S386

SENATE, No. 386

STATE OF NEW JERSEY

PRE-FILED FOR INTRODUCTION IN THE 1996 SESSION

By Senator DiFRANCESCO

An Act establishing a Regionalization and Shared Administrative Services Incentive Fund in the Department of Education, amending P.L. 1995, c.236 and P.L.1993, c.67, and supplementing chapter 13 of Title 18A of the New Jersey Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. (New section) This act shall be known and may be cited as the "Regionalization and Shared Administrative Services Incentive Fund Act of 1996."

2. (New section) The Legislature finds and declares that:

a. It becomes increasingly apparent that in an era of rising student enrollments, limited fiscal resources, and public insistence on accountability in the spending of tax dollars, that the issues of voluntary school district regionalization and the sharing of administrative and other services among school districts is of critical importance;

b. It is also obvious, and has been well documented through a variety of studies, that improvements are needed in the efficiency and effectiveness of the delivery of K-12 educational services within the State;

c. Research indicates that the need for such improvements is directly attributable to the fact that New Jersey has more than 600 local school districts the majority of which are well below the national average in terms of student population per district and well below the optimal size for offering a comprehensive yet efficient educational program;

d. Research also indicates that administrative costs per pupil are much higher than the average in smaller school districts, a fact which is of great significance in this State where almost one-half of the school districts have fewer than 500 students;

e. While regionalization has for many years been advanced as a mechanism through which school districts may join efforts to avoid duplication of effort and take advantage of the cost savings which can be realized when educational services are conducted on a larger scale, New Jersey's legacy of "home rule" has precluded any effort to force the regionalization of school districts; and

f. It has been generally recognized that although regionalization may benefit some school districts, it may not be the answer for every district and that it may be more appropriate that those communities which are well satisfied with their educational program examine other options to enhance the efficiency and cost effectiveness of their educational operations.

The Legislature further finds, therefore, that a program which provides financial incentives to school districts which engage in regionalization activities or activities which lead to the sharing of administrative services among districts would be a wise investment of public dollars in that such a program could provide a catalyst to move school districts in those directions and thus contribute to the stabilization of educational expenditures.

3. (New section) There is established within the Department of Education a fund to be known as the "Regionalization and Shared Administrative Services Incentive Fund," hereinafter referred to as the "incentive fund." The incentive fund shall be used to:

a. provide grants and loans as approved by the Commissioner of Education to public school districts to finance activities which promote regionalization and shared administrative services, including but not limited to, the costs to the district of a regionalization or shared administrative services feasibility study, facilities modification, program expansion, transportation expansion, and modifications to collective bargaining agreements; and

b. provide State regionalization incentive aid payments to public school districts pursuant to the provisions of subsection b. section 3 of P.L.1993, c.67 (C.18A:7D-37b).

4. (New section) The incentive fund shall annually be credited with the total amount of excess administrative spending penalty funds deducted from the State aid of penalized school districts pursuant to the provisions of section 3 of P.L.1995, c.236 (C.18A:7E-8). The fund shall also be credited with any moneys received from the repayment of loans made from the incentive fund to school districts pursuant to subsection c. of section 5 of P.L. , c. (C ) (now pending before the Legislature as this bill) and any interest thereon, and any other moneys appropriated to the fund by the Legislature.

5. a. (New section) Within 30 days of the notification to school districts of their per pupil administrative costs and the applicable median per pupil administrative costs pursuant to section 3 of P.L.1995, c.236 (C.18A:7E-8), the commissioner shall notify all school districts of the amount of funds available to finance regionalization and shared administrative services grant and loan projects for the budget year and shall invite the submission of applications for the receipt of such funds.

b. A local school district which wishes to apply for grant funding shall submit a proposal to the commissioner which outlines the nature of the regionalization or shared administrative services project for which it is requesting grant funding. The proposal shall also include information on the manner in which the project will foster regionalization or the sharing of administrative services among school districts and such other information as the commissioner may require.

c. In addition to grants provided to school districts pursuant to subsection b. of this section, the commissioner may use the money in the incentive fund to provide low interest loans to school districts to finance the renovation, repair or other alteration of existing school buildings, the construction of new school buildings, or the conversion of existing school buildings to other instructional purposes which may be necessary for school district regionalization. The amount of the loan and the percentage of the project to be funded by the loan shall be determined by the commissioner in accordance with the amount of money which is available in the incentive fund to provide loans and the number of school districts which have applied for regionalization loan funds.

