Investing in a Brighter Future for NJ Students

NJ’s School Funding Reform Act (SFRA) of 2008 set out to ensure that every student receives a “thorough and efficient” education, regardless of zip code. While this vision remains commendable, the current funding model has failed to keep pace with evolving student and district needs. Today’s challenges demand urgent adjustments to create a fairer, more effective system that supports every student.

The NJ Fair Funding Collective, a group of educators, school board members, parents, and other concerned citizens, invites you to join us in addressing three critical concerns:

1. Special Education Funding
2. Keeping Up with Rising Costs
3. Reducing Volatility and Increasing Predictability of Funding

Special Education: Funding Based on Reality
New Jersey’s diversity is its strength, but it also demands tailored solutions for its schools. With over 500 districts serving unique populations, a one-size-fits-all funding approach to special education is not just ineffective – it’s inequitable. Some districts face critical shortfalls, unable to provide legally mandated services, while others find themselves with surplus funds earmarked for services students don’t need.

A smarter, needs-based funding model would ensure resources are distributed where they’re most required, empowering every district to meet its obligations and serve its students effectively. The State’s current approach to special education funding assumes a one-size-fits-all rate, allocating resources as though 15.9% of students in every district require special education services. This assumption is far from reality. Traditional public schools, where classification rates average 17.63% and can climb as high as 33.41%, are routinely underfunded. Meanwhile, charter and vocational schools with lower classification rates – averaging 11.05% and 9.91%, respectively – are receiving more funding than they need.

In the 2023-24 school year, 68% of school districts across NJ had classification rates higher than 15.9% - meaning that two-thirds of school districts were underfunded in special education. This misalignment leaves traditional public schools stretched thin, impacting all students. A funding model that reflects actual district classification rates would correct these imbalances.

Preliminary analysis indicates this shift would be nearly cost-neutral for the state while vastly improving equity. The SFRA’s census method underfunded districts with classification rates higher than the statewide average by $378 million in 2022-23 and overfunded districts with lower classification rates by $287 million (Education Law Center). By funding based on actual classification rates, the State would need to find approximately $100 million in additional funds, representing less than a 1% increase over the State’s 11.52B appropriation for State formula aid to school districts in the 2024-25 school year

Additionally, extraordinary special education aid reimburses districts for high-cost services but is consistently underfunded, forcing schools to divert resources from other programs. School districts face the added challenge of never knowing how much funding they will receive until after they’ve already spent it, which then reduces funding for all programs in the following school year. Fully funding this aid as required by state statute would ensure that districts can meet the needs of their most vulnerable students without sacrificing broader educational quality and would make the amount of funds known and reliable each year.

Keeping Up with Rising Costs and Evolving Educational Needs
There is a pressing need to increase the base per-pupil funding amount. The base cost in the SFRA, developed through the 2002 Professional Judgment Panels (PJP), is meant to represent the costs of the staffing, programs, and equipment needed to deliver New Jersey’s content standards to all students but has remained largely unchanged over time. The base amount, which began at $9,649 in the 2009 Educational Adequacy Report for elementary students, has only risen to $12,451 for the 2024-25 school year. Meanwhile, the additional weight for middle school students, low-income students, and multilingual learners (MLLs) has remained unchanged, while the weight for high school students has actually decreased over this timeframe.

Previous Educational Adequacy Reports (EARs) have relied on the original 2002 PJP models to update the base costs and weights. While these updates adjusted costs for components such as personnel salaries and benefits using more recent data, they did not analyze whether these components themselves remain sufficient. For instance, non-personnel costs were indexed to inflation without considering whether new or different costs – like expanded technology and computer science requirements in modern curriculums – are necessary to meet current learning standards. These stagnant or declining adjustments fail to account for rising costs and evolving educational demands, leaving districts struggling to maintain quality programs and services. Increasing the base funding amount and revisiting the weightings for middle and high school students, low-income students, and MLLs, are essential steps to ensure that schools can meet the needs of all learners effectively.

Transportation costs have surged more than 42% since 2009, yet state aid has lagged far behind, increasing only 13% over the same period (Education Law Center). This disconnect forces districts to divert funds from classrooms to cover rising transportation expenses or eliminate non-mandatory services entirely. A further concern is that ceasing transportation under two miles when there is no safe passage for students walking leaves districts with no good choices to ensure student safety portal to portal, as required by law. Adjusting transportation aid to match actual costs would alleviate these pressures and allow districts to refocus resources on educational priorities.

