Jonathan Marshall: "PRINCIPLES: What should we expect in New Jersey's next school finance formula?"

Here is my September 2007 interactive report entitled "PRINCIPLES: What should we expect in New Jersey's next school finance formula?".  It's intended for wide circulation in New Jersey; please feel free to forward it to colleagues and friends.

Now what?  Are you interested in discussing this topic further?  Would you like to help?  Please click here to find out more, or email us your name and hometown at info@ValueNJ.org.  If there's broad enough interest, we'll organize a discussion on moving toward a specific legislative proposal.

Thanks!
--Jonathan Marshall

Comments

[Comments received on 2007-07-03 DRAFT]

 

COMMENTS RECEIVED ON 2007-07-03 DRAFT

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Thanks for your effort. I'd suggest only one item as a priority. Funding should follow the student -- at least in public school (vouchers are too controversial to be discussed). Districts should not have an incentive to discourage enrollment of students with special ed needs, students "at risk", etc. Other than that, I'd hope that NJ's formula would be influenced by what other states have already accomplished. Thanks.

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I read with interest your ideas and agree with many.

Having spent years in New Mexico, prior to coming to NJ, I lived under the formula concept, which may be relevant to what you are proposing. Some of the specifics are hazy, e.g., the exact amount that the state contributed to local schools, but I recall fairly clearly some of the issues. Essentially, during at least the 1980's NM used an index to fund schools. For example, (this is the hazy part, so please know that these are conceptual numbers and probably are way off from real life back then) the 1.00 index was prescribed for a student in grades 3-6; 1.05 was for grades 1 & 2 (there was no K in NM at the time); 1.2 for grades 7-9; and 1.4 for grades 10-12. The formula also address special education by index, e.g., children with mild disability were funded at 1.80, with severe disability as much as 3.00. Because the state funded all school districts at close to 100%, the legislature attached a dollar figure to the 1.0 index. They also built in the factor dollars for other varying costs, e.g., transportation, e.g., # of children transported less than 10 miles = X dollars; 10-15 miles X+2 dollars; etc. Several us us transported children 50+ miles, so even in an era of cheap gasoline, these costs were significant.

I send this not to suggest that everything about NM would work in NJ, but rather to suggest that their experience, both the positive and the negative, could provide a list of attributes and pitfalls that could help you. If my memory is correct, the index formula was created to address equity issues. It's also important to know that there was little to no collective bargaining in NM at the time and political pressures from a NMEA/NJEA were non-existent.

I do know that in NM, proportionately our sales tax was higher than in NJ. It was a regressive ad valorum tax on everything, groceries, doctor bills, as well as everything we tax in NJ. Income tax, which was progressive, was also proportionately higher, and property tax was exceedingly low. There was also state income from a severance tax on oil, which supported education. I'm sure there were other things that I simply wasn't in the know about.

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Union and Essex County property taxes are roughly 26% to 28% of the total property tax bill. Also, I know how county government creates patronage jobs to feed political aims. Only about 6 states still have county government. Why can't we enjoy such savings?

Moreover, if our schools have to live with S1701's 2% surplus rule, then why don't municipal and county governments? For example, if the my city had to abide by the 2% surplus rule then it would have to return @$6.6 million in this fiscal year and @$6.1 million in the last fiscal year to the taxpayers as property tax relief! In addition if Union County had to live by the same 2% surplus rule it is estimated that Union County would have had to return over $70 million to taxpayers! Now this would be real property tax relief!

Having studied county government and knowing how very few states still have it, county government was needed really only before local government developed especially during colonial times. It is an unnecessary and duplicative layer of government. Whatever services it provides can be more efficiently delivered via either local or state government. County government does not help to lower the cost of services rather it overlaps and duplicates services. It really exists to provide a source of patronage jobs.

In terms of practice, if we vote on school budgets why can't we also vote on municipal and county budgets? Why can't voters have a real say in how their governments are run by voting on these budgets? This would help add some much needed accountability to local and county governments whose spending tends to be out of control.

Other ways to cut property taxes:

* Make sure the state and federal governments fund all of their mandates at 100%. For example, No Child Left Behind (NCLB) and Individuals with Disabilities in Education Act (IDEA, 'special education) are only funded at @4% to 5% by the federal government. Hence, this results in billions of dollars in annual pass-through property taxes to our schools nationwide!

* New Jersey then adds its own mandates to each of these (NCLB and IDEA) which are the most expensive in the nation and that results in our schools having the highest cost of unfunded and under-funded mandates nationwide.

* Hold all schools harmless from frivolous law suits. Such lawsuits are one of the fastest growing expenses behind special ed costs.

By the way, when Maryland went to a 'County Executive form of school governance' its total administrative costs went up. New Jersey's total administrative costs are still lower than Maryland's.

* To also help reduce property taxes local governments as well as Boards of Education should ignore the activities on NIMBYs (Not In My Back Yard) that only drive up the cost of goods and services while undermining the common good of the community.

