With rising costs, district’s financial future remains bleak

SOUTH ORANGE / MAPLEWOOD, NJ — Taxpayers can expect some big cuts to come to the South Orange-Maplewood School District — not that this will reduce taxes. According to the 2016-2017 preliminary budget presentation made at the Feb. 22 Board of Education meeting, the school district is currently looking at a budget shortfall for next school year.

Business Administrator Cheryl Schneider brought out her chart — which can be seen on the district website — showing the shortfall between projected expenses and revenues. According to Schneider, the school district currently must find an extra $3.54 million for the next school year. By the 2020-2021 school year, the district expects to see a revenue-expense gap of $20.6 million.

“We are at that point as a school district where efficiencies are harder to come by and substantial reductions have to be considered,” Superintendent of Schools John Ramos Jr. said at the meeting, adding that it will be difficult to ensure each school is “adequately funded” while focusing on floundering schools. “That will be a challenge for us and a struggle to achieve that balance.”

The school district budget is largely reliant on revenue from local sources, though Schneider did announce it will see a bump in state aid next school year of approximately $91,349 from the current school year; however, federal grants are expected to amount to a bit less.

“The big story as far as budget-resource assumptions is that our state aid figures came out last Thursday (Feb. 18) and we in fact got over a $90,000 increase in state aid numbers,” Schneider announced at the meeting.

With revenue sources such as local taxes, state and federal aid and programs, debt service, tuition, fund balance, and capital reserve, Schneider said that the proposed revenue amount for the 2016-2017 school year is $125,331,301, which is $1,736,521 more than this school year’s. Of this amount, 94 percent is expected to come from local taxes, which includes operating budget and debt service, with only 3.4 percent coming from state aid, 2.4 percent coming from federal and state programs, and 0.2 percent each coming from debt service aid and miscellaneous revenue sources, such as tuition.

“The line for the past three (to) four years has been pretty flat as to what we’ve been getting in state aid as a percentage of revenue,” Schneider said.

Some of the money the district receives from the state comes from Title I funding, which is spent to improve the academic achievement of disadvantaged students. The SOMSD has three Title I schools: Seth Boyden, Clinton and Maplewood Middle School. According to Schneider, the district has applied for schoolwide funding for Seth Boyden; if more than 40 percent of the students in a school qualify as disadvantaged, the school is allowed to run schoolwide programs that target all students in the school, not just those identified as disadvantaged. This application will not bring in additional money for Seth Boyden, but will allow the district to spend it differently.

Under state law, local taxes cannot increase more than 2 percent for the operating budget. This of course leaves the oft-used loophole that it can exceed the 2-percent cap for other areas of the budget.

At a 2-percent operating budget, the tax levy cap would be $111,317,574, but with the added debt service of $3,844,298, that percentage bumps up to 2.07. At this estimate, based on 2015 figures, the average Maplewood household would pay approximately $165 more per year in taxes, while the average South Orange household would pay approximately $216 more. Schneider pointed out, however, that when taking tax appeals into account, the numbers for the two towns become much closer, with a Maplewood household paying $186 more and a South Orange household paying $182 more.

Schneider cautioned that the per-household numbers are “not real numbers” as the budget will change and as the number aren’t finalized until submittal to the county.

The school district also has banked cap it can use. There is $409,103 of banked cap from the 2013-2014 school year that, if not used this year, will disappear. If the school district uses the banked cap, the operating and debt service tax impact increases to 2.44 percent, raising taxes for the average Maplewood household by $180 and South Orange household by $234 before appeals.

One South Orange household pays more than one Maplewood household, which is an increasingly contentious issue for some South Orange villagers, who consider it unfair that the village should shoulder such a burden when Maplewood sends more students to the schools.

On Jan. 11, an ad-hoc committee tasked with looking at school tax inequalities between South Orange and Maplewood presented its findings to the South Orange Board of Trustees. Representing the committee were Rob Sandow, co-chairman of the South Orange Citizens Budget Advisory Committee, and Richard Vader, chairman of the ad-hoc committee.

