A20 ACS/ACS Statement 12/16/96

ASSEMBLY APPROPRIATIONS COMMITTEE

STATEMENT TO

ASSEMBLY COMMITTEE SUBSTITUTE FOR

ASSEMBLY, No. 20

STATE OF NEW JERSEY

DATED: DECEMBER 16, 1996

The Assembly Appropriations Committee reports favorably an Assembly Committee Substitute for Assembly Bill No. 20 ACS.

This committee substitute provides for the establishment of a thorough and efficient system of free public education (T&E) as guaranteed by the State Constitution. It establishes standards of thoroughness and efficiency and a new system for funding public education through a combination of State aid and local support. The proposed law supersedes those portions of P.L.1975, c.212 (C.18A:7A-1 et seq.) which address goals and standards and replaces the funding provisions established by the “Quality Education Act of 1990," P.L. 1990, c.52 (C.18A:7D-1 et al.), which is repealed in its entirety.

The substitute directs the State Board of Education to review the new core curriculum content standards within three years after their implementation and thereafter to review and update the standards every five years. The core curriculum content standards shall define for all students in the State the substance of a thorough education. The commissioner is directed to develop and establish efficiency standards which shall define the types of programs, services, activities and materials necessary to achieve an efficient education. In establishing the efficiency standards, the commissioner is directed to consider the cost benchmarks for non-instructional services in similarly situated school districts which will be developed by the Commission on Business Efficiency in the Public Schools. Together these standards will define what is required to provide a thorough and efficient education and will serve as the basis for determining the amount of funding necessary to do so.

Under the substitute's provisions, the Governor is required to issue biennially in each even numbered year, the Report on the Cost of Providing a Thorough and Efficient Education. The report will establish the per pupil amount necessary to provide a thorough and efficient regular education at the elementary, middle, and high school levels and the acceptable range of deviation from that amount in order to recognize and accommodate the need for local flexibility. In addition the report will establish per pupil amounts for early childhood and demonstrably effective program aids, instructional supplement aid, and additional per pupil categorical amounts. These amounts will apply to the two successive fiscal years beginning one year from the subsequent July 1 and will be adjusted for inflation by the CPI in the second year.

The per pupil amounts established in the report will in turn serve as the basis for determining a school district's T&E budget, or the total amount of funding needed to provide a thorough and efficient education consistent with the curriculum content and efficiency standards issued by the State board and commissioner. The T&E budget will be determined by multiplying the per pupil amount for a thorough and efficient regular education at the elementary level by the district’s resident enrollment, weighted based on the relative proportion of kindergarten, elementary, middle, and high school pupils included in the enrollment. Each school district is required to fund its T&E budget through local tax revenues up to a level based on district property wealth and district income. Any difference between the district's T&E budget and the required local share will be funded through State aid, with supplemental aid being available for certain districts where the impact of the new standards on local taxes would be excessive. Also, stabilization factors have been included within the State aid formula so as to prevent dramatic increases or decreases in a district’s State aid as a result of the permanent part of the formula. For each district, a maximum and minimum permissible budget level is calculated within the established T&E range.

Every two years, the commissioner is required to notify each district of the T&E amount, T&E flexible amount, T&E range, and amounts per pupil for early childhood program aid, demonstrably effective program aid, instructional supplement aid, and the categorical programs for the subsequent two fiscal years. Annually, within two days following transmittal of the State budget message to the Legislature by the Governor, the commissioner shall notify each district of the maximum amount of aid payable to the district in the succeeding school year and shall notify each district of its T&E budget, maximum T&E budget, and minimum permissible T&E budget for the succeeding school year. Annually, on or before March 4, each district board of education is to adopt and forward to the commissioner for approval, a budget that provides no less than the minimum permissible T&E budget plus categorical amounts required for a thorough and efficient education. Before approving the budgets, the commissioner must determine that they properly implement the core curriculum content standards, and in instances where they do not, the commissioner may make such fiscal or programmatic adjustments as he deems necessary, including directing additional spending up to the district's maximum T&E budget level.