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Jonathan, I believe you are well intended, but I have to say that I believe working with someone from one advocacy group on budget issues that will impact funding for the whole state is not going to be productive. One advocate of doing what is right for all kids explains that I and J districts do not need any money, they can pay for themselves and Abbotts need more. Everyone agrees they need more than the rest of us but how much more? I believe any contribution to their discussion will somehow be used against funding I and J districts. It is certainly not going to reduce any requests for more funding from the Abbotts. If Special Ed aid is equalized (instead of remaining categorical) then some districts will lose the only money we get and the only consolation will be they will give us an exemption so we can raise more than 4% in taxes. You may see this entirely different than I do but I am not going to contribute to this discussion. I would love to believe that a healthy dialog among all with a vested interest will result in a better and fairer solution to funding schools in NJ - unfortunately my experience has been very negative, and in the end decisions have been made/laws passed/funding formulas finalized - with political agendas, not educational issues as the driving force. Finally I believe that when we attempted this recently that our advocacy was somewhat diluted by alternate solutions proposed.

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Hi! I think your paper on financing is brilliant! I had a few thoughts. Under #2 Policy, Include Educational Outcomes as a Factor - I like the ideas set forth in the examples but was unclear how they are measured. Loved the ID and Share Best Practices. Under "Make Major Policy Decisions", the penultimate bullet point, not sure but I think needed a something at the start like "the formation of an administrative channel" or "establishment of". And, maybe an "and" at the end of it. And, under 3. Principles of Process, the concept of Knobs was not totally clear to me how they are implemented but maybe it's a term of art I'm not familiar with.

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I think this is a splendid effort. The jargon you have used is direct, e.g. "knobs"/"frugality". And, Danziger.... Keep up the good work!

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What an incredible piece you have written. Thank you for caring enough to spend the time to write it and for forwarding it to me. If I can be of any support to the cause, please don't hesitate to let me know how.

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Too abstract in a few places. Add more examples and summaries to make it clearer.

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What about the particularized needs of some districts, as mandated in Abbott court decisions? These don't fit into any "formula."

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Some of the points are extraneous. Focus on the important parts.

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I appreciate your work. It's a tough challenge. I think you have laid out the key issues.

I see a structural problem with our whole state system in that the best ways to be efficient, cut waste, improve quality is LOCAL control, but as you noted, the State is the sovereign, and everything must be uniform at a state level. This usually waters things down to a lowest common denominator. Add federal regulations and it's tougher. Good luck!

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[Comments received on 2007-08-12 DRAFT]

 

COMMENTS RECEIVED ON 2007-08-12 DRAFT

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Much of this appears to be supportable based upon our policies regarding school funding. There were a few items that raised an eyebrow of mine - even if it were only because I wasn't clear on the intent:

You indicate that we should tax progressively including income and property wealth. We have long been a proponent of a progressive tax to fund schools. I'm unclear, however, how property wealth can be a progressive tax. If I own a mansion and lose my job tomorrow, any tax on that mansion and its value will be regressive if the value of the property is increasing while I have no income.

I would suggest where you use an example of a legislative factor for a "lawn mowing area" that you perhaps consider another example. I understand the concept and you're intent, but school boards shouldn't even be dealing with mowing the lawn - I think using that as an example gives the opportunity for micromanagement by the legislature to arise.

I like your appeal process for changes to the formula or model. I'm skeptical, however, if such an appeal were unsuccessful, it litigation still would not result.

You mention a knob for what happens if the legislature chooses not to fund the formula. You might want to think about this one a little further. One of the major problems with many of the previous school funding formulas is that legislature doesn't fund them. The greatest model in the world won't work if the funding commitment isn't there.

Thanks for sharing the document and asking for input. It was a very interesting read.

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Good job gaining broad participation from many diverse groups.

Use of “model” vs. “formula” is confusing. Define/distinguish more clearly. What spending is or should be?

Define “accurate” model.

Explain more clearly the important premise: how spreading impact more evenly would gain $ billions.

Executive summary is weaker than rest of paper.

Court ruling on CEIFA pertained to Abbotts only.

“Test scores are notoriously inaccurate” – as compared to what?

“Formula is prescriptive … determines how much the state will contribute.” – What about total spending?

Can use a model as part of a formula – e.g., what a used car should cost.

“State funding should follow students.” -- What does that mean?

Check Odden & Picus work, vs. Hanushek criticism.

“…’guarantee’ that adequate funds are provided to school districts.” – to Abbott only.

“Districts should have no incentives to discourage enrollment …” – Should funding encourage them to diversify?

“School funding should be determined by the actual, assessed needs of students” – OK, but how?

“Establish a statewide forum for resolving…” – Isn’t there already the XXXX under federal law?

“…legislature should control overall level of state funding…” – But isn’t a big problem a top-down imposition of funding levels rather than bottom-up construction of the funding required to do the job?

“…administrative process would determine formula dimensions and weights…” -- Who’s to do this, and how? Can’t imagine the current NJDOE pulling it off.

How does giving a county superintendent more or less control translate to expected costs? – connect/explain.

”…districts retain the right to enhance … funded by local tax and subject to local control” – Not really – no, no, no!

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I think it is a very good approach and an approachable layout. A few specific comments:

Give Incentives to Share Services – should be mostly “break down barriers for the sharing of services”. County, school and municipality legislative/requirements/issues often cloud the ability and sometimes even the monetary feasibility (artificially) of sharing services. Specifically regionalization and consolidation rules around schools, board balance, ease of joining or leaving and property tax differentials prevent the “best” configurations (again artificially). Also, the highest pay scale and benefits requirements prevent regionalization of districts. State aid over multiple years would be needed to make it financially beneficial in the short-term.