Sandow said the SOMSD is a “consolidated district” as opposed to a “regional district,” which would have more latitude in funding apportionment among member municipalities. Consolidated districts are required to use a funding formula devised by the state that is based solely on equalized valuation, thereby not taking into account factors such as enrollment.

“We’re not here to advocate or ask for any reductions in school funding; we’re not saying we think we spend too much on the schools, we’re not going in that direction,” Sandow said Jan. 11. “We’re not trying to place any blame on Maplewood. Maplewood is going to get mentioned in this presentation because there is no way to do this presentation without mentioning Maplewood.

“This presentation is not about Maplewood,” Sandow continued. “It is about the formula we are required to work with under statute.”

According to the Jan. 11 presentation, which used numbers that came from the school district, South Orange pays 43 percent of the school district’s budget while only contributing 33 percent of the school district’s students. Using figures from the Board of Education document “Tax Impact of the Preliminary 2015-2016 Budget on the Average Residential Property,” the ad-hoc committee calculated that South Orange pays approximately $20,599 annually per student while Maplewood only pays $13,544 annually per student. Vader believes South Orange is overpaying by more than $10 million.

“$21,000 per student — that is more than the tuition for any state-sponsored college or university in New Jersey. How do you abide that?” Vader asked Jan. 11, adding that high taxes hurt home values. “It is rare that a home in South Orange sells for more than $1 million; it is not as rare in Maplewood. That is because of the subsidy we are providing to Maplewood.

“Maplewood is paying less than its fair share, we’re already paying in excess of our fair share,” Vader continued.

According to Vader and Sandow, one of the only remedies would be to go to the two towns’ legislators and demand a change. Sandow explained that, as former cases show, even if South Orange residents voted to dissolve the school district, separating the two towns into separate school systems, the state could force the continuance of the consolidated district. With a district split unlikely, legislative relief is the only viable option.

Vader would like to see South Orange split from the SOMSD and create a joint school district with West Orange or Millburn, for example.

South Orange Village Counsel Steven Rother agreed that a split seems unlikely, adding that one must know the background of the district before truly considering these issues.

“It’s important to know how the consolidated district came about,” Rother said Jan. 11. “If you look into the history of South Orange-Maplewood, you’ll find that South Orange wanted to break away from Maplewood because they wanted their own district. They petitioned the Legislature but, in a sense, the Legislature double-crossed them by saying, ‘You can be a separate municipality but must maintain a consolidated school district.’ Most consolidated school districts are from where two municipalities were once one.”

“We want the Legislature to realize the mistake they made,” Trustee Mark Rosner added.

While Trustee Deborah Davis Ford agreed that the village should go to the Legislature with its concerns, she said she “was not encouraged” by this option since Maplewood and South Orange share legislators.

“We have to go beyond just elected officials,” Rosner agreed. “It does make it a very difficult path when you share legislators with the other town, especially when that town has 3 to 4,000 more registered voters.” Rosner suggested working to get residents out to vote to ensure legislators are elected who will make this issue a priority.

“This issue is further complicated in the case of the SOMA BOE because it would require legislative action to change the current arrangement,” Village President Sheena Collum told the News-Record. “We recognize that the same legislative delegation representing South Orange also represents Maplewood and that any legislative action to improve South Orange’s situation would adversely impact Maplewood. As such, the reality of the situation is that a legislative solution is highly unlikely.”

While Assemblywoman Mila Jasey, who represents South Orange and Maplewood along with Assemblyman John McKeon and state Sen. Richard Codey, did not address concerns that she and her colleagues will be unable to remain unbiased, she did tell the News-Record that she is working to reform current funding formula legislation.

