HILLSBOROUGH, NJ — Hillsborough Superintendent Michael Volpe shared a presentation on Monday, shedding some light on how rising property values factor into the state school aid formula and add pressure to the district's budget.
During the Board of Education meeting, Volpe said the presentation was not a budget discussion, but part of an effort to explain school finance to board members and residents before budget season.
"This is not a budget conversation per se, but a lot of times people have a lot of curiosity about the state aid formula, the factors, and if I break it down piece by piece over time, I figure it may make a little bit more sense," said Volpe on Monday.
"I've titled it the mathematics of the squeeze," Volpe said of the presentation.
According to Volpe, Hillsborough's equalized property valuation rose sharply after 2020.
He said the town's assessed value climbed from $8.1 billion in 2021 to $10.61 billion in 2025, a 41.85 percent increase from 2020 to 2025.
Volpe said the district also saw a $2.98 billion housing assessment value increase over the past five years.
The state uses property values as part of the formula that determines a district's local fair share.
"According to the state aid formula, we are able in Hillsborough to pay a lot more. Not saying it's right. I'm saying that's how the state aid formula shows it," Volpe said. "So that is a significant problem."
He added, "So essentially there's a penalty for paper wealth."
The state also applies an equalization process to municipalities that do not assess homes every year, using a multiplier through the Department of Community Affairs to estimate true market value, according to Volpe.
Volpe said that means Hillsborough's annual assessments are not viewed in isolation when the state measures municipal wealth.
He argued that higher home assessments do not mean residents have more cash available to pay taxes.
"People's salaries aren't going up and up and up the same amount as these assessed values of homes," Volpe said.
He called that "a fundamental fallacy and flaw of the state aid formula."
Volpe also said much of the district's spending is not easily reduced.
He said 80 to 85 percent of the budget is tied to fixed costs including special education, transportation, health care premiums and contractual obligations.
The district, he said, is also constrained by the 2 percent tax levy cap, though he noted there are some exceptions.
Looking ahead, Volpe said he had been told the formula would not change for the coming budget year.
He said Hillsborough would still be operating under the current system for 2027-28, with a possible new formula in 2028-29 that may be more student-based.
Volpe or Business Administrator Gerald Eckert would continue explaining other parts of the state aid formula in the coming months as budget season approaches.
Watch Volpe's full presentation below:
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