Tax Property, Fairly – Suggested addition – the income to property tax balance is so out of whack that demographics are also being driven by schools and the tax policy. Older people are gravitating or being forced out of districts with lots of school needs because of property taxes on their rising home values which they have not realized nor do they generate the income necessary to pay the property tax increases. We therefore have resentment against families and children and increasing less diversity age wise in our communities with increasingly wider disparities of property tax rates as communities with little to no school expense are being created.

Identify and Share Best Practices – One of the requirements if the Charter School legislation was that innovation be a requirement of charter schools and that best practices be shared. None of this is happening. Whatever successes charter schools are having are being fostered in that environment. There is no process in place to analyze best practices and if and how they can be replicated in the public schools.

Question – have any other stated implemented and used the administrative process approach?

Explain how policy connects with values; Put children ahead of ourselves – Addition: school funding should not be reduced to service debt from poor borrowing decisions in the past that have led to tight budgets now.

Thanks Jonathan! – This is a yeoman’s piece of work!

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Jonathan - thank you for the opportunity to comment.

The essence of the proposal should be made more clear: it seems that the proposal is 1) gather data and perform a statistical analysis to determine how spending correlates with results; 2) devise a formula that allocates funds according to the data from each school district. In other words, if one has the data (e.g. from the "model comprehensively" section on pp 7-8), one would plug it into a formula to determine the percentage of the total State monies allocated to school budgets one's school district will receive. Property taxes would be used to provide the balance. Is this correct? How does this differ from what we have today? Certainly today the number of variables in the school funding formula is lower than advocated in this paper, but are there other differences?

While the point is made that relevant variables need to be part of a funding formula, the formula itself will be very complex; for instance, there are 27 variables listed. Presumably the final funding formula would include (say) over 100 variables in a complex equation that would be hard to comprehend. One could not expect to "understand" such a complex formula, only the outcome. Therefore efforts should be made to keep the number of variables to the bare minimum. Has any other state tried such an approach?

The point should be made that use of the formula is zero sum game; there will be winners and losers in school funding vs. the current formula, and this will result in political heat and challenges of unfairness by the losers. Since the new formula will be very complicated, it will be hard to explain to voters in the losing districts why their school funding has gone down (and therefore why their property taxes must rise to keep even.) The whole thing stands a good chance of being thrown out and a new effort mounted which is easier to understand/explain. In short, the approach advocated may be doomed to fail because of its complexity.

Suggest focusing on the primary subject implied in the title: the "school finance formula". Avoid discussion of things such as the taxation of "wealth" vs. income vs. sales tax, the "proper" level of taxation, as these are outside the scope of this paper. This also applies to discussion of financial controls, county government, executive county superintendents, pension plans, medical costs, etc. While interesting, these topics contribute to the length of the paper, distracting from the central area of focus.

Assuming that this paper is ultimately intended to be used to influence legislators, remove potentially offensive phrases such as "formulas haven't stuck", "financial mistakes", "notoriously inaccurate", "no credible account", "inaccurate funding", "inaccurate models".

Avoid speculation on the "billions" of dollars or percentages of budget which could be saved by this effort; the subject is allocation of scarce resources, not saving money.

Do some statistical analysis of the data in the graph on p4 and draw some quantitative conclusions, e.g. there would appear to be some correlation between cost per pupil and test scores, with a wide degree of variation. (what is the standard deviation?)

Thank you for the time and effort you have spent on this paper. We look forward to seeing the final product and working together to influence the process of devising a new school funding formula.

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We have this other problem. How can we talk about dollars spent when we don't establish the value of that dollar. A dollar in New Jersey is very different from a dollar elsewhere. While everyone now agrees, no one seems to understand the seriousness of these differentials. We hear that New Jersey spends so much more than everyone else. I used a CNN website that compares the cost of living from place to place. If I earn $100,000 in Middlesex/Monmouth, how much must I earn in other areas to maintain the same standard of living. These results show how significant this issue is. In Chicago, I would need $87,500; in Tacoma, I would need $83,000; in Dallas, I would need $72,500, in Mason City, I would need $68,700. These are significant differences. If we spend $15,000 for a student in New Jersey, is that the same as spending $12,000 elsewhere? I used a different web service to compare within New Jersey. If I earn $100,000 in Atlantic/Cape May, for me to live the same in Bergen/Passaic I would need to earn $134,000. These differentials are too significant to be considered as an afterthought.

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You make several valid points that we could openly and easily support: 1. The money should follow the student especially in the case of students with special needs. 2. Municipal government should have to follow the same rules we do.

You present many other ideas which I need to consider. thanks for the info

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I did a fairly cursory reading and find much to agree with. The major flaw that I see is that you advocate using state test data as the primary indicator of value. I think that sets a trap which essentially gives far more credence to the state tests than I am willing to give. In the latter part of your report, you indicate that the arts and other areas are valuable, but with out current set of testing, they are not tested. I can promise you that if dollars are based upon state test scores that many valuable programs will be dropped. Having said that, I also think it is foolish to totally disregard state tests, but I have witnessed some horrendous educational practices when a district places too heavy a value on state test results.

I particularly applaud your including the recognition that senior staff costs more money. I do recall in another state that the index built in a factor that encouraged districts to keep experienced teachers. I also wondered why you did not include sales tax as a source of support for schools. I understand that there is not a 1:1 formula to be used as there is with property or income, but the generalizable support that is possible through sales tax is huge, particularly if a funding formula is used.

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Thanks for sending this to me. I have a few comments.

