NJ School Funding Suburban Taxpayer Scam?


I hate wasting so much time countering completely absurd claims, like those that spill out on the E3 Cartel commercials. This is a short reply this time. At the end of one of the commercials, the spokesperson slips in the claim that not only are we wasting a ton of money on our low graduation rates in poor urban schools (I discuss this claim here: https://schoolfinance101.wordpress.com/2009/10/31/cartel-recap/), but this whole inefficient mess is a “suburban taxpayer scam.” Yep, suburbanites (like myself) are being dreadfully over-taxed and our hard earned money is being thrown down the rat-hole. We don’t get any of it back.

A simple question to answer here is whether the property tax effort in suburban communities (however we are supposed to define suburban?)  is that much greater than in “urban” communities. An appropriate way to measure this is by calculating the percent of income paid in property taxes.

Here’s a quick snapshot of tax effort in Essex County by income level and in Monmouth county by income level. These data are taken from http://www.nj.com/news/bythenumbers/, and the data are generally from 2005. Most “Abbott” funding to school districts had scaled up between 1998 and 2005.

Essex Tax Effort

Hmmm… no systematic pattern here. Yep, some pretty big differences, but no systematic pattern between poorer and wealthier communities.

Monmouth Tax Effort

As it turns out, tax effort in Monmouth declines systematically as homeowner income increases. Perhaps this is the “urban tax scam” not suburban one?

Yes, the property tax bill in an affluent suburban community is larger – because it is the tax bill on a more expensive home!  (should I really have to say that?) Yes, low property value, low income communities receive higher rates of state subsidy through the state aid formula for schools. That’s generally how aid equalization formulas work. And yes, New Jersey’s aid is targeted to higher need districts, above and beyond typical equalization (but only since 1998-2003).

Let’s get this straight. If the idea of the funding formula was to send back to communities and school districts exactly the amount submitted to state coffers from residents of those communities – then why the heck would we be collecting it to begin with? This would be a particularly foolish exercise since it costs money to process the tax revenues and send them back. That’s how taxes work – whether collected at the municipal level, providing benefit to the people across the street whose house may be valued (taxable value) less than yours, and tax bill may be proportionately less, or across the state. For those who don’t quite understand this, I recommend the Schoolhouse Rock tune about the Taxman. Pretty good stuff!

In a previous post, I also explain how local media in NJ has distorted comparisons of New Jersey property taxes with other states – https://schoolfinance101.wordpress.com/2009/10/03/should-nj-really-try-to-be-like-de-md-mo-ga-wa/

Published by schoolfinance101

Bruce Baker is an Professor in the Graduate School of Education at Rutgers, The State University of New Jersey. From 1997 to 2008 he was a professor at the University of Kansas in Lawrence, KS. He is lead author with Preston Green (Penn State University) and Craig Richards (Teachers College, Columbia University) of Financing Education Systems, a graduate level textbook on school finance policy published by Merrill/Prentice-Hall. Professor Baker has written a multitude of peer reviewed research articles on state school finance policy, teacher labor markets, school leadership labor markets and higher education finance and policy. His recent work has focused on measuring cost variations associated with schooling contexts and student population characteristics, including ways to better design state school finance policies and local district allocation formulas (including Weighted Student Funding) for better meeting the needs of students. Baker, along with Preston Green of Penn State University are co-authors of the chapter on Conceptions of Equity in the recently released Handbook of Research Education Finance and Policy, and co-authors of the chapter on the Politics of Education Finance in the Handbook of Education Politics and Policy and co-authors of the chapter on School Finance in the Handbook of Education Policy of the American Educational Research Association. Professor Baker has also consulted for state legislatures, boards of education and other organizations on education policy and school finance issues and has testified in state school finance litigation in Kansas, Missouri and Arizona. He is a member of the Think Tank Review Panel, a group of academic researchers who conduct technical reviews of publicly released think tank reports on education policy issues.

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