Budget Crises Possible For Gloucester Township School Districts

GLOUCESTER TOWNSHIP, NJ — Both the Gloucester Township K-8 and Black Horse Pike Regional public school districts are among South Jersey’s largest districts that are facing unprecedented financial challenges due to the outbreak of new coronavirus, according to a recent study.

A new research report from the Senator Walter Rand Institute for Public Affairs at Rutgers University–Camden explored the risk exposure factors (REF) for the largest school districts in South Jersey.

According to the report, each district that serves Gloucester Township residents would have to raise property taxes by at least 10 percent if there were to be a 10 percent reduction in school aid.

The Gloucester Township K-8 Public School District would have to raise property taxes by 11.1 percent and the Black Horse Pike Regional School District would have to raise property taxes by 10.6 percent, according to the report. To determine each district’s REF score, the report added up that district’s federal and state aid and miscellaneous income, and divided that number by the amount of local property taxes.

The state and federal aid ($53,930,308) and miscellaneous revenues for Gloucester Township ($1,896,917) adds up to $55,827,225, divided by $50,264,381 in property taxes produces an REF score of 1.11, or an 11.1 percent increase, according to data provided by Haynes.

The Black Horse Pike Regional School District score of 1.06, or 10.6 percent increase, came from adding the federal and state aid ($36,565,640) to miscellaneous revenue ($579,550) for a total of $37,145,190, and dividing by local property taxes in the amount of $35,155,869.

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Michael Haynes, an assistant professor of public policy and administration at Rutgers University–Camden, authored the study based on the premise that governments often reduce school aid when balancing their budgets during economic recessions.

He said this proves problematic for New Jersey because the state’s school districts tend to rely heavily on federal and state funding. However, he also said schools’ reliance on property tax revenue gives them a more stable base than most other publicly funded services.

“New Jerseyans are often concerned about their property taxes, but there is an upside: property tax represents a revenue stream that is less volatile than sales tax or income tax, both of which are the first revenue streams to drop off in a crisis,” Haynes said. “Since it takes time for the value of homes and property to decline, property tax is a relatively predictable resource.”

One potential factor that can alleviate these budgetary shortfalls is the availability of short-term financial capital, such as cash and cash equivalents, on the school districts’ balance sheets. These resources offer school districts extra liquidity to pay for short-term obligations like employee payrolls and supplies.

“Unfortunately, school districts are disincentivized to have ‘rainy day’ funds, since state and federal supporters would question why the district needs investment when it carries a balance on its books,” Haynes said. “In anticipation of future recessions, the State of New Jersey might consider encouraging districts to maintain unrestricted funds without fear of funding penalties.”
“If education funding cuts become a reality, this report seeks to help policymakers distribute those cuts as reasonably as possible and to help school districts plan for their futures,” Darren Spielman, executive director of the Senator Walter Rand Institute for Public Affairs at Rutgers University–Camden said.

The report projects that the Gloucester Township School District could continue to operate for another 36 days after its inflow of cash stops. The same report projects the Black Horse Pike School District could only survive for six days beyond the end of any money coming in.

Haynes acknowledges the report only uses financial data for each district through June 30, 2019, the end of the last fiscal year. Some fiscal information may have changed between July 1 and the time the report was published.

Second, the local tax burden and unemployment rate data come from 2016 because this is the most recent year that there is data on unemployment rates in the CAFRs for all school districts in the sample.

The Senator Walter Rand Institute for Public Affairs at Rutgers University–Camden addresses public policy issues impacting southern New Jersey through applied research, community engagement, and organizational development.

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