d. Upon application by any school district to the commissioner for a loan to be made under subsection c. of this section, the commissioner shall determine whether to grant approval for the loan based upon the appropriate authorization for the loan pursuant to subsection d. of N.J.S. 18A:20-4.2, the relationship of the project to the enhancement of the district's plans for regionalization, the ability of the school district to begin and complete the project in an expeditious manner, and the ability of the school district to proceed with the funding of the balance of the moneys needed for the project.

e. The commissioner shall establish the terms of the loan which shall include, but not be limited to, the rate of interest, a schedule for drawing down loan funds, and a repayment schedule. The repayments shall be treated by the school district as net debt service for school aid purposes. In addition to the amount of taxes determined by the legal voters of the district at the annual school election, the secretary of the board of education shall certify the amount required for the repayment of the interest and principal of the loan in the same manner required for interest and debt redemption charges pursuant to N.J.S.18A:22-33, and the amount so certified shall be included in the taxes assessed, levied and collected in the municipality or municipalities comprising the school district for such purposes.

f. All repayments, and interest thereon, shall be deposited by the commissioner in the incentive fund for the purposes provided for in P.L. , c. (C. ) (now pending before the Legislature as this bill). Net earnings received from the investment or deposit of monies in the incentive fund shall be redeposited in the fund for those same purposes.

6. Section 4 of P.L.1995, c.236 (C.18A:7E-9) is amended to read as follows:

4. [a. A school district shall be eligible for a reward if it meets the following criteria:

(1) the school district's budgeted per pupil administrative spending, as defined in subsection b. of section 3 of this act, is below 115% of the median budgeted per pupil administrative spending for the preceding school year for districts of the same operating type;

(2) the school district is a multi-school K-12 school district, a county vocational-technical school district or a county special services school district; and

(3) the school district is certified by the Department of Education as providing a thorough and efficient education pursuant to the provisions of section 10 of P.L.1975, c.212 (C.18A:7A-10).

b. If a district is under investigation by any agency of the State or federal government for fiscal abuse, impropriety or mismanagement, the reward shall be withheld until the district is cleared of wrongdoing.

c. The amount of funding to be distributed in rewards shall equal the total amount of funds in penalties as specified in section 3 of this act. A qualified district shall be eligible for a reward in one of two amounts, which shall be based on the total enrollment of pupils in the district. A district with an enrollment of 2,500 or more pupils shall receive a reward twice as large as a district with an enrollment of fewer than 2,500 pupils]

The total amount of funds in penalties as specified in section 3 of P.L. 1995, c.236 (C.18A:7E-8) shall annually be deposited in the Regionalization and Shared Administrative Services Incentive Fund established pursuant to section 3 of P.L. , c. (C. ) (now pending before the Legislature as this bill). The funds shall be distributed by the commissioner to eligible school districts to provide regionalization and shared administrative grants and loans pursuant to section 5 of that act and State regionalization incentive aid payments pursuant to the provisions of subsection b. of section 3 of P.L.1993, c.67 (C.18A:7D-37b).

(cf: P.L.1995, c.236, s.4)

7. Section 3 of P.L.1993, c.67 (C.18A:7D-37) is amended to read as follows:

3. a. For a period of five years following regionalization, each regional school district formed after the effective date of this act shall be eligible to receive supplemental State aid equal to the difference between the regional district's State foundation aid calculated pursuant to section 4 of P.L.1992, c.52 (C.18A:7D-4) for the budget year and the sum of foundation aid received by each constituent district of that regional school district in the year prior to regionalization, multiplied by the transition weight. For the purposes of this [section] subsection, the transition weight shall equal 1.0 for the first year following regionalization, .80 for the second year following regionalization, .60 for the third year following regionalization, .40 for the fourth year following regionalization and .20 for the fifth year following regionalization.

b. In addition to the supplemental State aid received pursuant to subsection a. of this section, for a period of ten years following regionalization, each regional school district formed after the effective date of P.L. , c. (C. ) (now pending before the Legislature as this bill) shall be eligible to receive State regionalization incentive aid in the amount of $200 per student multiplied by the transition weight. For the purposes of this subsection, the transition weight shall equal 1.0 for the first year following regionalization and shall decrease by .10 in the second and each subsequent year thereafter.

