NJ Budget Referenda Snapshots

The media seems to be making much of the relatively low pass rate of school district budgets this week – 41%. Being a data geek, my first instinctive question was whether this low pass rate really was out of line with expectations given the current economic conditions. The media has generally described the “expected” pass rate as 75% by saying that 75% of budgets typically pass in a given year. My quick glance at the data suggested that this assumption alone is not necessarily true, and also that pass rates fluctuate quite a bit, and do so in predictable ways.  Here’s a quick look based on the historical data I could easily acquire. First, the trend over time in NJ unemployment and NJ school budget pass rates.

Not surprisingly, using unemployment as a general indicator of economic climate and likely predictor of voter sentiment on tax and budget issues, when unemployment goes up – and especially when it peaks – budget pass rates tend to go down quite a bit. And, when unemployment goes down, budget pass rates get very high.

This second graph shows just how strong this relationship is for the past 13 years (post 1998 Abbott reforms):

So, basically, NJ school budget votes seem to fluctuate very much in sync with unemployment over the past decade (as a broad economic indicator). This relationship does erode somewhat during periods in the early 1990s and certain time periods in the 1980s.

In most cases, the outlier years can likely be traced to significant changes to the distribution of state aid to schools. For example. In the early 1990s while unemployment was high, there are a few years where budget pass rates were also high, likely because of the infusion of aid. The 2009 results may, in part, relate to the implementation of the new school finance formula SFRA – which distributed more aid across middle-wealth districts – many of which had great difficulty passing budgets in the past.

In 2009, budgets passed at a very high rate – out of line with expectations. Unemployment was already climbing but most budgets still passed.  In 2006, budget pass rates were below expectations despite a reasonably good economy. Excluding the 2009 result, the correlation between unemployment and pass rates in the years available was nearly .85 (negative, because when one goes up, the other goes down). Further, the 2010 result falls right near the trendline. That is, the 2010 result is entirely expected given the current economic climate – regardless of political rhetoric.

This final graph addresses a separate issue and one that is common in school budget referenda – school budgets are simply more likely to pass in more affluent communities where residents have the additional resources to spend. School budgets may also be more likely to pass in communities where the state picks up a larger share of total school costs, reducing the burden on local property taxes. In New Jersey, this results in a “squeeze on the middle.” I’ve made this graph using NJ’s District Factor Group classification system which roughly rates districts based on wealth/income factors also correlated with education levels, etc. DFG A tend to be poor, urban (smaller and larger city) districts and DFG J tend to be very affluent, generally small, suburban districts. The chart shows that pass rates were by far the highest in the most affluent districts in the state, and somewhat higher than average in the poorest districts. As, expected, the middle got squeezed.

Nice follow-up by NJ.com: http://www.nj.com/news/index.ssf/2010/04/shooting_down_school_budgets_nj.html