Economic Analysis in April 2010, Term Paper

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The idea is that specific cuts -- a one-year wage freeze and a 1.5% contribution to health care benefits could bring the budgets into equilibrium with state funding and property taxes (Heininger, 2010). Impacts to the school board will include layoffs, program reductions, administrative pay freezes and in some cases an increase in the property tax levy.

School boards resist the issue because it will force them to make cuts that they feel are detrimental to operations. Hamstrung to some extent by union teacher contracts, school boards may not have substantial leeway on costs immediately, and therefore will need to make cuts in programming and administrative staffing.

For the school boards, wage freezes make it more difficult to attract talented new teachers and administrators. This could result in a reduced ability to deliver services. Also, it renders school board budgets to be more sensitive political issues, which was not the case when the aid was available.

For the state, the reduced aid helps the state budget considerably, as $820 million in aid has been cut. This helps keep the state from increasing its own taxes. In addition, it removes accountability from the state for school board activities and for property taxes.

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The original policy of providing aid is essentially deemed a failure and replaced with a more direct, market-based approach wherein the school boards are held directly accountable by the taxpayers.

The state also believes that reducing school board budgets will make the state more competitive, as it is felt that the tax structure in New Jersey is sufficiently high as to discourage investment. The school boards would contend that a reduction in education will leave New Jersey will less qualified workers in the long run.

Overall, the objective of the school board budget changes is to orient the taxpayer to the direct cost of education -- the property tax. This orientation is likely to work to drive down education costs as school boards must make cuts to their budgets in order to have budgets passed that do not increase property taxes. By making school boards accountable for their spending, the state hopes to reduce the total tax burden on the state's citizens, making it a more attractive place in which to work, live and invest. The school boards resist these changes because they will be forced to curtail spending.

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