Corzine’s School Aid Plan: “Local Fair Share”
In this post we’ll review one of the basic components of Governor Jon Corzine’s proposed state aid formula for New Jersey’s public schools – the “local fair share” formula. We’ll also explain why it’s unfair and should be rejected by our lawmakers in Trenton..
The proposed aid formula begins by calculating each school district’s adequate budget and “local fair share” contribution.
A district’s adequate budget is established by the State through a formula based upon student enrollment and demographics. It is the amount the State deems adequate to provide a thorough and efficient education to the district’s students
“Local fair share” is the total amount of property taxes the State deems a district should contribute towards its adequate school budget.
The difference between a school district’s adequate budget and its “local fair share” is the amount a district would receive in “equalized state aid”.
Equalized state aid = Adequate district Budget - Local Fair Share
Corzine’s proposed school spending and state aid plan is grossly unfair and should be rejected by state legislators. Here’s one more reason why.
Each district’s “local fair share” is calculated as follows:
(District’s Equalized Property Valuation x 0.0092690802 X .0.50) + (Districts Aggregate Income x 0.04546684 x .0.50)
A district’s equalized property valuation is the total value of the real estate property in the district as certified by the state’s Director of the Division of Taxation. A district’s aggregate income is the total income as reported by taxpayers on New Jersey State Income Tax forms.
The “local fair share” formula is heavily weighted to income and is especially advantageous to those districts with many property owners not living in the school district and therefore, not reporting income attributable to the district. One major example, nonresidential property used for business.
Keep in mind, “local fair share” is just the combined “fair share” of every property owner in a school district. Here’s an example of the formula’s gross inequity.
Two districts, District #1 and District #2, have the same state-established adequate school budget and the same total equalized property value.
In District #1, property owner A’s real estate is valued at $500,000 and he has an income of $100,000. His property is in District #1 and because he lives in the district, his $100,000 income is included in the formula.
Property Owner A’s Fair Share:
($500,000 x 0.0092690802 X .0.50) + ($100,000 x 0.04546684 x 0.50) =
$2,317.27 + $4,546.68 =
Fair Share = $6,863.95
In District #2, property owner B’s real estate is also valued at $500,000 and he has an income of $300,000. His property is in District #2, but because he lives outside the district, his income is zero in the formula.
Property Owner B’s Fair Share
($500,000 x 0.0092690802 X .0.50) + ($0 x 0.04546684 x 0.50) =
$2,317.27 + $0 =
Fair Share = $2,317.27
Property owner A’s “local fair share” reduces District # 1’s equalized state aid by $6,863.95. Property owner B’s “local fair share” reduces District # 2’s aid by only $2,317.27.
Clearly, Corzine’s “fair share” formula is terribly unfair to districts with a high percentage of property owner A types and few type B’s. Of course, Corzine would probably say “that’s not a bug in the formula, it’s a feature”.
Remember, every dime in state school aid comes from the state's income tax. That’s another element of “fare share” that’s missing.
The proposed aid formula begins by calculating each school district’s adequate budget and “local fair share” contribution.
A district’s adequate budget is established by the State through a formula based upon student enrollment and demographics. It is the amount the State deems adequate to provide a thorough and efficient education to the district’s students
“Local fair share” is the total amount of property taxes the State deems a district should contribute towards its adequate school budget.
The difference between a school district’s adequate budget and its “local fair share” is the amount a district would receive in “equalized state aid”.
Equalized state aid = Adequate district Budget - Local Fair Share
Corzine’s proposed school spending and state aid plan is grossly unfair and should be rejected by state legislators. Here’s one more reason why.
Each district’s “local fair share” is calculated as follows:
(District’s Equalized Property Valuation x 0.0092690802 X .0.50) + (Districts Aggregate Income x 0.04546684 x .0.50)
A district’s equalized property valuation is the total value of the real estate property in the district as certified by the state’s Director of the Division of Taxation. A district’s aggregate income is the total income as reported by taxpayers on New Jersey State Income Tax forms.
The “local fair share” formula is heavily weighted to income and is especially advantageous to those districts with many property owners not living in the school district and therefore, not reporting income attributable to the district. One major example, nonresidential property used for business.
Keep in mind, “local fair share” is just the combined “fair share” of every property owner in a school district. Here’s an example of the formula’s gross inequity.
Two districts, District #1 and District #2, have the same state-established adequate school budget and the same total equalized property value.
In District #1, property owner A’s real estate is valued at $500,000 and he has an income of $100,000. His property is in District #1 and because he lives in the district, his $100,000 income is included in the formula.
Property Owner A’s Fair Share:
($500,000 x 0.0092690802 X .0.50) + ($100,000 x 0.04546684 x 0.50) =
$2,317.27 + $4,546.68 =
Fair Share = $6,863.95
In District #2, property owner B’s real estate is also valued at $500,000 and he has an income of $300,000. His property is in District #2, but because he lives outside the district, his income is zero in the formula.
Property Owner B’s Fair Share
($500,000 x 0.0092690802 X .0.50) + ($0 x 0.04546684 x 0.50) =
$2,317.27 + $0 =
Fair Share = $2,317.27
Property owner A’s “local fair share” reduces District # 1’s equalized state aid by $6,863.95. Property owner B’s “local fair share” reduces District # 2’s aid by only $2,317.27.
Clearly, Corzine’s “fair share” formula is terribly unfair to districts with a high percentage of property owner A types and few type B’s. Of course, Corzine would probably say “that’s not a bug in the formula, it’s a feature”.
Remember, every dime in state school aid comes from the state's income tax. That’s another element of “fare share” that’s missing.
Labels: Abbott School Districts, Jon Corzine, New Jersey, Property Tax Relief, School Aid, School Aid Formula, School Funding, School Spending Plan
Posted by Enlighten-NewJersey @ 3:59 PM
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2 Comments:
Don't know what to say It's really easy to connect with your writing these days because you really pull out the stories and lessons in what you're saying and you tell me in a way that feels more like story time than information overload.
Vanessa
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I'd make a different criticism of how Local Fair Share is calculated.
Raw land value is a component of Equalized Valuation, but land value and ability to support schools are only weakly correlated. Land value is very high close to NYC (and to a less extent Philly), but residents close to NYC in places like Hudson County, southern Bergen County, and Essex County aren't necessarily that wealthy.
Conversely, land value is low in exurban places like Tewksbury, West Windsor-Plainsboro, Hillsborough, etc, even though the people there are relatively affluent.
Using land value to calculate Local Fair Share makes inner suburban places look wealthier than they are and makes exurban places look poorer than they are.
Using Improvements to calculate Local Fair Share is problematic in a different way. If allowing a $100 million office building in a town means that the town will receive less school aid then NIMBYists are empowered.
The most foolish thing about how Local Fair Share is calculated is that it uses a district's _total_ income, and not median income. The problem with using total income is that it is affected by income outliers. Under the status quo if someone wins Powerball in your town then you are going to see a reduction in state aid since your town's total income has now increased.
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