A Roadmap for Improving New Jersey's School Funding Formula - Modifying the Property Tax Cap

Oct 15, 2026

Uploaded by Callum

A roadmap for improving New Jersey’s school funding formula by examining the interaction between the School Funding Reform Act (SFRA) and the state property tax cap. The report explains how a foundation aid framework sets each district’s adequacy budget and uses the Local Fair Share (LFS) calculation to determine required local revenue. It then demonstrates how property tax limits can restrict local collections, creating conflicts that contribute to unequal educational opportunities across districts.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages12

Reading Time30 min

AccessFree to download

Introduction

Funding New Jersey’s School Aid Formula, the School Funding Reform Act

Determining Local Fair Share

A ROADMAP FOR IMPROVING NEW JERSEY'S SCHOOL FUNDING FORMULA: MODIFYING THE PROPERTY TAX CAP Danielle Farrie, Ph.D. October 2024 About the Author Danielle Farrie, Ph. D., is Research Director at Education Law Center. Since 2008, she has conducted research and data analysis to support public policy advocacy for ELC and partner organizations. Dr. Farrie is the lead author of ELC’s Making the Grade report and has authored book chapters and peer-reviewed articles on topics such as school finance and school segregation. She has testified about school funding issues before numerous state and national commissions and has provided expert testimony in state school funding lawsuits. She holds a Ph. D. in sociology from Temple University. About Education Law Center Education Law Center ( ELC) pursues justice and equity for public school students by enforcing their right to a high-quality education in safe, equitable, non-discriminatory, integrated, and wellfunded learning environments. We seek to support and improve public schools as the center of communities and the foundation of a multicultural and multiracial democratic society. We strive to secure and protect the rights of students who are underserved, experience inadequate learning opportunities, or face discrimination based on race, ethnicity, socioeconomic status, language, religion, sex, sexual orientation, gender identity, immigrant or migrant status, or disability. To achieve these goals, we engage in litigation, research and data analysis, policy advocacy, communications, and strategic partnerships and collaborations © October 2024 Education Law Center, Inc., Newark, NJ. All rights reserved. Introduction New Jersey, like many states, has long struggled with the tension of maintaining a well-funded public education system while not overburdening residents with high property taxes. New Jersey’s school funding formula, 2008’s School Funding Reform Act (SFRA), includes a determination of how much local funding – raised through property taxes – is necessary to support each school districts’ budget. At the same time, New Jersey also has a property tax cap that is intended to keep spending down and protect residents from large annual increases in their property tax bills. It’s time to study and improve the Local Fair Share calculation in the state ’s formula and make sure school districts can meet it. In many school districts across the state, these two laws are in opposition: one law requires districts to raise taxes to meet their local funding obligation under the SFRA, and the other restricts the amount of local revenue that can be raised through the school tax levy. In this report, we demonstrate how the property tax cap and funding expectations under the SFRA are in conflict and contribute to disparities in educational opportunities for many New Jersey students. Funding New Jersey’s School Aid Formula, the School Funding Reform Act New Jersey uses a foundation aid formula to finance its public education system. A foundation formula establishes a minimum spending level at which each district can provide a quality education program. The responsibility for funding that program is then split between the state, which makes direct payments to districts in the form of state aid, and local revenue. Districts are required to levy a minimum tax rate, typically assessed on property values, to raise their local share of school funding 1 The difference between the district’s formula required minimum spending level and the local levy determines the amount of state aid a district receives. This type of formula promotes equity because state aid is proportionate to a district’s property wealth: low-wealth districts receive more state aid, and high-wealth districts receive less. Under New Jersey’s formula, the SFRA, a unique spending target is calculated for each district. A“base” per-pupil amount is allocated for every enrolled student ($13,946 in 2024-25), and then ad

FAQs

What are the SFRA and the property tax cap intended to do?

The SFRA sets how much local funding is needed for each district’s budget through property-tax-based contributions, while the property tax cap aims to limit spending growth and protect residents from large annual increases in property tax bills.

How does New Jersey’s foundation aid formula work?

It establishes a minimum spending level for each district’s quality education program, then divides funding between the state (state aid) and local revenue, with the state share calculated relative to local fair share needs.

What is Local Fair Share (LFS) and why is it important?

LFS is the formula used to estimate how much revenue should be raised locally through school property tax collections, using district property valuations and personal income levels to assess fiscal capacity.

Oct 15, 2026

Uploaded by Callum