Monday, November 30, 2009

Alternative Public School Funding

It’s About the Kids.

The New Jersey State Constitution Article VIII; Section IV REQUIRES public funding for the Instructional, Administrative and Capital Maintenance of all Public Education (ages 5-18); but does not specify How Public Money is to be raised or used for this purpose. The existing system of Local Property Taxes levied specifically to fund Home Rule for free, public education from Kindergarten thru 12th Grade is hopelessly broken because of the demographics of the population density and property values are not homogeneous throughout the State (hence the identification of the “Abbott Districts” are those communities with Real Estate Tax "ratable properties" which are insufficient to fund their own schools). Therefore - in my opinion (for what its worth) - a radical new approach is required, rather than just tinkering with a broken system, to wit:

The establishment of an EDUCATIONAL TRUST FUND

which will addresses all of these issue (and more) by:

(1) Providing a ongoing and stable source of Primary Educational Funding

(2) Equally funding all students on a per grade level (eliminating the need for Abbott Districts, and all other “pet project” funding initiatives)

(3) Provides safeguards for Capital Funding and Facilities Maintenance

(4) Eliminates the burdensome Real Estate Tax AND

(5) Retains Home Rule over the administration of local education; and allows for additional local funding contributions with voter approval while also facilitating Consolidation where appropriate.

Does this sound to good to be true? Read On......

A short History of Real Estate Taxation.

Land (Real Estate) has traditionally been the most prized asset throughout recorded history, and was once all owned by a KING. In order to control large territories, the King allocated his land among his Vassals (See Feudalism) who paid him a "rental". When lands passed into the hands of non vassals (common folks like you and me), the King lost the ability to obtain LAND DUES, and so a TAX on the privileged of owning the land was assessed, based upon the value of the land (as verse its “economic use”) to wit, our modern day real estate tax laws.

Historic Advantages of Real Estate Taxation are:

(a) the Historical Precedent (this is the way “we” have always done it) and was based upon The “Ohio Model” (promoted by President Thomas Jefferson) used as a basis for funding Public Education,

(b) Principal Asset of large dollar amount, with low volume of transactions makes it easy to administer (and the best part is: owners can afford to pay taxes, if they can afford to buy land), and

(c) Land Records are Easy to Trace because they are activated by registration of deed - Land can’t be hidden or concealed (as with cash, personal property or Swiss bank accounts), and the valuation is reasonably assured (i.e., based on Fair Market Value at time of last sale, plus a periodic “reassessment”).

While Real Estate Taxation offers the benefits (as discussed above) these are a few problems (many of which reading will recognize here in New Jersey):

(a) Land is no longer the Principal Asset for generating income, because modern commerce tends to be a function of the use of “financial capital” and “intellectual property” and mobility of tenants facilitates economic relocation,

(b) the lack of mobility restricts use and the resulting loss of landlords and tenants (and their associated economic activities) reduces value of land (i.e. Urban Centers verse Suburban Districts – Do the Abbott Districts contain any high Real Estate Values? Not usually), and

(c) geographical restriction creates disparity in valuations and substantially identical land parcels can receive different values depending upon their locations.

THE NEW MODEL - Prerequisites Assumptions:

#1 – We must acceptance of the BASIC PREMISE that Taxation upon Real Estate Valuation for proposes of Funding Public Schools within the State of New Jersey is no longer a viable methodology - it is a broken model, to be replaced not "tinkered with" (chewing gum and duct tape) in terms of exemptions, allowance, and rebates.

#2 - While studies will be required to determine reasonable calculations, the Instructional, Administrative and Capital Maintenance (a) per Student Cost and (b) per Grade Level can be reasonably be determined, and projected.

#3 - We must also use of diverse sources of taxation will provide a more stable source of funding, rather than a single funding source (i.e. Real Estate Taxation); in order to smooth out economic fluctuations.

#4 - Because some school districts are no longer viable stand-along entities; consolidation of school districts and or the ability of neighboring districts to share common services should be encouraged and facilitated, rather than impeded.


