Is School Consolidation The Answer To New Jersey’s Property Tax Crisis?

New Jersey Democrats contend local government consolidation and shared services are the keys to reducing local property taxes. State Senator Bob Smith (D-Middlesex), co-chairman of a special legislative committee looking for ways to reform New Jersey’s property taxes, offers this idea:

[H]e intends to push his idea of establishing 21 county school districts. In each, one staff of administrators would oversee the operation of existing school districts, purchasing, transportation and health and insurance costs while allowing the schools to retain their hometown identity.

New Jersey’s public schools are currently financed though local property taxes, the state’s income tax and to a lesser extent with federal income taxes. Let’s test the Democrats’ school consolidation theory to see if it is the most promising way to reduce New Jersey’s property taxes. As Smith said, “Sixty-five percent of local property tax dollars go into the schools.”

Newark has one school district and about the same number of schools as all of Somerset County, making the two excellent examples to test the school district consolidation theory.

Somerset County, covering 305 square miles, is comprised of 40 communities which have consolidated into 21 municipalities. There are a total of 19 school districts, including 2 county districts for vocational and special education. The following are key statistics for Somerset County schools:

Somerset County Public Schools
Number of Public Schools - 78
County Public School Enrollment - 53,804
Average Cost Per Student – $11.915
Average Administrative Cost Per Student - $1,076
Total Cost County Schools (Enrollment x Avg. Cost per Student) - $641,086,249
State School Aid (Property Tax Relief) - $98,683,997
School Costs Paid By Somerset County Property Taxpayers - $542,402,252

Somerset County property taxpayers pay as much as 95 percent of their local public school costs, with the county average at 85 percent.

Now let’s compare Somerset County statistics with those for the city of Newark. Newark encompasses 23.8 square miles and has one school district. You can’t get any more consolidated than that and of course the city covers a much smaller area than Somerset County.

Newark City Public Schools
Number of Public Schools - 76
City Public School Enrollment – 41,855
Average Cost Per Student – $16,506
Average Administrative Cost Per Student - $1,775
Total Cost City Schools (Enrollment x Avg. Cost per Student) - $690,858,630
State School Aid (Property Tax Relief) - $698,818,253
School Costs Paid By Newark Property Taxpayers - $0.00

Newark has about twelve thousand fewer students than Somerset County, but spends about $50 million more per year and receives $600 million more in school aid (property tax relief) than all of Somerset County. Newark’s average cost per student is 39 percent higher and the city’s administrative costs per student are 65 percent greater than Somerset County. By any measure Somerset County school spending is far more cost effective than Newark's. Under the school consolidation theory, Somerset County should have higher administrative and total per student costs, but that clearly is not the case.

Newark’s property taxpayers pay nothing toward their public schools and received about $8 million more in school aid last year than the city’s actual school costs. You may remember reading that Corzine’s budget was cutting state aid to some of New Jersey's neediest school districts this year. Newark was one of those districts and had its aid cut this year by $8 million.

Obviously, Newark has no incentive to hold down school costs and every incentive to spend as much of the state’s income tax revenue as the city can get away with. The way it stands now, Somerset County taxpayers foot the bill for their local schools though property taxes and then pick up the tab for all of Newark’s schools through their income taxes. To top it all off, Somerset County residents are supposed to quietly accept the notion that is fair for so-called needy schools to spend 39 percent more than their own.

If Newark property taxpayers continued to pay nothing for their schools, but spent the same per student as Somerset County, that would free up $200 million in property relief. That’s enough to cut every Somerset County resident’s school tax bill by 37 percent.

This same property tax solution can be applied throughout the state. We will post similar comparisons between entire counties and city school districts to show what could be accomplished if the goal was to reduce property taxes though spending efficiencies. There are reasons Democrats have not chosen the most obvious way to reduce property taxes and we will explain them in future posts.