The Millionaire's Tax Makes a Comeback as a School-Funding Vehicle

June 24, 2011

When the state Supreme Court in May ordered that New Jersey’s highest-poverty districts be fully funded under the school finance law, their ruling had an unintended consequence. Democratic legislative leaders began openly grappling with the question as to which other districts might qualify for additional money.

Yesterday, they came up with an answer: All of them.

Democratic leaders in the Senate and Assembly yesterday announced they will file an appropriations bill with a new millionaire’s tax. Their goal is to add $1.6 billion in aid overall, enough to fund virtually every district in the state.

They're counting, however, on a political gambit to make all the money available. Many of the state’s wealthier suburban districts many of them Republican strongholds will only get the bulk of their money if Gov. Chris Christie agrees to the new surcharge on the wealthy, something he has staunchly resisted.

It would work this way, as outlined by Senate President Stephen Sweeney (D-Gloucester) in a late—afternoon press conference. The appropriations bill to be filed Monday would start with three main funding streams, totaling nearly $1.1 billion:

  • $447 million to fully fund the 31 districts falling under the Abbott v. Burke rulings, as ordered by the state Supreme Court and agreed to by both parties;
  • $580 million for an estimated 215 other districts that are spending less than what the School Funding Reform Act (SFRA) of 2008 deems "adequate;"
  • $87 million for the balance of the state’s nearly 600 districts, although details were unclear to how this money would be distributed.

"We propose to bring all the school districts up to adequacy, to live up the constitutional requirement of the school funding formula," Sweeney said. "We have also found additional funding to spread out to the remaining districts."

The gambit comes in the Democrats’ separate move to tax residents earning more than $1 million. Doing so would raise an additional $500 million to $550 million the aid that would be steered almost exclusively to suburban schools.

"The millionaires tax will fully fund the formula for all districts in the state of New Jersey, so we will comply with the law we wrote in 2006," Sweeney said.

Much of the discussion since the Abbott ruling last month has been on whether to limit the additional non-Abbott money to the roughly 200 districts that the law says are inadequately funded.

But there had been quiet backlash to that idea from some advocates and legislators. They maintain that other districts are just as needy, especially in light of rising special education costs and steep funding cuts over the past year.

There had been some discussion about funding districts with extraordinary costs in excess of $40,000-50,000 for a single child.

But Democratic legislators in both chambers, meeting in and outside party caucuses, said there was a growing consensus to extend the money further and to use the millionaires tax to accomplish that.

Assemblyman John McKeon (D-Essex), the Assembly's deputy speaker, said Christie is likely to veto the measure. But then, he added, Republican legislators will have to choose to back the governor or their home districts.

"When we look to override, it will put a lot of people in tough position," McKeon said. "If exclusivity in the governor's club is more important to them than providing needed funding to public schools, then they should stand up and be counted."

School advocates learning of the budget news in the late afternoon sounded pleased with the initial piece of the plan, the $1.1 billion in new money that will serve a range of schools.

"It's good news that it will reach all districts," said Lynne Strickland, director of the Garden State Coalition of Schools, a suburban school organization. "All districts are in distress, and we are thankful."

She and others were warier about the fate of the remainder of the funds that were linked to the millionaire’s tax.

"When you go that way, it's a political or partisan tug of war," she said. "We’d hope the children would be above the partisan politics."