Modern security demands – including advanced surveillance systems, cybersecurity measures, and mental health resources – require significant investments. The new reality is that the top priority of public schools is no longer solely student learning but also maintaining physical and psychological safety for all students, which is now at the forefront of daily operations. Yet the SFRA’s funding model, which provides a baseline per-student amount supplemented for at-risk populations, fails to meet these escalating needs. Schools, particularly those serving high numbers of at-risk students, often face impossible choices between safety and education. Increasing security aid to reflect contemporary requirements would empower districts to prioritize both.

Finally, the State must also address the issue of vendor contracts. Currently, vendors can adjust costs at any time, including after contracts are signed, leaving districts essentially hostage to rising costs – especially for specialized services and in rural areas with limited vendor options. Capping vendor contract increases would ensure that districts are not forced into unsustainable financial situations and can maintain predictable, stable budgets without compromising on essential services.

Reducing Volatility and Increasing Predictability of Funding
Another critical issue lies in the state’s funding formula process for determining Equalization Aid. Currently, the State has determined that Equalization Aid as the difference between the Adequacy Budget and what it can afford to provide, rather than the difference between what it takes to adequately educate students and what districts can afford to contribute locally, also known as the Local Fair Share (LFS).

The Adequacy Budget begins with a baseline cost to educate one elementary school student without external factors considered, adding weights for middle and high school students, low-income students, multilingual learners (MLLs), and geographic cost adjustments; however, when the State calculates Equalization Aid, it prioritizes its available resources over adequacy requirements, leaving districts responsible for addressing the shortfall through LFS. This process often leaves a funding gap with no local mechanism to address it due to the 2% tax levy cap.

There is also nothing in the SFRA that prevents a district’s LFS from increasing by more than 2% from one year to the next, which means that their expected local contributions outpace what they can actually collect locally. In the 2024-2025 school year alone, 91% of NJ districts saw their LFS increase more than 2% (Education Law Center).

These disparities highlight the need for the state to reform its funding formula to ensure that Equalization Aid fully covers the gap between the Adequacy Budget and LFS, enabling districts to deliver equitable education without budget crises.

Additionally, current LFS calculations rely on single-year assessments of property values and income, leading to unpredictable and often drastic shifts in state aid. This is particularly dangerous for small municipalities, where dramatic swings in LFS can create budget crises. When LFS increases, districts often lack clarity on how to collect funds effectively, especially since income taxes cannot be leveraged in the same manner as property taxes. Exploring mechanisms to better collect based on actual resident incomes – while maintaining fairness – is essential for ensuring that districts can meet their obligations without placing undue strain on local communities. Moving to a five-year rolling average would smooth out many of these fluctuations, giving districts greater budget stability.

Extending budget planning timelines by providing multi-year state aid projections and lengthening the planning window from the current three weeks to at least six weeks would give districts sufficient time to adequately prepare and plan for any budget changes. Additionally, the state should provide 3-5 years of funding projections to enable districts to build comprehensive multi-year plans. To further protect against instability, the state should establish a maximum cut that can be applied over this timeframe, ensuring that even if projections shift, funding changes remain gradual and do not significantly disrupt the educational experiences of students.

Recommendations

To address these issues effectively, the NJ Fair Funding Collective calls for:

1. Aligning Special Education Funding with Actual Needs:
   1. Base funding on actual district classification rates - prevent critical dollars from being siphoned away from essential programs by ensuring accurate, needs-based funding.
   2. Fully fund extraordinary special education aid.
2. Keeping Up with Rising Costs and Evolving Student Needs
   1. Increase the per-pupil base funding to reflect changes in student needs and costs over time.
   2. Revisit the weights for middle and high school students, low-income students, and MLLs.
   3. Adjust transportation and security funding to reflect true costs and current student needs, ensuring districts can prioritize safety and learning.
   4. Cap year-over-year increases in vendor costs to help districts better plan for and manage expenses.
3. Increasing Predictability of Funding
   1. Ensure that Equalization Aid fully covers the gap between the Adequacy Budget and LFS.
   2. Use five-year rolling averages to calculate LFS to reduce volatility and provide districts with consistent funding.
   3. Extend budget planning timelines by providing multi-year state aid projections and extend the planning window from the current three weeks to at least six weeks to allow districts sufficient time to adequately prepare and plan for any budget changes.
   4. Cap annual state aid cuts by implementing a maximum cut ceiling to protect districts from abrupt, drastic reductions in funding.

While the SFRA needs to be overhauled, we recognize that will likely take time. The good news is that, with the FY2026 Educational Adequacy Report on the horizon, NJ has a timely opportunity to make many of these critical changes. These updates may require shifts in state funding priorities, but they represent an investment in fairness, stability, and the future of our children and State.

It’s time to fulfill the promise of the SFRA. Our students deserve nothing less. We urge parents, educators, and community leaders to contact their legislators and demand action on these needed reforms.