Abolish and Repeal all Real Estate Taxation Laws and or Regulations which exist for proposes of Funding Public Schools within the State of New Jersey and concurrently establish an EDUCATIONAL TRUST FUND (hereafter the “Trust”) under Article VIII; Section IV for the Instructional, Administrative and Capital Maintenance of all Public Education (ages 5-18) [and mandated preschool activities as have been determined by the NJ Supreme Court] within the State of New Jersey. With respect to the Trust:

1) The Governor shall nominate (with the advice and consent of the State Senate – see Senate Rules) Five (5) Independent Trustees who shall each serve for staggered 5 year terms, such that one Trustee shall be replaced or re-nominated every year.

2) The State Legislature shall provide that some portion of funds from State Revenues from: Personal Income Taxes*, Corporate Business Taxes*, Sales and Use Tax* be apportions and transferred to the Trustees (THEREFORE, ALL FUNDS PREVIOUSLY ALLOCATED TO THE “REAL ESTATE REBATE PROGRAM” ARE HEREBY RELEASED - see "seed capital" below). * this may require tax increases, which will be tolerable if the overall level of taxation remains less than or equal to the current aggregate dollar amounts.

3) The Trustees shall annually determine, and project the Instructional, Administrative and Capital Maintenance on a “per Student Cost per Grade Level” for each Grade Level from Kindergarten thru 12th Grade (High School), as mandated by law. {Shouldn't students in Camden, Cranberry or Cape May receive the same level of instructional funding? Wasn't this the point of the Abbott Decision?}

4) Each School District, as is currently required (and as certified by the State Secretary of Education), shall report their student enrollment to the Department of Education and to the Trustees on a periodic basis.

5) The Trustees shall periodically (monthly or bi-weekly) pay over to each School District, funds for Instructional & Administrative per student per grade level; to each district.

6) “Seed Capital” (to be 20% of the projected five (5) year average Budget of the Trust) shall be appropriated by the State Legislature as the Corpus of the Trust.

7) The Trustees shall annually project the funding / disbursement requirements of the Trust for the succeeding School Year and shall formally advise the State Secretary of Education of any additional funding which they deem shall be required; any projected deficit funding requirements such funding will be appropriated by the State Legislature.

8) Capital funds shall be accumulated (based on student population data previously reported) and held for each School District; such funds shall be dispersed in accordance with the previously approved multi-year capital funding plan. {How often - in the past decade - were facilities maintenance projects "postponed" in order to fund current operations?} TO BE DETERMINED - the ability of the Trustees to issue Bonds to build current schools based upon expected Capital Funding Allocations.

9) School Districts which, upon the appropriate submission of their Student Census Data, and the resulting Funding which shall be provided under this Plan, wish to appropriate additional funding may make such requests directly to the Municipal Authority within which the School District resided; however the Municipal Authority shall not be required to provide any additional funding.

10) School Districts which conclude that they will not be able to meet the educational mandates of the State Department of Education within the funding provided under this Plan, may elect to combine their educational activities (Schools or Specific Grade Levels) with those of activities of Neighboring School Districts (see Regionalization).

11) Severability: If any portion of this Agreement shall be held to be invalid or unenforceable for any reason, then the remaining provisions shall continue to be valid and enforceable. If a court finds that any provision of this Agreement is invalid or unenforceable, but that by limiting such provision it would become valid and enforceable, then such provision shall be deemed to be written, construed, and enforced as so limited by the Court Order.

12) This TRUST AGREEMENT shall be subject to amendment or revocation in the 4th year following its inception, and every 4th year thereafter, by Act of the New Jersey State Legislature which shall be made by an affirmative 2/3rd vote of the Senate and the Assembly and Signed by the Governor; unless formally instructed to be amended or revoked at any time by an order of the Supreme Court of the State of New Jersey.

13) This Trust shall terminate, cease to operate, shall pay over all remaining funds and transfer such records and documents as may exist to the care, custody and control of the Secretary of Education of the State of New Jersey, or as may be designated by the New Jersey State Legislature, on the 1st business day 100 years from the date that the Corpus of the Trust shall have been transfer and accepted by the Trustees, unless otherwise amended (See - NJ Law Against Perpetuities).

New Jersey was a founding partner in the American Experiment, so now is the time for all New Jersey Citizens to work together to bring New Jersey Education into the 21st Century – It’s About The Kids!

No comments:

Post a Comment