Civics 101: School Finance Formulas & the Limits of Executive Authority

This post addresses a peculiar ongoing power grab in New Jersey involving the state school finance formula. The balance of power between state legislatures and the executive branch varies widely across states, but this New Jersey example may prove illustrative for others as well.  This post may make more sense if you take the time to browse these other two posts from the past few years.

  1. Student Enrollment Counts and State School Finance Formulas
  2. Twisted Truths and Dubious Policies: Comments on the Cerf School Funding Report

[yeah… I know… prerequisite readings don’t always go over well on a blog – but please check them out!]

In New Jersey, as in many other states the State School Finance Formula is a state statute. That is, an act of the legislature. State school finance formula statutes may vary in the degree of detail that they actually lay out in statutory language, including varying the precision of which specific numbers must be used in the calculations and in some cases specifically how the calculations are carried out. It is my impression that until recently, many state school finance statutes have been articulated in law with greater and greater precision – meaning also less latitude for the formula to be altered in its implementation (often through a state board of education).

The New Jersey school finance formula is articulated with relatively high precision in the language of the statute itself, like many other similar state school finance formulas. Again, it’s an act of the legislature – specifically, this act of the legislature of 20008:

AN ACT providing for the maintenance and support of a thorough and efficient system of free public schools and revising parts of the statutory law.

BE IT ENACTED by the Senate and General Assembly of the State of New Jersey:

(New section) This act shall be known and may be cited as the “School Funding Reform Act of 2008.”

Among other things, the statute spells out clearly the equations for calculating each district’s state aid, which involve first calculating the enrolled students to be funded through the formula.  In short, most modern school finance formulas apply the following basic approach:

  • STEP 1: Target Funding = [Base Funding x Enrollment + (Student Needs Weight x Base Funding x Student Needs Enrollment)] x Geographic Cost Adjustment
  • STEP 2: State Aid = Target Funding – Local Revenue Requirement

Using this general approach above, how students are counted necessarily has a substantive effect on how much aid is calculated, and ultimately delivered. And in most such formulas, how the basic  enrollments are counted has a multiplicative, ripple effect throughout the entire formula. So, it matters greatly how kids are counted for funding purposes. This is likely why state statutes often articulate quite clearly exactly how kids are to be counted for funding purposes.

The School Funding Reform Act of 2008 articulates precisely the definitions of fundable student enrollment counts. The following calculations and definitions are copied and pasted directly from the legislation.

Weighted Enrollment Definition

(New section) The weighted enrollment for each school district and county vocational school district shall be calculated as follows:

 WENR = (PW x PENR) + (EW x EENR) + (MW x MENR) + (HWx HENR)


PW is the applicable weight for kindergarten enrollment;

EW is the weight for elementary enrollment;

MW is the weight for middle school enrollment;

HW is the weight for high school enrollment;

PENR is the resident enrollment for kindergarten;

EENR is the resident enrollment for grades 1 – 5;

MENR is the resident enrollment for grades 6 – 8; and

HENR is the resident enrollment for grades 9 – 12.

Legal Definition of Resident Enrollment

“Resident enrollment” means the number of pupils other than preschool pupils, post-graduate pupils, and post-secondary vocational pupils who, on the last school day prior to October 16 of the current school year, are residents of the district and are enrolled in: (1) the public schools of the district, excluding evening schools, (2) another school district, other than a county vocational school district in the same county on a full-time basis, or a State college demonstration school or private school to which the district of residence pays tuition, or (3) a State facility in which they are placed by the district; or are residents of the district and are: (1) receiving home instruction, or (2) in a shared-time vocational program and are regularly attending a school in the district and a county vocational school district. In addition, resident enrollment shall include the number of pupils who, on the last school day prior to October 16 of the prebudget year, are residents of the district and in a State facility in which they were placed by the State. Pupils in a shared-time vocational program shall be counted on an equated full-time basis in accordance with procedures to be established by the commissioner. Resident enrollment shall include regardless of nonresidence, the enrolled children of teaching staff members of the school district or county vocational school district who are permitted, by contract or local district policy, to enroll their children in the educational program of the school district or county vocational school district without payment of tuition. Disabled children between three and five years of age and receiving programs and services pursuant to N.J.S.18A:46-6 shall be included in the resident enrollment of the district;

Not much there left to the imagination and certainly not a great deal of flexibility on implementation. It’s in the statute. It’s in the act adopted by the legislature. It is, quite literally, the law.

Executive Budget Language (2012-13 budget)

Civics 101 tells us that the executive branch of federal or state government doesn’t write the laws. Rather, it upholds them and its executive departments in some cases may be charged with implementing the laws, including adoption of implementing regulations – that is, adding the missing precision needed to actually implement the law. Of course, regulations on how a law is to be implemented can’t actually change the law itself.

Now, in some states like New Jersey, the Governor’s office has significant budgetary authority, including a line item veto option. Of course, that doesn’t however mean that the Governor’s office has the authority to actually rewrite the equations for school funding that were adopted by the legislature. It may mean that the Governor can underfund, or defund the formula as a whole, but that raises an entirely different set of constitutional questions, which I previously addressed here.

