Paying for NJ Schools ?>

Paying for NJ Schools

Who pays for New Jersey schools?  Is the lottery an important source?  The question of special sources for special spending arose again in NJ with the question of funding for NJ senior citizen programs.  Both schools and seniors depends on special revenue sources, or so the story goes.  Fans of the lottery and casinos point to these noble causes as justification for gambling and gambling taxes in New Jersey.  How much do gambling benefit the oldest and youngest of New Jerseyans?

Local property taxes are the largest source of support for primary and secondary schools in NJ.  Local school boards tell the municipalities how much money they need.  The municipalities raise taxes accordingly.  In my town, police and roads see only a third of real estate taxes collected.  The other two thirds are a straight pass-through to the school board.  That division is probably about the same in most of the state.  In thirty-one school districts, the state provides substantial subsidies to the school system.  Those Abbott (or SDA) districts are the largest municipalities and the poorest.

Using the lottery to support education seems a noble cause.  A deeper look at lottery revenues shows that its revenue is earned in the poorest regions of the state, from its poorest citizens.  It’s not a tax, but it is a regressive revenue source.  The state’s education spending, though, is pumped back into those very areas by Abbot funding.  In short, education in NJ in rich areas is paid by real estate taxes, paid by the locals.  Education in in NJ in poorer areas is paid from lottery revenues, also paid by the locals.

Is it fair?  That’s the question worth $8,300 – the average real estate tax bill in NJ.  The state allocates $9 billion in state funds to primary and secondary schools using a formula based on a broad measure of educational achievement in various areas.  In my town, 58% of the real estate tax bill is devoted to education.  In my local high school district, that covers 85% of the operating expense.  State and federal funding covers 15%.

My town, which covers 85% of its education expense, contrasts with Jersey City, in which local taxes cover 20%.  Direct state aid to Jersey City schools is $420 million.  The situation in Newark is even more skewed.  Local taxes pay 14% and state direct aid is 85%, $717 million.  New Jersey only makes $960 million from the lottery, so those two school districts consume all of the lottery take and more.  There are another 29 Abbott districts similarly situated.  A billion dollars from the lottery is nothing to sneeze at, but it’s only a supplement to money coming from the state’s General Fund.

Most people agree that spending on education is a good idea.  It should, in the long run improve the standard of living.  The state of New Jersey measures education and standard of living using six measures:

  • Percent of adults with no high school diploma
  • Percent of adults with some college education
  • Occupational status
  • Unemployment rate
  • Percent of individuals in poverty
  • Median family income.

When you’ve gotten a good education and a good job, you may be tempted to move to an area where your neighbors are educated and have a higher income.  Once you are there, however, your real estate taxes will pay for your local schools and your income taxes will be routed back to your old neighborhood.  The good news is that you will likely give up playing the lottery.

From a taxpayer’s perspective, bad results in the decennial census are good news.  From a homeowner’s perspective, having a lower median income in your area will hurt the value of your home.

New Jersey residents pay twice for good schools, high property taxes for their neighborhood schools and high income taxes to subsidize the schools in poorer neighborhoods.  Is it any wonder they move away right after their kids graduate?

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