“The only way that parity will be restored to the SOMSD and to K-12 funding in New Jersey is for the School Funding Reform Act to be run and to be fully funded,” Jasey, a former member of the South Orange-Maplewood Board of Education, told the News-Record. “The governor has not allowed changes to the proposed education budget by the DOE, which has not used the SFRA for years by Commissioner (David) Hespe’s own admission. It is doubtful that this will change in the next year. However, I am working on legislation intended to provide some measure of relief to SOMSD and other similarly situated districts, and expect the bill to be introduced shortly.”

While South Orange’s ad-hoc committee and Rosner were hoping the village would pass a resolution stating its intent to have the statute governing consolidated districts’ funding apportionment formula changed, Collum opted to hold off on that until they could speak to the village’s legislators. She told the News-Record that she will be reporting back to the Board of Trustees about this issue and her discussion with legislators at the April 14 meeting. But, as Collum does not think this route will help much, she is looking at other options.

“Given our limited time and resources, our efforts have been primarily dedicated to finding solutions that can actually be achieved,” Collum told the News-Record, pointing to the strong history of South Orange, Maplewood and the Board of Education collaborating to save money. “To date South Orange and Maplewood have successfully implemented shared services for municipal court, code enforcement, vehicle maintenance, and IT services, all of which have controlled costs and realized savings. We are presently exploring options to build on a long and successful partnership between our recreation departments, including new senior services and the two communities are in the process of commissioning a comprehensive study to evaluate our fire protection services to identify cost-saving opportunities through merger, consolidation or sharing of all or any services. We’ve also been discussing health and animal control. South Orange, Maplewood and the Board of Education also continue to study possibly options to cut employee health care expenses through a partnership.”

Maplewood Mayor Vic DeLuca similarly feels the best change will come about if the two towns work together.

“I do not support splitting the school district. I believe the system has worked well and it would be more expensive for each town to have its own schools,” DeLuca told the News-Record. “Funding for regional or shared school districts is set by state statute and, like all towns in New Jersey, based on property valuation. One of the reasons the two towns are doing a shared property reassessment in 2016 is to determine the most up-to-date values of property in both towns. This will provide us with better information.

“I think there are some issues with school funding, including the loss of ratables for Maplewood with the high school and administrative properties being located in its borders,” DeLuca continued. “I would prefer we jointly pressure the state to properly fund our district rather than having a fight between the two towns.”

While the Board of Education has no say in the tax split between the two towns, BOE President Elizabeth Baker also thinks the issue is with the law, telling the News-Record that “the tax pressure on our communities is the direct result of inadequate and flat aid from Trenton.”

“Although we continue to have increases in our enrollment and significant expenses related to aging infrastructure, PARCC and other mandates, our funding from the state is essentially flat. We receive only a fraction of the aid that we should receive under the state aid formula. This underfunding has resulted in an increased burden on local taxpayers and in school budgets where we have been cutting to the bone,” Baker told the News-Record. “The best way to address the pressure on local taxpayers and provide for our schools is for our school district’s leadership to join with the elected officials from both towns to find areas where we can coordinate programs to maximize every local tax dollar and to demand changes at the state level that will bring more resources to our district.

“These issues are not only urgent, but ones where we have common ground,” Baker continued. “The district and towns have been working together on a number of program coordination issues and the leadership of both towns is making school funding a priority. I look forward to our continued work in partnership.”

Increasing district enrollment projections are driving increases in the school district’s operating budget, with rising enrollment affecting staff and supply needs. According to Schneider’s presentation at the Feb. 22 BOE meeting, in just two years time, the school district is projected to have 100 more students, with the largest increases occurring in the elementary schools, with new students who stay long-term, or around 12 years. The tally of high, middle and elementary school students for this school year is 6,757, a figure that is expected to increase to 6,817 in the next school year.

Additionally, increased enrollment at Seth Boyden accrues extra costs as Seth Boyden’s population is the highest in the district to qualify for free and reduced lunches.

At the end of the day, enrollment is rising much faster than revenue.

