The League of Women Voters
of New Jersey

a nonprofit, nonpartisan organization whose purpose is to promote political responsibility
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Testimony S.200 School Facilities Construction and Financing Act

to NJ Senate Budget and Appropriations Committee

May 11, 2000

by Judith Cambria, Education and Fiscal Policy Specialist

Thank you for the opportunity to present the position of the League of Women Voters of New Jersey on The School Facilities Construction and Financing Act. The League will restrict its comments today to the fiscal implications of this massive construction and borrowing program.

The League strongly supports the position of the Governor and the Senate to provide 100 percent of facilities costs in the poor urban districts. We believe that the $6 billion estimate of costs for facilities in the Abbott districts is reasonably close to the amount needed. Shortcomings in the state program for determining costs seem likely to have inflated the cost beyond that figure. However, should later studies and increasing costs inflate the $6 billion figure, the League expects these additional costs will be added to the total.

In December 1999 and January 2000, the League testified in support of a 5 percent increase in the proportion of debt service aid. Despite the increase in the state’s share of costs, we now support the provision which makes districts receiving more than 40% state aid eligible for construction aid of 115 percent of their CCCS aid. We do so because of the serious erosion in basic state school aid, which has eliminated or reduced debt service aid to middle income districts in recent years.

A decade ago, LWVNJ joined others in supporting facilities legislation, which would make school districts eligible for a minimum of 25 percent of construction costs. It and similar bills did not pass. Since that time, property taxes for schools have grown enormously placing a far heavier tax burden on low- and middle-income taxpayers. The League recognizes that the amendment which would provide a minimum of 40 percent state aid to all districts clearly would help ameliorate the inevitable increase in school property taxes caused by facilities construction. Moreover, the League’s long-term position in support of measures which reduce New Jersey’s use of the property tax seems to make our support a foregone conclusion.

However, the League has consistently spoken out concerning the failure of the administration and the legislature to responsibly address the need for additional state revenue for school facilities. The 40% and 115% amendments to this bill will dramatically escalate the state’s share of costs. LWVNJ cannot in good conscience support the 40 percent minimum facilities aid when provisions for payment of state costs are inadequate to address even the lower proportion of costs covered before the 40 percent amendment.

Earlier, the League opposed zero percent interest on the loans from the revolving loan fund because of the cost. Likewise, we must oppose providing state aid for districts for construction, which preceded the 1998 limit. We agree with Governor Whitman that the state’s "money supply is not endless".

Presently identified revenue sources are capable of paying facilities debt service payments only for two, or possibly three, years. Furthermore, they purport to use increased state revenues when at least a portion is existing revenue diverted from the General Fund. To date, the state has identified $50 million in cigarette tax revenue, $50 million in Big Game Lottery revenue, and $100 million in tobacco settlement revenue for the funding of school facilities.

Cigarette Tax: Despite a doubling of the cigarette tax, projected income in 2001 is $8 million less than the revenue received in 1997 before the tax increase. The $50 million dedicated to facilities is simply reducing the amount of revenue available for other state programs.

Big Game Lottery: The Office of Legislative Services projects that all lottery proceeds, including the Big Game, will increase to $685 million this year, instead of the $713 million earlier estimate. The lower amount is due to a 40% drop in Pick-6 sales, far larger than originally estimated. We note that the state has cut the amount dedicated to school facilities from the Big Game Lottery revenue from $62 to $50 million. Nevertheless, the net revenue gain appears to be around $35 million, still $15 million short of the dedicated $50 million. Perhaps, this week’s massive $325 million jackpot will increase New Jersey’s revenue, but it is risky to count on super jackpots for additional income.

Even more serious is the fact that the amount of the three revenue sources, even if it were all new revenue, falls far short of projected annual debt payments which will rise to around three-quarters of a million dollars with the addition of the 40 percent minimum aid provision for all districts.

The League repeats what we said earlier: "Passing legislation without providing the revenue source(s) leaves the unpleasant and politically unpopular necessity of raising taxes, or reducing other programs, to later administrations, governors, legislators and taxpayers. This failure to provide additional revenue sources for the massive costs for school construction is fiscally irresponsible and not acceptable."

The League notes with interest the continuing discussion of which authority should be responsible for carrying out the state’s role in school facilities planning, design and construction. What is clear to us is that, at present, no New Jersey authority is prepared for the enormous task it will face. The administration and legislature, with special responsibility falling to the Assembly and Senate appropriations committees, will have to identify additional financial resources needed to rapidly develop the capacity of whichever agency is selected. This is an immediate problem, significant new funds must be provided in the 2001 budget if the authority is to carry out its responsibilities. This expansion and gearing up to provide efficient and effective service must assure that construction is not slowed or halted by inadequate capacity. If this does not happen, New Jersey’s school facilities program will be seriously undermined and slowed.

We continue to urge that school districts other than those mandated to use the state authorities should be encouraged to construct and finance their schools to reduce the overload on the state authorities. For most school districts, the present system should be retained. It responds to needs without creating an ongoing bureaucracy, and avoids using the debt capacity of the state. Furthermore, it is not clear that authority costs will not be higher, or that bundling of projects will not bid up construction costs.

The most important goal of legislation governing school construction and financing should be as rapid construction or renovation as possible. Appropriate funding measures need to be addressed now, even if phased in over a period of time, to assure there is no delay in construction in future years because of a failure to provide sufficient fiscal resources as annual debt service payments escalate.

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