Specifically, what we have here are two separate bills/laws. First, there is the the statute enacting the formula, which sets forth substantive standards that must be applied from year to year, unless amended through usual Legislative process of proposing amendment in bill, committee review, and vote on the bill.  Then, there is the budget bill, which appropriates state school aid for each fiscal year and only is in effect for that year.  At their intersection, the appropriations in the budget bill are to be based on the ongoing formula requirements in the formula statute. Increasingly, it would appear that governors are attempting to affect changes to their state school funding formulas through their annual budget bills. Strategically, it can be hard for legislatures to successfully amend these budget bills and re-implement their formula as adopted, because the annual budget bills include everything under the sun (all components of the state budget) and not just school funding.

Last year, the Governor’s office, through the executive budget, did actually change the equation – which is the law. And, by first glance of this year’s district by district aid runs it would appear that they have again done the same. It would appear, though I’ve yet to receive the data to validate, that the governor’s office in producing its estimates of how much each district should receive, relied on the same method as for the current year – a method which proposes to reduced specific weighting factors in the formula, and perhaps most disturbingly, exerts executive authority to change the basic way in which kids are counted for funding purposes.

Here’s the language from last year’s executive budget book:

pg D-83

Notwithstanding the provisions of any law or regulation to the contrary, the projected resident enrollment used to determine district allocations of the amounts hereinabove appropriated for Equalization Aid, Special Education Categorical Aid, and Security Aid shall include an attendance rate adjustment, which is defined as the amount the state attendance rate threshold exceeds the district’s three–year average attendance rate, as set forth in the February 23, 2012 State aid notice issued by the Commissioner of Education.

Did you catch that? It says that resident enrollment, throughout the formula will be adjusted in accordance with an attendance rate factor. A facto that is not, in fact, in the legislation itself. It is not part of the equation that is the law.

Here’s a mathematical expression of the change:

Legal Funding Formula

AB = (BC + AR Cost + LEP Cost + COMB Cost + SE Census) x GCA


AR Cost = BPA x ARWENR x AR Weight

LEP Cost = BPA x LWENR x LEP Weight

COMB Cost = BPA x CWENR x (AR Weight + COMB Weight)

Executive Funding Formula

AB = (BC + AR Cost + LEP Cost + COMB Cost + SE Census) x GCA


AR Cost = BPA x ARWENR x CRAP* x AR Weight

LEP Cost = BPA x LWENR x CRAP* x LEP Weight

COMB Cost = BPA x CWENR x CRAP* x (AR Weight + COMB Weight)

*Cerf Reduction for Attending Pupils [attributed to Cerf here because this adjustment was originally proposed in his report to the Governor on the school finance formula]

This change is unquestionably a change to the law itself. This is a substantive change with ripple effects throughout the formula. And as I understand Civics 101, such a change is well beyond the authority of the executive branch.

Permitting such authority to go unchecked is a dangerous precedent!

Then again, it’s a precedent already endorsed by the President and U.S. Secretary of ed in their choice to grant waivers to states and local districts to ignore No Child Left Behind, which was/is an act of Congress.  But who cares about that pesky old checks and balances stuff anyway? That’s so… old school… so… constitutional…

Why it Matters

What I find most offensive about this power play is that the change imposed through abuse of executive power is a change to enrollment count that is well understood to be the oldest trick in the book for reducing aid to high poverty, high minority concentration districts.

In New Jersey, as elsewhere, attendance rates are lower – for reasons well beyond school & district control – in districts serving larger shares of low income and minority children. Using attendance rates to adjust funding necessarily, systematically reduces funding from higher poverty districts. Here are the attendance rates by grade level and by district factor group (where A districts are low wealth/income districts and IJ are high wealth/income).

CRAP Adjustment

And here are a handful of related articles which address this issue, and related issues in other settings:

  • Baker, B. D., & Green III, P. C. (2005). Tricks of the Trade: State Legislative Actions in School Finance Policy That Perpetuate Racial Disparities in the Post‐Brown Era. American Journal of Education, 111(3), 372-413.
  • Baker, B. D., & Corcoran, S. P. (2012). The Stealth Inequities of School Funding: How State and Local School Finance Systems Perpetuate Inequitable Student Spending. Center for American Progress.
  • Green III, P. C., & Baker, B. D. (2006). Urban Legends, Desegregation and School Finance: Did Kansas City Really Prove That Money Doesn’t Matter. Mich. J. Race & L., 12, 57.

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.

7 thoughts on “Civics 101: School Finance Formulas & the Limits of Executive Authority

  1. Bruce, I will read this posting more carefully later. Yesterday (Mar. 1st), I saw the current Kentucky governor and a pass Kentucky governor on the floor of the Kentucky Senate chamber. I hope that this practice of executive school-funding adjustment has not occurred in Kentucky’s adjusted-base operating aid formula. I am most certain that Paul Mort — if he were living — would be irate of such a practice. It would be interesting to see if the computer aid runs bare out your suspicion of state executive over-reach. Tyrone Bynoe

  2. State Aid under SFRA is supposed to be State Aid=Target Funding-Local Revenue Requirement.
    I am simplifying but
    In N.J, Target Funding is called Adequacy Budget and Local Revenue is called Local Fair Share..
    These numbers are calculated and State Aid is supposed to be calculated as per this simple formula.