The budget is also being forced to increase to accommodate special education needs; these increases are mostly due to increased referrals and out-of-district placements. Referrals cost money as an expert must be brought in to evaluate the child; the school district must pay tuition for children sent to schools out of district. Special education is expected to account for 26.4 percent of next school year’s budget, as opposed to 25.1 percent in the current school year.

“We were seeing an increase in referrals as well as an increase in out-of-district placements,” Schneider said at the Feb. 22 meeting. “The out-of-district placements, the tuition, continue to increase, as well as the transportation costs that go with it.”

Schneider told the News-Record that the district had 171 out-of-district placements for the 2015-2016 school year. According to school district documents, that number has been increasing.

Certain curriculum and policy changes will also increase next year’s school budget. For example, the Access and Equity policy that passed in the fall to much fanfare will have costs associated with it, such as making sure there are enough textbooks for the potential influx of students into higher level classes and increased professional development, among other changes.

Among other budget requests and considerations — which Schneider emphasized are only being considered at this time — are redistricting considerations; science, technology, engineering, arts and math initiatives; the continued expansion of the Montrose Early Learning Center, which will be in its second year in 2016-2017; increased paraprofessional staffing needs; and security enhancements.

Ramos added that the school district is currently looking into the elementary feeder patterns to the middle schools and is considering hiring a consultant to look into redistricting to soften the strains being caused by increased enrollment at some schools, but not others.

“We need to know where we have capacity excesses before redistricting,” Baker said. “Some schools are under capacity and others over capacity.”

Schneider told the News-Record that a redistricting consultant will likely cost approximately $15,000.

All this is forcing the district’s hand — cuts need to be made. Schneider called these reductions “very painful.” Current suggestions for cuts include not purchasing new supplies where possible, not buying any new technology, cutting back on memberships to various organizations, tightening procedures and looking at scheduling efficiencies.

Schneider also announced that cuts will be made to the professional development budget. Rather than sacrifice quality, the district is looking to capitalize on professionals who are local, which cuts travel costs.

“We’re really trying to use the resources we have here,” Schneider said.

Schneider did make it clear, however, that the district will not be tightening the budgets for athletics and extracurriculars. In fact, there may be some increased athletics costs, especially as the district will soon need to rent pool space for the swim team and is working with the two towns to enter into a shared program for field maintenance, which is likely to end up costing the district a bit more. Rather than cutting existing programs, Schneider explained that the district will be holding off on adding some activities.

According to Schneider’s presentation, in order to smoothly transition to a reduced budget, the district is looking to “re-imagine and redesign all aspects of student scheduling, use of facilities and administrative structures”; “maximize community expertise and external resources to provide multiple pathways for student and professional growth and learning”; and taking advantage of “opportunities to learn and develop skills through online resources, collaborative partnerships, collective projects, field experiences, internships, mentoring opportunities and service projects.”

BOE First Vice President Stephanie Lawson-Muhammad had some concerns about the implementation of the Access & Equity policy and the effect it will have on some students.

“We are shoring up advanced (students), but we need to make sure college prep (the lower levels) are still good, but then I see cutting of professional development, which strikes concern,” Lawson-Muhammad said Feb. 22. “As you continue to struggle with the budget, we cannot forget the rest of the students at Columbia High School. They’re not all going to take AP; they should have viable options to get them to college should they wish it.”

While Lawson-Muhammad is supportive of reducing travel and looking in-district for professional development, she cautioned that there should be a strategy for doing so, as the board “cannot have more reports of chaotic and nonproductive classrooms.”

BOE member Donna Smith was also excited about the idea of using in-district pros for professional development.

“We have a lot of resources in district that we haven’t been utilizing,” Smith said, adding that “teachers might be more excited about professional development if it is familiar faces providing it.”

Ramos added that the district is also looking for outside revenue sources to support professional development.

“We’re also looking to find external dollars beyond the budget process to support it,” Ramos said, explaining that the district is currently in talks with some universities. “We’re constantly trying to figure out how to deliver professional development that is timely and pertinent.”

School district employee salaries and benefits continue to take up a good deal of the operating budget, accounting for 73 percent.