1. I'm not sure the word "accurate" is the best choice when speaking about a new funding formula. Don't you really mean fair, equitable, etc.?

2. In your summary, number 7, you speak of using savings. Will there be any savings? We already know how underfunded schools are. I envision any freed up money staying put.

3. It might be helpful in the Introduction section to explain why test scores are not a good indicator of performance.

4. In the last paragraph on page 3, what "administrative cuts" are you referring to?

5. On the bottom of page 4, how do you know New Jersey collects so little data?

6. Given your expertise, can you estimate a time frame and cost range for a new formula? Also, are you confident the state DOE has the brain power to devise a formula such as the one you advocate?

7. Do you have any ideas on how to neutralize political interference in the process? After watching what happened with the special sessions, I am certain Corzine, Codey, and Roberts still and will call the shots.

8. Is it possible to elaborate on the need to reward districts that perform well? Conversely, districts which may lose funds under the new formula should be given assistance so that potential cuts do not affect student performance.

9. I believe districts should do more to keep special ed students local, either in-house or at programs delivered by education services commissions. Do you have an opinion on that and/or do you think you should include a statement about the benefits of local placements? Also, I believe we are already under a mandate to use mediation first in resolving disputes over special ed students' IEP's, placements, etc.

10. Are you going to say anything about the new executive county superintendents?

Thanks again, Jonathan, for not letting this go.

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Be careful with the special ed formula. While I agree that funding should be based solely on students needing these services, the fact remains that parents are not alone in attempting to "game" the system. School administartors can be far bigger culprits here. Many would not hesitate to reclassify borderline students to protect their funding levels.

The real key to reducing public education costs is to reduce the number of non-teaching "administrative" and "support" jobs. Our own Board of Ed added 21 new fulltime postions this year; none of which are teachers. Some of these were part-time converted to full time. But the number is still excessive.

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Biggest unfunded mandate of all (bar none) is "Special Ed." You know, for learning-disabled students. 13% of our student body is classified "SpecialEd" per state code, meaning they get IEP's (individual education plans) in addition to regular Report Cards. IEP's require a host of specialized teachers, aides, psychologists, linguists, as well as lots of one-on-one contact (i.e. ultra-small class sizes). This year we will spend over $10 million on SpecialEd (20% of total BOE budget), yet get reimbursed less than $2 million from Federal + State + County aid in total. Net net, we're $8mm out of pocket . . . more than what our entire Police Dept costs !

State aid for SpecialEd should be directly tied to # of classified students each District has. Period. Meaning it should not also be "means tested" according to the wealth of a given community. Because parents will game the system, and move to a community with the best SpecEd services. Market forces quickly distort the system unless state aid moves in lock step with where SpecEd student enrolls next.

For example, if our municipality's "wealth" deprives us of proper state aid, but the marketplace deluges us with SpecEd students (because we do such good job with them), our taxpayers get killed.

So you should insist any new formula stop SpecialEd aid from being diluted because of a community's "wealth" factor. Case load should be the one and only determinant of SpecialEd reimbursements.

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Very Impressive document. You obviously have given this issue a lot of thought. Unfortunately policy makers are inherently unable to take a long term view. They operate on the principle of disjointed incrementalism. Nibble at the edges, don’t rock the boat unless you must. We want local control but more State aid. This will never happen. The original equity case (Robinson Cahill) was only about equity in raising funds, leaving it to communities to decide how much they would raise. It is fairly easy to come up with a formula that provides equal dollars for equal tax effort. Any State broadbased tax will do it. In the middle seventies, there was a proposal to go to a State wide property tax, but that would mean winners and losers. My idea is to take everything off the table except special education expenditures. The State and Federal Gov. would pay the full cost of special education. They would be free to establish whatever regulations they deem appropriate as long as they are fully funded. All other costs would be handled by property taxes.

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Glad that you are connected. I will have to check out your website. I have sent your draft principles to our assistant superintendent of finance to get his feedback.

Are you aware of the Garden State Coalition of Schools. http://www.gscschools.org/gsc

I am not an expert in school finance reform, however, have attended several meetings on the topic via both the Garden State Coalition of School and the NJPTA Legislative Workshops. It sounds like you are very committed to public education. I suggest that you contact the director of GSCC if you haven't done that already. I'm one who doesn't believe in reinventing the wheel.

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Good piece of work. I do have a few comments:

Checks and Balances: In the past, when funding "formulas" have changed, districts found ways to "game" the system. For example, at one time, districts classified too many students to get additional special ed dollars. We need to ensure that there are checks in the system. Not sure where to include this idea, but I think it needs to be there.

Clear Legislation: Too often, the process of compromise in the legislature produces laws that are vague and ambiguous, leaving the courts to interpret the meaning and boundaries. While I like the notion of “adjusting knobs,” I am very concerned that this will leave us with giant “litigation traps.” The lawyers will keep districts in court for years!

Policy: Over the past 30 or 40 years, we have implemented many, many educational policies. Some have been conscious decisions, where we had some idea of the consequences. Unfortunately, some have been implemented for political reasons, or other reasons. We should revisit the policies we have in place and look at the costs, as well as the consequences, and determine if they have yielded the results we expected.

Thanks for asking!

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First of all, let me say how grateful I am to you for doing all the work involved in putting together this very comprehensive document. I am especially pleased that you mentioned the current disincentives for districts like mine that have made frugality (and success) a habit for years. We feel that every time we save money, we get punished for it!