    However in School Districts like Cherry Hill…that State Aid was “Capped” based on the previous…Unconstitutional funding formula (?) CEIFA. We never received our direct state aid to Education as per this formula.We are tens of millions of dollars above our Local Fair Share ..
    Thus the State has shifted more of the burden of funding onto local property taxpayers..This a large part of the reason that we in Camden County have the largest median effective property tax rate in NJ and the ninth largest in the country.(at 2.7% countywide…our tax rate in Cherry Hill is greater than the County Average).

    One thing you can help me on… .We got Zero Extra Aid this year…However according to published reports in the Cherry Hill Patch..Our Special Ed Cat Aid increased approx $120,000,
    But our Equalization Aid Decreased approx $160,000.

    Given that Special Ed funding is also part of the SFRA Equalization Aid Formula..and that Equalization Aid is supposed to compensate districts that were paying over their local fair share…
    How did our State Actually Calculate my Districts Aid figures????


    1. Quick response for now:

      1) Categorical special ed aid is “outside the formula”… and constitutes a supposed 1/3 of SE Aid. It was done this way as a political ploy to create a separate chunk of aid that could be allocated to “all” districts. The other 2/3 of SE aid are folded into the equalization formula.

      2) At this stage, I don’t quite know how they determined the foundation formula aid amounts, except that they were built on last years amounts…thus the 0 aid changes and $1 aid changes. You couldn’t really accomplish that without building on last years, inappropriately, illegally calculated amounts

      3) Yes… well above and beyond what I’ve laid out here, there are many factors that completely undermine the formula goals, including caps that may hold districts below their calculated “constitutional” level of funding.

      1. “At this stage, I don’t quite know how they determined the foundation formula aid amounts, except that they were built on last years amounts…thus the 0 aid changes and $1 aid changes. You couldn’t really accomplish that without building on last years, inappropriately, illegally calculated amounts”

        That is a VERY good point. The “coincidence” of 40 districts getting exactly $1 more than last year tells me the amounts were calculated BACKWARDS. The Christie administration knew it wanted these districts to get exactly $1 more than they got last year, so they fudged the numbers to make that happen.

        This speaks volumes as to how politicized the entire process has become. I know it sounds contradictory to say it, but only the assertion of the Legislature to take back its authority will depoliticize school funding.

      2. Well… leaving it to the legislature isn’t really “depoliticizing” it… it’s just putting it back into the legally relevant political hands, with, of course, that other branch of state government (judicial) maintaining authority to review constitutional complaints brought against either or both the executive and legislative branch in their adoption (legislature) or implementation (executive) of the formula. It’s all political. It’s the balance of power that matters and must be respected.

  3. School Finance 101 ..Concerning SFRA and Equalization Aid …I need your help on this one .
    I am looking at the Budget Guidelines ..Fiscal Year 2013-2014…From the New Jersey Department of Education…Office of School Finance…

    Pg.37-38…In the case of a district whose LFS is less than base adequacy budget,the state share (Equalization Aid) will equal the difference between LFS and the base adequacy budget..

    How does our State define and calculate “base adequacy budget”????

    Does our define Base Adequacy Budget as per calculations in the original SFRA Funding Formula which in addition to Base Costs includes costs for all at risk students so the money follows at risk children no matter what the district..

    or has the State changed the definition of Adequacy Budget when calculating Equalization aid under SFRA to mean only BASE COSTS as per base costs calculations????

    I am just trying to figure out how the State is doing its calculations…Thanks…

    1. Right… the way it works is that the Adequacy Budget is calculated by applying the base to the grade level weights, through each of the student need weights, then times the GCA… (incl the 2/3 special ed). So, yes, the adequacy budget includes calculations for “resident” enrolled children, including weights on those children. Pass-throughs to charters and inter-district transfers are, in theory, to be based on host district weighted funding – but I’ve noticed that’s not always the case either.

      Then Adequacy Budget less local fair share is the supposed state aid amount. It’s a lot like the equations I laid out in the post. BUT… they aren’t really applying the legal equations for determining adequacy budget, nor are they producing a transparent “run” of the numbers/parameters for all districts. This is inexcusable.

      Last year… when they released their district by district runs, they a) changed the pupil count method to ADA (added that attendance adjustment) and b) they reduced the student need weights – even though they lacked the authority to screw around with any of that. By taking these steps, they significantly reduced the adequacy budget targets for higher need districts. If I recall, there were still unexplainable differences in what they actually ended up allocating, when compared with their illegal calculations of what should have been allocated (largely achieved through the various “outside the formula” parameters, like sped categorical).

      This year… since the allocations seem largely pegged to last year – and not actually run through any formula – we assume/have pretty good insight into the fact that they again calculated adequacy budgets using their illegal changes to SFRA.

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