Last year the Board of Education and South Orange Maplewood Education Association, the teachers’ union, agreed to a 2.5-percent salary increase for 2016-2017. According to Schneider, if staffing levels remain the same, that will cost the district an additional $2.5 million.

According to Schneider’s presentation, the school district added 11.8 full-time educators, or FTEs, to its 2015-2016 budget that it had not planned to add. Some of these additions resulted from enrollment increases, program adjustments, and even converting from purchased services to in-house tech trainers, which Schneider pointed out was an increase in staff but a decrease in budget.

Due to all this, the district is looking to cut 20 FTEs for the 2016-2017 school year, with 10 fewer classroom teachers and 10 fewer supervisors, administrators, and media and technology specialists. Schneider explained that most of these reductions will be the result of structural changes to supervision, high school administration and support, academic support, and media and technology programming.

A chart in the presentation showed that, while enrollment continues to rise steeply, employee figures have stayed mostly flat, never deviating beyond a change of seven staff members.

BOE member Maureen Jones questioned where exactly those 10 classroom teachers will be cut, citing Schneider’s earlier statement that paraprofessional costs have increased in past years.

Schneider explained that paraprofessionals are necessary to IEPs and 504s, which had increased that budget line, but that they are looking at scheduling efficiencies and reevaluating the referral process to reduce the need for so many paraprofessionals.

“Teachers cuts are mostly at the secondary level and mostly at the high school,” Ramos added. And, in response to BOE member Johanna Wright, Ramos said they were planning to cut administrators, though he did not want to get into particulars about names and numbers at that meeting.

In just the short time since the Feb. 22 meeting, two petitions have been created on Change.org opposing teacher cuts. The first, “Cut Costs Don’t Cut SOMSD Teachers,” already had 134 votes as of press time March 1 and the second, “Save the SOMSD School Libraries,” which opposes cutting librarians and media specialists, already had 573 votes.

But, the school district has lowered its health insurance costs by switching from the State Employees Health Benefits Program to Horizon Blue Cross Blue Shield.

“Health care costs continue to go up, but we have been able to start to alleviate some of that,” Schneider said. “We’re going to be looking at pretty much flat figures going into 2016-2017.”

In 14 months, the school district will have saved approximately $697,000. Schneider did explain, however, that the net savings are more likely to come in at $600,000 due to opt-outs. Full-time employees who choose not to have health coverage through the district can opt out and receive an opt-out payment.

Schneider told the News-Record that other districts do pay opt-out fees, but that the payment numbers vary. As of press time, Schneider did not have the exact numbers for the opt-out cost this school year.

Board members requested looking into whether it is possible to stop paying opt-out fees.

“I think when we’re saying that we’re looking under every rock and at every opportunity for savings and we’re trying to avoid cuts in the classroom, I think that’s a place we need to look,” Baker said.

The health insurance cost is also expected to decrease as employee contributions will be increased to Tier 4, the top tier in employee contributions, which will likely garner savings of approximately $500,000 to $750,000, according to Schneider.

That being said, there are factors that could lead to increases in the health insurance cost. For instance, under the Affordable Care Act, the school district must offer insurance to all full-time employees and, if the school district does not meet ACA requirements, it could face a hefty fine.

“We did not budget for any of these fines because we do feel that we are meeting the requirements for the ACA and we do not think the fines will be a problem for us,” Schneider explained.

There is also the planned “Cadillac tax,” a 40-percent tax of the cost of plans that exceed a predetermined threshold.

“The Cadillac tax, named after the luxury car, is the planned levy on high-cost health-benefit plans provided by employers to their employees,” Schneider explained to the News-Record. “A central piece of the Affordable Care Act, it imposes an excise tax of 40 percent on health plans whose value is more than an established threshold, with the tax only on the amount exceeding the threshold.”

The school district will hold a community forum to discuss the budget on Monday, March 7, at 7 p.m. in the district meeting room at 525 Academy St. in Maplewood.

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