Under the substitute's provisions, a district proposing a budget which includes spending which exceeds the maximum T&E budget must submit a general fund tax levy to the board of school estimate, or the voters, as appropriate, which when added to the other components of its net budget does not exceed its prior year net budget by more than the spending growth limitation. For such a district, the spending growth limitation equals the sum of three percent or the CPI, whichever is greater, with adjustments for changes in enrollment, certain capital outlay expenditures, pupil transportation costs provided pursuant to N.J.S.18A:39-1.1, and special education costs per pupil in excess of $40,000. The enrollment adjustment will equal the increase in unweighted resident enrollments between the prebudget and budget years multiplied by the per pupil general fund tax levy amount for the prebudget year indexed by the CPI or three percent, whichever is greater. The adjustment for capital outlay expenditures will equal the difference between the capital outlay portion of the general fund budget for the budget year and the capital outlay portion of the general fund budget for the prebudget year indexed by the CPI or three percent, whichever is greater. The adjustment for special education costs shall equal the sum of per pupil amounts in excess of $40,000 for the budget year less the sum of per pupil amounts in excess of $40,000 for the prebudget year indexed by the CPI or three percent, whichever is greater. The adjustment for pupil transportation costs provided pursuant to N.J.S.18A:39-1.1 shall equal the cost of providing such pupil transportation services for the budget year. For the purpose of determining a district's spending growth limitation for the 1997-98 school year, the substitute authorizes a district to apply to the commissioner to add all or a part of the district's original designated general fund balance for 1996-97 to the spending growth limitation if the district can demonstrate through current accounting records and historical trend data that the fund balance will actually be spent in the budget year. The issue of the inclusion of designated general fund balances within the calculation of the spending growth limitation and the calculation of T&E budgets is addressed in future budget years by the inclusion of these amounts within the substitute's definition of T&E program budget.

A district proposing a budget set at or below the minimum T&E budget is to submit to the board of school estimate or voters, a general fund tax levy which when added to the other components of the net T&E budget does not exceed the prebudget year net T&E budget by more than the spending growth limitation. This limitation will be calculated as described above except that the enrollment adjustment is to equal the increase in weighted resident enrollment between the prebudget and budget years multiplied by the T&E amount less the T&E flexible amount.

A district proposing a budget set at or below the maximum T&E budget, but including amounts in excess of the minimum T&E budget, is to submit to the board of school estimate or voters, a general fund tax levy which when added to the other components of its net T&E budget does not exceed the spending growth limitation. This limitation will be calculated as previously described except that the enrollment adjustment is to equal the increase in the unweighted resident enrollment between the prebudget and budget years multiplied by the prebudget T&E program budget per pupil indexed by the CPI or three percent, whichever is greater.

The substitute also establishes a procedure for cap waiver proposals to be submitted to the board of school estimate, or the voters of the district. Any cap waiver proposal which is rejected will be submitted to the municipal governing body or board of school estimate for a determination of the amount, if any, which should be expended. The decision of the municipal governing body or board of school estimate will be final.

Any general fund tax levy which is rejected by the voters for a proposed budget in excess of the maximum T&E budget is to be submitted to the governing body of the municipality or the board of school estimate as appropriate for a determination of the amount that should be expended notwithstanding voter rejection. If the governing body or board of school estimate reduces the district's proposed budget, the district may appeal to the commissioner any reduction on the grounds that the reductions will negatively impact on the stability of the district given the need for long term planning and budgeting. In considering the appeal, the commissioner shall consider enrollment increases or decreases within the district; the history of voter approval or rejection of district budgets; the impact on the local levy; and whether the reductions will impact on the ability of the district to fulfill its contractual obligations. Such a district may not appeal any reductions on the grounds that the amount is necessary for a thorough and efficient education.

Any reduction made to a proposed budget which is at or below the maximum T&E budget may be appealed to the commissioner on the grounds that the amount is necessary for a thorough and efficient education or that the reductions will negatively impact on the stability of the district given the need for long term planning and budgeting. Any reduction made to a proposed budget which is below, or after reductions by the municipal governing body or board of school estimate is below, the minimum T&E budget shall be automatically reviewed by the commissioner. In addition, the municipal governing body or board of school estimate will be required to demonstrate clearly to the commissioner that the proposed budget reductions will not adversely affect the ability of the school district to provide a thorough and efficient education or the stability of the district given the need for long term planning and budgeting.

Under the substitute, special education including extraordinary costs, pupil transportation, bilingual education, adult and post- secondary education, distance learning network, and county vocational aid are to be paid to all school districts as categorical aid. Also, the department is to determine programmatic definitions and establish appropriate per pupil amounts for adult high school programs and post-secondary vocational educational programs.

State aid for special education will be distributed for the 1997-98 school year on the basis of classifications under four tiers, with an increasing amount of per pupil aid for each tier: Tier I includes related services; Tier II includes perceptually impaired, neurologically impaired, educable mentally retarded and preschool handicapped; Tier III includes pupils in categories other than speech correction and the Tier II categories, who do not meet the criteria of Tier IV, intensive services; Tier IV services are defined for 1997-98 as those services provided in a county special services school district and services provided for pupils who meet the classification definitions for autistic, chronically ill, day training eligible, or visually handicapped, or are provided for pupils who meet the classification definition for multiply handicapped and are in a private school for the handicapped, educational services commission, or jointure commission placement in the 1996-97 school year. The cost of speech correction services for students who are classified to receive only those services will be supported within the T&E program budget.

