Phil Murphy's billion-dollar challenge: N.J. school funding

As the Democratic gubernatorial nominee, Phil Murphy pledged to "fully fund" New Jersey's schools, vowing to end years of failure by the state to abide by its own funding law.

To keep that promise, all he'll have to do is find a spare billion or two after he becomes Gov. Murphy on Tuesday.

How Murphy plans to accomplish that remains unclear. He hasn't spelled out how he will ramp up state aid; a key tax proposal, which targets the wealthy, has been endangered by the Trump tax plan; and lawmakers aren't racing to legalize marijuana, another potential revenue source.

Murphy will be the latest governor to take on what has been a challenge for states all over the country: how to pay for public education adequately and fairly. The issue has continued to vex states as they try to move past band-aid solutions employed during the recession.

"School funding is often a queen-size sheet on a king-size bed. If you pull it over to one corner to cover it up, you pull it away from another corner," said Mike Griffith, a school finance consultant with Education Commission of the States.

"The way states make these changes palatable is by putting more money into the system."

In Pennsylvania, where the state Supreme Court last year reinstated a lawsuit challenging the school funding system, per-pupil spending increased 3.4 percent in 2014-15, according to a report last week by the National Center for Education Statistics. In New Jersey, spending fell slightly. Average per-pupil spending in New Jersey was $18,838 compared with $14,405 in Pennsylvania.

Murphy's spokesman did not respond to questions last week about how precisely Murphy would inject more money into the state's schools, which have been repeatedly shorted since New Jersey passed its progressive funding formula in 2008.

Grounded in the landmark Abbott v. Burke New Jersey Supreme Court rulings that steered resources into poorer districts, the formula directs added money for students who are poor, have disabilities, or aren't proficient in English. It determines how much in education costs a district can afford to raise locally and how much state money is needed.

But the state hasn't spent the required money. Murphy has priced full funding at an additional $800 million to $1 billion — although the formula currently caps aid to growing districts. If those caps are removed, districts are short about $2 billion, or close to 6 percent of the $34.7 billion state budget, according to legislative staff.

The governor-elect has said previously he would cover new costs in part by raising income taxes on millionaires and other tax changes totaling a projected $1.3 billion in new revenue.

But the millionaires tax has lost some support among legislative leaders, given the recent federal tax overhaul limiting deductions for state and local taxes. "Raising taxes should be a last resort," Senate President Stephen Sweeney (D., Gloucester), who had previously described the millionaires tax as a top priority, said in an interview Thursday.

Marijuana legalization, which Murphy has pointed to as another revenue source, also isn't a guarantee. Assembly Speaker Craig Coughlin (D., Middlesex) said last week he wants "thorough and thoughtful" consideration of the ramifications.

Sweeney, who met with Murphy on Wednesday but said the two didn't discuss Murphy's school funding plan, said he would continue to push for the reallocation of existing dollars to underfunded districts.

Not all New Jersey school districts are underfunded: Some are receiving more state aid than the formula says they should — the result of a deal to pass the 2008 funding law that spared districts from any cuts. But while the money was intended to be temporary, phasing it out has been highly controversial, including with the state's largest teachers' union.

"We do not believe that the state should be taking needed funding away from some students," said Steve Baker, spokesman for the New Jersey Education Association, which spent millions trying to defeat Sweeney's recent reelection.

Sweeney said districts with shrinking enrollment are "getting funding for children they don't have." If existing money were shifted, "at least then everyone's being underfunded at the same level," he said.

Lawmakers and Gov. Christie agreed last year to increase aid to underfunded districts by $130 million and shift $31 million away from other districts; about $600 million more could be moved to help compensate underfunded districts, according to Sweeney's office.

Richard Bozza, executive director of the New Jersey Association of School Administrators, said he expects that redistribution will continue "given the tightness of this budget." Besides funding schools, Murphy has also pledged to put more money into reducing the state's looming pension liability and has called for making community college free, among other proposals.

Balancing those priorities "is going to be a very difficult task for him," Bozza said.

Some underfunded districts aren't waiting for Murphy to present his budget. On Friday, a group of 10 districts — including Chesterfield Township in Burlington County and Kingsway Regional in Gloucester County — filed a petition with the state Department of Education, arguing that the state's method of awarding aid is "arbitrary" and violates the funding law, and that inadequate aid has forced them to overtax residents.

Chesterfield Township technically received more than "full" funding under the formula last year, with $820,000 in state aid. But take off the formula's growth caps, and the K-6 district, where enrollment has doubled in the last eight years, should be getting $4.2 million.

"Every year, the amount we have to cut out gets higher and higher and higher," Scott Heino, superintendent of the Chesterfield district, said of the district's $10 million budget. Although the district was able to save its library and instrumental-music programs last year thanks to an added $401,000 in state aid in the budget deal, Heino doesn't know whether it will get to keep that money in the coming year. If it doesn't, he said, more staff will have to be cut.

Chesterfield has repeatedly raised taxes at the state-imposed 2 percent cap — although health-care increases next year will eat up the extra $184,000, Heino said. The district raises more than $9 million in school taxes, though its "fair share" under the formula is $7 million.

Cherry Hill, while not part of the petition, is also short on state funding. The district raises $168 million in taxes, $34 million more than its fair share of $134 million. While it has increased taxes the last four years, it is planning a referendum for later this year to make health and safety upgrades.

"We literally need to go out and ask the community for additional funds because there's work that has to be done," said Superintendent Joe Meloche.