The basics:
- Garden State Initiative report says New Jersey school funding formula lacks transparency, equity
- State ranks third nationally in per-pupil spending at $26,990
- FY2026 budget includes more than $12B in K-12 state aid
- Report recommends stabilizing aid, revising Local Fair Share, improving transparency
A new report from the Garden State Initiative contends that New Jersey’s school funding system is overdue for reform. GSI argues that record levels of education spending have not resolved longstanding concerns about transparency, equity and predictability.
Despite ranking third nationally in per-pupil spending – at $26,990, while maintaining the highest property taxes per capita – New Jersey continues to see uneven funding outcomes across districts.
The paper concludes that the state’s school funding formula produces disparities among districts serving students with similar levels of need.
It identifies three core structural problems:
- A lack of transparency in how formula cost assumptions and annual state aid decisions are determined
- Volatile state aid allocations that do not consistently reflect enrollment changes
- Unrealistic Local Fair Share (LFS) expectations that often exceed the state’s 2% property tax cap and disproportionately burden middle-income districts
Christian Barnard authored “Rebalancing the Scales: How to Achieve a Fairer, More Transparent School Funding Formula in New Jersey.”
Then Gov. Jon Corzine signed the School Funding Reform Act of 2008 establishing the strategy. It was later revised through the 2018 S-2 law enacted under Gov. Phil Murphy, which phased in full funding by Fiscal Year 2025.
Murphy’s final FY2026 budget, signed July 1, 2025, totaled approximately $58.78 billion. It included more than $12 billion in state aid for K-12 schools — the highest level in state history. Despite those record totals, the formula has become a flashpoint during the annual state budget process.
Resulting aid shifts have led to criticism that districts have experienced instability or made downward adjustments, even as overall education spending climbed. Towns with big cuts include Toms River, Jackson, Cape May, among others.
More money more problems?
The report argues the issue is not simply how much the state spends on K-12 education, but how that money is calculated, allocated and adjusted each year.
For example, despite having similar poverty rates, Jersey City receives $22,942 per student, North Bergen receives $19,437 per student and Newark receives $26,632 per student.
The report also notes that year-over-year changes in state aid are volatile and often disconnected from actual enrollment trends.
Due to caps on state aid losses for districts with declining enrollment in FY2026, 192 districts collectively receive $396 million more than the formula prescribes. Meanwhile 284 districts receive $383 million less. In addition, just over 50% of all state aid is concentrated in only 22 of New Jersey’s 590 operating school districts. The report says this contributes to uneven funding distribution across communities.
“New Jersey taxpayers face the highest property tax burden in the country and some of the highest overall state spending levels,” said Audrey Lane, president of GSI. “Yet we already spend more per pupil on K-12 education than almost any other state.”
The report outlines five recommended reforms:
- Re-evaluating and auditing outdated cost assumptions built into the SFRA
- Simplifying and stabilizing Local Fair Share calculations to align with the 2% cap
- Preserving the 2% property tax cap
- Limiting the use of caps on state aid increases and decreases
- Improving transparency by providing districts at least 60 days’ notice of aid decisions, along with clear explanations of formula calculations and tax implications
Head of the class
Although New Jersey fell five spots in U.S. News & World Report’s most recent overall Best States ranking, the Garden State was tops in education. Get the rankings here.
“Reforming the funding formula will create a transparent, predictable system that protects taxpayers and ensures students get the support they need,” said Lane. “Education funding should work fairly for every community.”
The report concludes that while New Jersey’s funding system is intended to support high-need students, increased spending by itself will not solve underlying challenges.
“For policymakers, the message is clear: more spending alone is not the answer — smarter, more transparent funding reform is,” Lane said. “We’re hopeful Gov. Mikie Sherrill and the Legislature can work in a bipartisan manner to deliver greater transparency and meaningful reform that benefits both taxpayers and students.”
The school funding issue will be at the center of the upcoming budget address, Sherrill’s first as governor.
The full report is available here.
The post GSI report urges New Jersey school funding formula reform appeared first on NJBIZ.