If the amount of money available to fund State regionalization incentive aid is not sufficient to provide aid in the amount of $200 per pupil, the commissioner may adjust the per pupil amount of incentive aid in accordance with available funding.

(cf: P.L.1993, c.67, s.3)

8. Section 4 of P.L.1993, c.67 (C.18A:7D-28.5) is amended to read as follows:

4. Each regional school district formed after the effective date of this act shall, for the purposes of calculation of its maximum permissible net budget pursuant to the provisions of section 85 of P.L.1990, c.52 (C.18A:7D-28), have its net budget for the prebudget year increased by an amount equal to the supplemental State aid received by the district pursuant to section 3 of this act plus the amount of any start-up costs incurred by the district in the regionalization process including, but not limited to, the costs to the district of a regionalization study, program expansion, transportation expansion, and modifications to collective bargaining agreements. In addition, each regional school district formed after the effective date of P.L. , c. (C. ) (now pending before the Legislature as this bill) shall also have its net budget for the prebudget year increased by an amount equal to the State regionalization incentive aid received by the district pursuant to subsection b. of section 3 of P.L.1993, c.67 (C.18A:7D-37b).

(cf: P.L.1993, c.67, s.4)

9. This act shall take effect immediately and shall first apply to State aid for the 1997-98 school year.

STATEMENT

This bill establishes a Regionalization and Shared Administrative Services Incentive Fund in the Department of Education. The purpose of the fund would be to provide grants and loans to public school districts to finance activities which promote regionalization and the sharing of administrative services among school districts. The fund would also finance State regionalization incentive aid payments to public school districts which regionalized after the bill's effective date.

Under the bill's provisions, the fund would annually be credited with the total amount of excess administrative spending penalty funds which are deducted from the State aid of school districts pursuant to the provisions of P.L.1995, c.236. That law provides that any school district whose budgeted per pupil administrative spending for the preceding school year exceeds the median budgeted per pupil administrative spending for the preceding school year for districts of the same operating type by a percentage established in the law, shall have its school aid reduced by the dollar amount of the excess. This bill provides that the penalty money will be deposited into the incentive fund to finance regionalization and shared administrative services grants and loans as well as regionalization incentive State aid.

The grant funding provided for in the bill would be available to school districts to finance activities which promote regionalization and shared administrative services, including but not limited to, the costs to the district of a feasibility study, facilities modification, program expansion, transportation expansion, and modifications to collective bargaining agreements. The grant funding would be distributed by the Commissioner of Education based on proposals submitted to him.

The loan funding provided for in the bill would also be distributed by the commissioner to provide low interest loans to school districts to finance the renovation, repair, alteration, or construction of school buildings or the conversion of existing school buildings to other instructional purposes which may be necessary to effectuate school district regionalization. The amount of each loan and the percentage of the project to be funded by the loan would be determined by the commissioner in accordance with the amount of money available in the incentive fund and the number of school districts applying for regionalization loans.

Finally, the incentive fund would also be used to provide incentive State aid payments to school districts which regionalize after the bill's effective date. Each such school district would be eligible to receive aid for a period of ten years following regionalization. The aid would be in the amount of $200 per student multiplied by the transition weight. The transition weight would equal 1.0 for the first year following regionalization and would decrease by .10 in the second and each subsequent year thereafter.

It has been well established that there exists a critical need to improve the efficiency and effectiveness of the delivery of K-12 educational services within the State. Research has confirmed that at least one of the root causes of the high per pupil costs of educating students in this State is the very large number of school districts many of which have student populations well below the size required to offer a comprehensive and efficient educational program. It is also well known that administrative costs per pupil are much higher than the average in the smaller school districts and that such costs contribute significantly to the overall problem of high per pupil costs. The mechanisms established in this bill provide concrete incentives to school districts to look seriously at designing more efficient K-12 educational delivery systems without removing the local option of designing a system which best suits that community. The incentives provided in this bill are significant and should be attractive to school districts. At the same time they represent a wise investment of public dollars because of the promise they hold for stabilizing educational expenditures in the long run.

Establishes a Regionalization and Shared Administrative Services Incentive Fund for public school districts.