Also, additional special education aid may be provided to a district in which the costs for an individual classified pupil exceeds $40,000; in which the district must educate an extraordinary number of classified pupils; or in which the district is ordered to make a high cost placement by a tribunal of competent jurisdiction. The substitute also establishes a procedure whereby a school district may apply to the commissioner to receive emergency special education aid for any classified pupil who enrolls in the district after the calculation of State aid for the budget year, but prior to March of the budget year, and who is in a placement with a cost in excess of $40,000. The commissioner may debit from the student's former district of residence any special education aid which was paid to that district on behalf of the student.

The T&E budget is designed to give districts resources to provide a thorough and efficient regular education. However, additional early childhood program aid, demonstrably effective program aid, and instructional supplement aid are provided for districts that have socioeconomically disadvantaged children living in conditions of poverty. Early childhood aid is provided for those districts having 20% or more low-income pupils, and is to be used for preschool, full-day kindergarten and other early childhood programs. Additional aid is provided for concentrations of low-income pupils of 40% or more for transition and social services to primary grade students. Demonstrably effective program aid is to be distributed based on school-based concentrations of low income pupils in order to provide instructional, school governance, health and social services aimed at addressing the socioeconomic disadvantages of these pupils. Instructional supplement aid is to be provided to districts with concentrations of low-income pupils of 5% or more but which do not qualify for early childhood program aid. The substitute also makes provision for technological advancements through the establishment and funding of distance learning networks, which, while available to all districts, will be especially helpful to disadvantaged districts as a means of providing quality programs at low cost.

The substitute also establishes an Academic Achievement Reward Program to provide rewards to districts having one or more schools that meet criteria for absolute success or significant progress towards high student academic achievement. Schools are to be ranked into three groupings by enrollment for the High School Proficiency Test, the Early Warning Test, and the Fourth Grade Test which then determine reward eligibility for both the absolute success and the significant progress reward. Schools with 90%of student enrollment performing at or above the passing scores qualify for the absolute success reward. Schools that do not qualify for the absolute success reward are eligible for the significant progress reward. The schools will be grouped together in five bands and the top 10% in each band with the highest level of improvement will qualify for the significant progress reward. The reward appropriation will be equally divided among all districts with schools determined to be eligible for a reward.

Under the substitute, the commissioner is directed to establish a Consolidation of Services Grant Program which will utilize the county special services school districts to promote shared services and regionalization of services. Also, a Regionalization Advisory Panel consisting of 12 members will be created in order to study and to develop recommendations regarding ways to encourage school districts to regionalize or share services. In addition, the substitute establishes a five year sending-receiving school district tuition calculation pilot project which will provide for the calculation of such tuition rates in accordance with a district's maximum T&E budget.

The pupil transportation formula established under the substitute is designed to encourage operational efficiency and includes two principal components: a base aid amount and an efficiency factor. For the 1997-98 school year, the efficiency factor is to equal one. Base aid represents a level of funding to reimburse districts for the cost of efficiently transporting eligible pupils based on regular or specialized modes of transportation, eligible pupils transported, average miles per eligible pupil, and cost factors representative of school districts in the top two quartiles of efficient performance. The substitute provides that for the 1997-98 school year, each district's base aid will be prorated so that the overall distribution of base aid does not exceed that distributed Statewide in the 1996-97 school year. Also, the Governor is to submit to the Legislature at least sixty days prior to the 1998 budget address proposed transportation incentive factors applicable to the 1998-99 school year and thereafter.

The substitute provides that beginning in the 1998-99 school year, State aid for school facilities shall be paid to districts toward principal and interest payments on both debt service and lease purchase agreement payments. The aidable base for State aid shall be that percentage of debt service and lease purchase payments equal to the ratio of approved costs to the original issuance amount and shall be reduced for districts which fail to meet maintenance requirements on aided facilities. The Governor is to submit to the Legislature at least 60 days prior to the 1998 budget address, criteria for determining approved costs, State support levels, and maintenance incentives applicable to the 1998-99 school year and thereafter. For the 1997-98 school year, the amount and allocation of debt service aid shall be determined in the budget.

The substitute also establishes a program of supplemental school tax reduction aid for districts which are spending less than 115% of the State average net budget per pupil in 1996-97; in which the district's 1996-97 equalized school tax rate is greater than 130% of the Statewide average equalized school tax rate; and which meet certain other criteria. The funds available under this program must be applied to the district's required local share under the formula and therefore will provide tax relief for the residents of the municipality in which the district is located.

Other aid programs included within the substitute are a program which provides additional aid for school districts with a projected 1997-98 resident enrollment which exceeds 10,000 pupils, in which the T&E budget is not supported through core curriculum standards aid in an amount greater than 50%, and which was not originally notified of a penalty for administrative cost inefficiency in the 1996-97 school year; a program which provides aid to school districts to assist in the transition to funding county special services school district students through the district of residence; and a program which provides funding for districts located in municipalities which have concentrations of senior citizens of more than 45%.

FISCAL IMPACT

The estimated additional cost of this legislation is approximately $286 million for the school year 1997-98 over 1996-97.