I also like your emphasis on identifying and sharing best practices. I think this could be done by benchmarking consortiums, like the Western States Consortium in the western U.S. My district is participating in such a consortium right now. If we could get all districts to take part in benchmarking consortiums (possibly with some kind of incentive for doing so), we would go a long way on the road towards better outcomes. Consortiums don't cost that much and the potential to increase achievement levels and cut costs is substantial.

I am a bit concerned about your qualified advocacy of using a temporary formula. If we let our legislators off the hook for even a short period of time, we will never get a formula. (Just my opinion, but based on my 7+ years of BOE service and adventures in Trenton!)

I know that you would have to reformat the whole paper, but I would put the "Explain How Policy Connects With Values" section at the very top. It goes to the core of the educational mission, which is the top priority for everyone.

I think your final conclusion is right on target. A good formula will lower property taxes and save money.

The problem I see, and it has nothing to do with the quality of your work, is that our politicians do not want a new formula. They want to be able, each year, to say, "We have x amount of dollars for education; this is how we are going to parcel it out." That way, they have maximum room for political expediency and minimum restriction on the amount of political manipulation that can take place. I am not sure how we overcome NJ "politics as usual" to get real, constructive change.

That said, I think that once you have gotten all the comments and feedback that you have solicited, you need to be able to "cook down" the eighteen pages into about ten bullet points that legislators (even those with the IQ of turnips) and the general public can digest easily. You should release the eighteen pages, plus the ten bullet points, in September, in plenty of time for large-scale dissemination before the election.

Of course, in all of this, I am speaking for myself, not for my BOE or any other group.

Again, thanks for your efforts and for giving me the chance to review this document.

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Thank you for sharing. I am assuming you want me to tell the truth so I will do so. Please understand that I appreciate your effort and the dedication to the cause we share.

I will read the paper tomorrow, but my first thought is that the groups you are addressing are varied in their approaches and their agendas. Therefore, satisfying them all seems unlikely. Who do you really think the target needs to be?

Secondly, what is going to get people to read so many pages? If the reader doesn't agree with your opening statement, saving 10% of the top, will they continue to read?

Do you think it is realistic to think the Legislators, the advocacy groups, or the DOE folks will put politics aside in favor of sound financial decisions? I'm sorry if I appear negative. I have learned though that narrower focus and accomplishable goals give you a better chance of being listened to. I approached your paper with the assumption that we are not so different. I believe that we truly wish to inform, but we also want to have impact on the decision makers. It is my perception that these folks want definitive and verifiable facts, and plans for action.

With this said, when I got to #7 of your "exec. summary", I turned off. Saving billions is so broad, and in my way of thinking, a fantasy. We can spend better, and get more for our money, but we are not going to get to save and certainly not billions.

I believe that the background is familiar enough to all that are really concerned. Spelling this out, and then talking about flying blind rubs salt into an open wound.

You state that equalizing uncontrollable factors is a policy and law issue. I think, at best, that this is a matter of opinion. Mine is that this cannot happen.

That should give you a sense of my approach to this. I believe that we must present answers, not lessons. Whether this is right or wrong I don't know. In fact, I don't know that there is a right or wrong. You have to do what works for you because that is what keeps you going. Me too. Keep up the good work.

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Funding should follow the student to the public school of choice. (Not private or parochial school).

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I looked over your draft and came up with a few comments:

--The idea of a single model of spending has practical limitations because school districts categorize their own spending in ways that vary between fairly accurate to flat out deceptive. Yes, the standardized chart of accounts is supposed to minimize monkey business, but in my experience schools practice all sorts of games to conceal spending, to spread out contracts over multiple codes, to transfer budget dollars back and forth between accounts to the extent the law allows, and other games. Tracing the path of budget dollars in a single district is work enough--I'm not sure how the six hundred some odd NJ districts could be analyzed together with any degree of accuracy when the identical contract could be assigned to a dozen different accounts depending on the whim of the district staff. Maybe a model would have to attack the problem another way, such as coming up with a list of vendors who sell to NJ schools, assigning each vendor a "type" code and tracking how much is spent with each vendor by each district. I dunno--it's a thorny problem no matter what.

--The NJ SMART program is likely never to amount to anything if the past few years are any indication. For that matter, federal efforts may supersede it anyway. I think it will be a long wait before the state of NJ figures out how to set the specs or design software to track every student through the whole system. The software vendors who were initially contacted some years ago to be involved in the issue used it as a selling point to schools that they were involved, but the truth is that the competitive market for student record keeping prevented much real cooperation. For awhile a few vendors consolidated the student records market, but now it is fragmenting again and vendors from all over the country are bidding on the RFQs sent out by NJ schools. I wouldn't count on NJ SMART for meaningful, detailed data.

--Some of your references to special ed spending remind me of the special issues there. Special ed costs rise so dramatically because there is no mechanism for review AT ALL. In IEP meetings professionals and parents discuss the best or the preferred strategies for educating a special needs child, without regard to cost. In fact, federal law prohibits schools from doing much else. Once a strategy has been codified in an IEP, it must be paid for by the school district even if a cheaper and equally good method may exist. It isn't as though the school board can object to a specific strategy without breaking the law or triggering a lawsuit. About all a school board can do is try to bring more special needs students in-house by hiring the right professionals. What is needed is a legal method for a district to use cost as one criteria for placing students (federal law is a problem there) or at least the legal means to encourage NJ districts to share the burden with other districts. We all want the best for these students, but with no flexibility on placement the end result is that money is no object and costs spiral out of control.

