Moorestown Schools May Raise Taxes If State Aid Falters: Study

MOORESTOWN, NJ — The Moorestown Public School District may see a tax increase if the state reduces state aid by 10 percent due to the new coronavirus pandemic, 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.

The Moorestown Public School District would have to raise local property taxes by 1.4 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 ($5,171,630) and miscellaneous revenues ($3,474,827) adds up to $8,646,457, divided by $67,731,107 in property taxes come out to an REF score of 0.14, or a 1.4 percent increase.

New Jersey Coronavirus Updates: Don't miss local and statewide announcements about novel coronavirus precautions. Sign up for Patch alerts and daily newsletters.

Moorestown is among the 25 biggest districts in South Jersey. It’s situation wouldn’t prove as dire as some others. Seventeen of the top 25 districts in the state would face what the report deems a “budget crisis,” meaning they would have to raise property taxes by at least 5 percent to balance a loss of 10 percent in state aid. Moorestown was among the three lowest in terms of possible increases in the report.

Last week, the district approved a $75,656,895 budget that carries a 2.39 percent tax rate increase. It has already lost $144,000 in revenue through April 20 and is expected to lose about $300,000 in revenue by Memorial Day due to the pandemic, officials said. Read more here: Moorestown Schools Expect $300K Loss Due To Coronavirus

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.

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.

See related: NJ Coronavirus Updates: Here's What You Need To Know