative burdens and provides districts with greater discretion and flexibility. Minimizes administrative burdens and provides districts with greater discretion and flexibility.

32. The School Funding Reform Act of 2008 Pros Pros Expands the definition of at-risk studentsExpands the definition of at-risk students Aid is distributed based on a school district's enrollment, with extra funding allocated to schools with an above average number of poor students and ELL students.Aid is distributed based on a school district's enrollment, with extra funding allocated to schools with an above average number of poor students and ELL students. Establishes an “adequacy budget” for each district.Establishes an “adequacy budget” for each district.

33. The School Funding Reform Act of 2008 Pros Pros More affluent areas get less state aid while poorer areas and those with increasing disadvantaged students will receive greater levels of funding.More affluent areas get less state aid while poorer areas and those with increasing disadvantaged students will receive greater levels of funding. Funding has been created for an estimated 30,000 low-income 3- and 4- year-olds to attend preschool.Funding has been created for an estimated 30,000 low-income 3- and 4- year-olds to attend preschool.

34. The School Funding Reform Act of 2008 ProsPros More money is given to needy districts outside the state’s large cities. More money is given to needy districts outside the state’s large cities. There is a minimum 2-percent increase for every district in the state. There is a minimum 2-percent increase for every district in the state. Communities are required to pay a “fair share” contribution of property taxes to support school budgets. Communities are required to pay a “fair share” contribution of property taxes to support school budgets.

35. The School Funding Reform Act of 2008 Cons Cons Eliminates money for after school programs such as tutoring, activities and clubs as well as health services.Eliminates money for after school programs such as tutoring, activities and clubs as well as health services. Eliminates the Abbott districts designation for the 31 poorest districts.Eliminates the Abbott districts designation for the 31 poorest districts.

36. The School Funding Reform Act of 2008 Cons Cons Requires that some districts use part of their state aid reduce the communities property tax.Requires that some districts use part of their state aid reduce the communities property tax. Distributes special education aid on a wealth- equalized basis.Distributes special education aid on a wealth- equalized basis. Uses per capita income, instead of property wealth alone, in formulating a district’s contribution to cost of educating the students within the district.Uses per capita income, instead of property wealth alone, in formulating a district’s contribution to cost of educating the students within the district.

37. Conclusion The State Department has made intensified efforts that the final school funding proposal is: Adequate and Equitable Adopted expeditiously for implementation for FY2009 To end unpredictable, adhoc funding

38. References New Jersey State League of Municipalities. (2007) Governor Announces New School Funding Formula. Retrieved on October 13, 2008 from: http://www.njslom.org/school_funding_pr ess_release_121207.html New Jersey State League of Municipalities. (2007) Governor Announces New School Funding Formula. Retrieved on October 13, 2008 from: http://www.njslom.org/school_funding_pr ess_release_121207.html http://www.njslom.org/school_funding_pr ess_release_121207.html http://www.njslom.org/school_funding_pr ess_release_121207.html State of New Jersey Department of Education. (2007). A Formula For Success: All Children, All Communities. Retrieved on October 14, 2008 from: http://www.state.nj.us/education/sff/ State of New Jersey Department of Education. (2007). A Formula For Success: All Children, All Communities. Retrieved on October 14, 2008 from: http://www.state.nj.us/education/sff/ http://www.state.nj.us/education/sff/

39. Reference Revising NJ’s School Funding Formula (2007) Retrieved on October 16, 2008 from: http://www.nj.gov/education/sff/11300 7stake.ppt. Revising NJ’s School Funding Formula (2007) Retrieved on October 16, 2008 from: http://www.nj.gov/education/sff/11300 7stake.ppt. http://www.nj.gov/education/sff/11300 7stake.ppt http://www.nj.gov/education/sff/11300 7stake.ppt

40. References Joint Legislative Committee on Public School Funding Reform. (2008). A New Formula For Success. Retrieved October 7, 2008. http://www.state.nj.us/education/sff/ Joint Legislative Committee on Public School Funding Reform. (2008). A New Formula For Success. Retrieved October 7, 2008. http://www.state.nj.us/education/sff/http://www.state.nj.us/education/sff/ Ryan, Lisa.(2008). School-funding formula on trial before N.J. court. Retrieved October 14, 2008. http://www.courierpostonline.com/apps/pbcs.dll/article?AI D=/20080923/NEWS01/809230361/1006 Ryan, Lisa.(2008). School-funding formula on trial before N.J. court. Retrieved October 14, 2008. http://www.courierpostonline.com/apps/pbcs.dll/article?AI D=/20080923/NEWS01/809230361/1006 http://www.courierpostonline.com/apps/pbcs.dll/article?AI D=/20080923/NEWS01/809230361/1006 http://www.courierpostonline.com/apps/pbcs.dll/article?AI D=/20080923/NEWS01/809230361/1006 Ryan, Lisa. (2008) Court weighs funding formula: Justices will decide legality of schools plan. Retrieved October 14, 2008. http://www.app.com/apps/pbcs.dll/article?AID=/20080923 /NEWS03/809230342/1007/rss03 Ryan, Lisa. (2008) Court weighs funding formula: Justices will decide legality of schools plan. Retrieved October 14, 2008. http://www.app.com/apps/pbcs.dll/article?AID=/20080923 /NEWS03/809230342/1007/rss03 http://www.app.com/apps/pbcs.dll/article?AID=/20080923 /NEWS03/809230342/1007/rss03 http://www.app.com/apps/pbcs.dll/article?AID=/20080923 /NEWS03/809230342/1007/rss03