--One thing perhaps missing from your document is an emphasis on encouraging consolidation of districts or shared services in an organic way. By that I don't mean forcing all the towns in a county to report to a central authority, but, instead, to put in place mechanisms that encourage the districts with a good fit to seek each other out on their own. That might mean that three districts in two different counties might be able to merge, or it might mean that two districts in opposite ends of the state could share services. The point is not to force districts together but to put in place the legal means to allow the ease of such movement when it is supported by districts and stakeholders. The recent experience of some regional districts breaking up shows how difficult it is to initiate movement like this. We need to revise the law to make shared services and consolidations simple, easy, and well defined. We don't need as many districts as we have in NJ, but we shouldn't use that as an excuse to trample the idea of home rule either. Making consolidation and shared services voluntary but also easy to do would go a long way toward encouraging cost saving. Spending formulas could be a part of this process.

Overall I admire your intent, but I can't help but feel that the cause is bordering on hopeless. The recent stories in the NY Times about our state pension and state employee health care debacle only adds to my feeling. How deep a hole can these politicians dig? Is there no end to the creativity of their mismanagement? Its a long trail back to civilization and the way out is the way in.

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Interesting reading and certainly complicated. I believe clear open accounting of the funding and expenditures are key. The books should be available at all times on the internet, uploaded weekly from the working accounts. Accounts should be shown in standard accounting form, like businesses use.

On another note, why not skip state aid? My town can certainly afford to educate its children without state aid. Leave state aid for municipalities that cannot afford to educate their children. Skipping aid from the state may even help the state with its financial problem. The town may even benefit from skipping state aid and the associated mandates. Less money may help our school district to focus its spending better.

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Your school finance formula appears to be moving in the direction. When did New Jersey have a formula which was OK? I mean one that we could operate the educational system under. Your formula appears to be very complicated. I am pretty sure our politicians will not allow a formula to take over work the feel is rightly theirs. What do you think?

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Thanks for including me in your message. I particularly liked the emphasis on taxing both income and property fairly as well as the awareness that currently frugality is definitely penalized. The explanations of values that can be translated into policy are excellent. My own "musts" for a new funding formula include:

• Special Ed funding MUST follow the child regardless of district

• New funding formula MUST take into account the variable cost of living throughout New Jersey

• New funding formula MUST eliminate ALL funding to non-public schools until ALL public school needs are met

Thanks for your continued efforts.

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[Ed Quinn]

 

Jonathan,

Please read the report at http://online.wsj.com/public/resources/documents/DroppedB.pdf that addresses the sixty billion dollar OPEB (Other Post Employment Benefits) financial obligation (that remains unfunded in New Jersey).

As stated in the report, the New Jersey tax rate will rise by 20 percent this year (and future years) if this issue were addressed today.

The other alternative to a 20 percent tax increase is to significantly reduce retirement benefits of New Jersey's State, Municipal and Teacher retirees.

The report also indicates that this OPEB deficit problem is most severe in New Jersey and a much smaller problem in other States.

I believe that your report should be revised to include and address this enormous financial obligation that effects every person in New Jersey.

Thank you,
Edwin Quinn

[NJ School District Superintendent]

 

Jonathan,
Well done! Thank you for an illuminating treatment of the matter. It seems that the principle of "deep pockets" is now viable in more than the tort insurance industry.

[Readington88]

 

While I commend the effort that went into the Working Paper I have a few comments.

First, it strikes me that the working paper is intended to generate more heat then light. For example, "No one knows why some New Jersey school districts spend twice the money .....And conversely, no one knows why some get twice the performance without spending more money."

While it is always possible to want more data, the School Report Card provides sufficient data to explain much of the variation in district costs. I doubt you see anyway near the range you cited if you compare similarly structured districts (i.e., k-8 vs k-8, 9-12 vs 9-12 and k-12 versus k-12).

Likewise, since much of the student performance reflects the socio economic characteristics of the students, I doubt there is anywhere near that large of performance variation among districts within the same District Factor Groups.

Second, your approach to modeling school costs seems likely to bog down in too much detail and eventually fail. A long time ago a professor told me, "Clarify the question you are asking, then start with as simple as model as possible. Exercise the hell out of the model and learn all you can. If you've answered the question stop. If not, consider building a better model."

If I was doing this work I'd start with the school report card data and identify the "big moving parts" of the cost components to see how much cost variation per student there really is across district types.

In the process of identifying the big moving parts, I'd also look for any significant scale economies. While there usually are folks who want to consolidate regional or county wide districts, I don't think the school cost structure justifies such consolidation. It would be nice to have real data to put the issue to bed.

A big component of school costs are teacher salary (around 50%). The typical teacher salary guides usually double the starting salary over 20-25 years and are frequently very non-linear (they look like hockey sticks). As a result, rapidly growing districts will frequently have significantly lower average salary costs then stagnant or shrinking districts (in growing districts space constraints usually increase class sizes at the same time average salary declines. In shrinking districts class size fall while average salaries rise, since the total costs are relatively flat few complain).

[Jonathan A. Marshall]

 

Thanks for your comments, Readington88!

BY GRADE-LEVEL TYPE

You raised an interesting question about the breakdown by the school district's grade-level type. I checked the data for you, and created another chart.

It turns out that almost all school district grade-level types are scattered over the same wide range of cost and performance.

The exception is the 47 grade 7-12 and 9-12 districts. (NJ's spending data combine these into a single category.) They have a narrower spread, in both cost and performance. Generally they are regional high schools.

For each of the other 3 types (500 districts), the spread is pretty much the full range, in both cost and performance.

You could do more statistics, analyzing means and standard deviations. But it's clear from the chart that (except for regional high school districts) there's no obvious clustering by district grade-level type.

I would say that your hypothesis is interesting, but disproved by the data.

BY DISTRICT FACTOR GROUP

Within District Factor Groups, we see the same wide variation of costs, but a narrower range of performance which correlates with wealth. That's why I showed the I-J example in the original chart.

Wealth correlates significantly with measured performance, but spending does not.

Educators in poorer districts work hard to overcome that disadvantage in their students. Certain strategies help, such as state funding for preschools, and family reading programs. But they don't help enough. My view is that the state should support more research and data analysis, to find, improve, and disseminate successful practices.

One unanswered question, across all districts, is how to spend so that spending does correlate with outcomes.

HEAT AND LIGHT

I disagree with your assertion that my paper "is intended to generate more heat than light." There is already plenty of heat in public discussion, and my intention here is to point calmly to specific solutions that haven't been adequately discussed.

My proposed solutions include more data and better modeling, more education research, spreading impact more evenly, aligning incentives, channeling disputes toward constructive resolution, exposing the costs of short-term budget cuts, and building public confidence.

If I were just grumbling and criticizing, you could call it heat. I would encourage anyone interested in school finance to propose solutions -- that's what I'd call light.

TOO MUCH DETAIL?

I agree with your concern about models possibly getting bogged down in too much detail. Not all details should be included in the model.

In the paper I proposed several objective criteria to avoid that problem. The criteria include the dollar amount (to exclude trivial details), the data collection cost (to exclude details that aren't worth the effort), and accuracy (to exclude self-serving details).

In practice, the proposed dimensions that might be included in the model would be ranked according to criteria like these. They would be accepted into the model in rank order. Dimensions below a certain rank would be excluded.

That's how we'd avoid bogging down the model. We get to control how many details to include, and the order in which we include them. We can stop adding details when we understand how to apply dollars to improve outcomes.

MOVING PARTS

I agree with you that scale economies and salary-seniority-growth characteristics can be included in the model. The decision on whether to include those dimensions should use the same criteria as on any other dimension.

Thanks again. I appreciate your insights. I think NJ has to try hard to improve, regardless of whether we feel optimistic or pessimistic.

[Readington88]

 

It would be helpful to see separate charts for each of the three types of districts k-8 and k-6 combined, 9-12 and 7-12 combined and k-12.

However, instead of performance it would be interesting to see a plot of comparitiave cost per student against district enrollment.

Finally it would be useful to identify the 5 districts in each of the tails of each comparative cost per student distributions (2 in each tail for 7-12 and 9-12) .

[Barbara Belasco]

 

The following issues came to my mind while reading your document. Have you considered them?

NJ Property Tax Burden

Changing to a statewide property tax could lift some of the unequal tax burden paid by residents in different NJ municipalities.

While New Jerseyans have a high median income they also pay the highest property taxes in the country. What’s more, the property taxes are distributed unevenly. Municipalities with large commercial and residential ratables, pay substantially lower taxes than those without such ratables. Also residents of municipalities (for example, non-operating districts) which send their students to other municipalities often pay very low school taxes, because they pay per student tuition rather than being taxed on their assessed valuation.

The state average equalized property tax rate (ETR) in 1985 was $2.47 per $100 of property value. This was more than double the national average rate of $1.21. In 2000, 129 municipalities had an ETR of $3.00 or more, with at least one such municipality within each county. These include South Orange where I live.

Organization rather than Finance

Student success depends on strong school leaders and a well organized, trained and committed faculty rather than the amount of money spent.

The book It’s Being Done: Academic Success in Unexpected Schools by Karin Chenoweth takes readers into schools where educators believe that all children, even those considered “hard-to-teach,” can learn to high standards. Their teachers and principals refuse to write them off and instead show how thoughtful instruction, high expectations, stubborn commitment, and careful consideration of each child’s needs can result in remarkable improvements in student achievement. How will you capture this in a model?

Socio-economic Factors

The best predictive criterion of success in school is the socio-economic class of a student’s family. Using the best practices, it may cost very little to teach reading in a district with families of high socio-economic level but much more for students from poor, less educated families. How do you plan to correct for this?

Savings

You estimate savings in the $1 billion range annually. This is truly a very large number. I cannot tell from your document how you arrive at this estimate. Isn’t it equally likely that school costs could rise by $1 billion depending on your spending model?

[Jonathan A. Marshall]

Barbara, those are great questions -- thank you!

NJ property tax burden

I agree with you that shifting some of the burden from local property tax to a statewide uniform-rate property tax would reduce the uneven impact on residents of different municipalities. Local property tax is extremely regressive -- residents of the poorest municipalities pay the highest property tax rates.

An attempt to institute statewide uniform-rate property taxation in New Jersey failed several years ago.

In my view, the most likely way it would pass today would be via linkage to funding a small, wealth-blind state aid program, such as categorical aid for special education. It would represent a compromise agreement between those who seek wealth-blind aid and those who seek a statewide property tax.

I'm not sure what you meant about non-operating districts, though. Even though they pay per-student tuition, the funds do come from local property tax on assessed valuation.

Self-supporting tax deferral program

A novel proposal is for New Jersey to start a tax deferral program that is self-supporting. Unlike tax deferral in 25 other states, such a program would not be a burden to New Jersey's taxpayers, and hence would not need to be artificially hobbled or restricted.

As described in a VALUE NEW JERSEY proposal here and here, a self-supporting property tax deferral program would reduce the regressiveness of property tax, for cash-poor homeowners.

Organization rather than finance

I agree with you and Chenoweth that strong school leaders and a well organized, trained, and committed faculty are key success factors.

The question that you (rightly) raise is how to measure "thoughtful instruction, high expectations, stubborn commitment, and careful consideration of each child’s needs." We can't directly measure these things.

But we can measure the number of administrators and teachers who have completed certain training programs. We can also record various indicator categories, such as number of teacher peer-support meetings, number of complaints about administrators, number of times a certain practice is exhibited in class, number of schools where a certain organizational structure is in place.

Characteristics like these would be recorded and later analyzed for correlation with student outcomes.

I'm not saying that we can measure everything, nor that our measures can be exact. We just record what we can. Who was the teacher? What training has the teacher had? How long has the teacher stayed in the job? What curriculum options were chosen?

One of the success factors that Chenoweth identifies is data-driven instruction: recording and analyzing data both on individual students and on aggregates (class/school/district).

I would love to see Chenoweth's observations turned into a training program for principals and teachers. She says that there is no magic bullet, but educators can get plenty of ideas and inspiration from the schools that she described. And it would certainly be possible for trained assessors to visit schools and evaluate them on a rubric based on the success factors that Chenoweth identified.

New Jersey has no systematic way to assess and improve instructional practices and to spread the practices that work. Many of our schools have great practices -- but we need to do a better job of identifying them and disseminating them where needed.

Socio-economic factors

Wealth/poverty, native English, and cultural support of early reading are examples of the socio-economic factors that must be included as part of the "hand dealt" to each district. These are measurable and should be included as dimensions in the model.

To the extent that they predict less-successful outcomes, such dimensions should also be included in the funding formula. The legislature may set the formula to increase funds to districts where needed, on the assumption that more funds allow more remediation.

Most importantly, the model would allow identification of the specific characteristics of each district, and better matching of the programs offered to the students' specific needs.

Savings

You can think of my estimate as a tradeoff between reduced costs and improved performance. The state can either reduce spending while continuing today's standard of education, or keep today's spending level while improving education. (Personally, I believe that improving education should be the state's highest priority. But that's up to the legislature and governor to decide.)

My $1 billion figure is an order-of-magnitude (or factor-of-10) estimate, at the geometric mean between about $300 million and $3 billion.

I came up with the estimate by weighing several factors:

• How much do the state and school districts spend to defend equity-related lawsuits?


• How much do the state and school districts spend to defend special-ed lawsuits?


• How much would it cost us to transform low-performing districts into high-performing ones (using today's spending patterns, versus better-informed spending patterns as observed by Chenoweth and others)?


• How uneven is tax impact, relative to what taxpayers can afford? How many taxpayers are under-taxed, relative to others? How much does the complaints of relatively over-taxed residents influence legislators to hold state taxes down?


• How much room does New Jersey have to increase overall revenue, yet stay out of the top 20% of states in tax rate (Appendix B)? Or to stay within 1% of the national average tax rate?


• How much money could be saved simply by using the model to expose the different amounts that districts pay for the same items (and thus facilitating comparison shopping)?


• What is the human cost to New Jersey residents from having inadequate education and inadequate economic mobility?

In the end, I believe that the total available savings from the proposals easily would exceed $1 billion/year (whether applied to reduce taxes or to improve education).

I would also say that these anecdotal factors justify a study to develop a more detailed estimate.

$1 billion is about 5.5% of New Jersey's $18 billion school spending. It's not implausible to imagine that the effectiveness of our state's school spending can be improved by 5.5%. Chenoweth describes examples where performance is twice as good as what the demographics would predict.

Your questions are the right ones to be asking. How can my bold claim about the $1 billion order-of-magnitude figure be justified? How can a data-driven system account for intangibles like "teacher commitment" and "leadership strength"? How can the regressiveness of property tax be eased?

[Readington88]

 

NJ property tax burden

I don't understand the logic that would promote a state-wide property tax. I thought we had local property taxes to provide relatively stable funding for what was perceived as a local cost, public education. If we no longer want public education to be locally funded, why would we want to keep funding it via property taxes on a state-wide basis. Wouldn't that keep many of the most troubling equity problems and engender a whole new set?

Also, I'm a little confused by your statement: "Local property tax is extremely regressive -- residents of the poorest municipalities pay the highest property tax rates". I always thought about "regressive/progressive" taxes in terms of income tax, I don't know if it makes sense to define regressive in terms of property tax rates.

Self-supporting Tax deferral program

As I understand it, the idea of a "self-supporting tax deferral program" is basically the government establishing a reverse mortgage program to enable seniors to pay their taxes with the equity in their homes.

Considering there are private market mechanisms that provide seniors these financial services, why does it make sense for the state to get into that business? I can imagine many problems with few benefits.