Archive for the ‘Bruce Baker’ Category

CEIFA’s Impact

Thursday, December 10th, 2009

The rising power of state government (Fusarelli and Cooper, 2009) has grown from the states’ increasing domination of school finance and, therefore, policy making because of the strings the states attached to funding.  Legal challenges to funding inequities and disparities led to court decisions such as Serrano v. Priest establishing financial neutrality as the basis for school funding.  States remedied the disparities among districts with the infusion of incremental state funds and regulation.  Subsequent rulings focused on adequacy and required state governments to provide resources to disadvantaged districts such that the provision of education adequately met their constitutional requirements.  New Jersey’s state constitution was deemed to go even further because of its provisions guaranteeing a thorough and efficient education especially in the Abbott v. Burke court decision. 


Although the state’s flawed approach to education is exemplified by the new funding formula contained in the New Jersey School Funding Reform Act (SFRA) of 2008, it is manifested in its predecessor, the Comprehensive Education Improvement and Financing Act of 1996 (CEIFA.)  Dr. Reock studied the financial impact on school districts of the state’s failure not only to not fully enact CEIFA but also to freeze most CEIFA funding beginning with the 2002-03 school year (Reock, 2007.)  Based on his study (Sciarra, 2008), Dr. Reock found that “the state aid freeze caused massive under-funding of many school districts throughout the state, especially poor non-Abbott districts, and contributed to the property tax problem in the state.” 


Instead of fully funding CEIFA’s school funding formula as required by law, the state froze financial aid to schools at their 2001-02 school year levels regardless of any increases in enrollment, rising costs as well as state and federal unfunded mandates.  The shortfall was hardest on those districts that were most dependent upon state aid.  During the 2005-06 school year the statewide shortfall amounted to $846 million which translated into per pupil shortfalls of $1,627 in non-Abbott DFG A and B districts, $758 in DFG C through H districts, $386 DFG I and J districts and $188 in Abbott districts.  


The impact of the CEIFA funding shortfall was minimized on the Abbott districts largely due to their “parity-plus” court mandated protection.  State law forbids the budget of an Abbott district from falling below its level of the prior school year (Hu, 2006.)  Furthermore, under state law, if an Abbott district increases local property taxes without a state directive to do so, it will lose a similar amount of state aid. 


The CEIFA funding shortfall caused serious imbalances between local school districts.  During the 2005-06 school year, Abbott districts received approximately 58% of all state financial aid while educating only 23% of New Jersey’s K to 12 student enrollment.  This meant non-Abbott districts were educating 77% of New Jersey’s students with only 42% of state aid.  This imbalance has continued to widen under SFRA with Abbott aid increasing to approximately 60% of all state aid or $4.64 billion.  State aid reductions and the ever increasing unfunded state mandates force non-Abbott districts to balance their budgets by raising property taxes, increasing class sizes as well as cutting regular education programs and services.   


As part of his statement of New Jersey Supreme Court certification in support of the Plaintiffs’ opposition to the School Funding Reform Act (SFRA) of 2008, Dr. Reock concluded (Sciarra, 2008) that “the State’s failure to fund CEIFA for the past six years directly resulted in an enormous shortfall of funding in districts across New Jersey.”  He went further to state, “By 2007-08, the sixth year of the CEIFA “freeze,” the total under-funding of state aid had reached $1.326 billion annually, despite the introduction of several new, smaller aid programs.”  The result was a state-driven increase in local property taxes within non-Abbott districts to make up for the shortfall. 


By passing through the majority of the cost of state mandates to local school districts, the State of New Jersey forces local schools to divert resources to bureaucratic regulatory compliance.  As a result, disproportionate amounts of a typical school district’s scarce financial and human resources are not invested in the classroom where they are needed most.  Local school districts would be able to operate more cost-effectively, earn a higher rate of return on their educational investment and provide greater accountability if they were free to concentrate on improving every student’s performance with the maximum possible level of local public support for the public funding of its public schools.





Fusarelli, B. C., & Cooper, B. S., Editors.  (2009) The Rising State: How State Power is Transforming our Nation’s Schools, Albany, New York: SUNY Press. 

Hu, W. (2008) In New Jersey, System to help Poorest Schools Faces Criticism, New York Times, October 30, 2006

Reock, E. C. Jr., (2007) Paper, Estimated Financial Impact of the ‘Freeze’ of State Aid on New Jersey School Districts, 2002-03 to 2005-06, Institute on Education Law and Policy, Rutgers University, Newark, http://  

Sciarra, D. G., (2008) Certification of Dr. Ernest C. Reock, Jr. for the Supreme Court of New Jersey in support of the Plaintiffs’ opposition to the School Funding Reform Act of 2008, Education Law Center, Newark New Jersey,  


The Tieboutian Choice

Saturday, December 5th, 2009

Tiebout’s (1956) conceptual breakthrough was that taxpayers are mobile and as a result will choose the municipality that best meets their needs by moving to that location.  His model successfully addressed the free rider problem that plagues governmental entities providing public goods and services such as public education.  Indeed, taxpayers seem to decide where to live based largely on the quality of the local school district.


According to Tiebout (1956,) taxpayers reveal their preferences for their desired level of public goods and services by the decision they make concerning where they choose to live.  Through such a decision making process (Baker, Green and Richards, 2008,) Tiebout’s model “could lead to an optimal allocation of public services where no one person in the system could be made better off without making someone else worse off.”  According to Tiebout (1956,) “The greater the number of communities and the greater the variance among them, the closer the consumer will come to fully realizing his preference position.”


Tiebout (1956) concluded that a taxpayer’s choice of municipalities and, therefore, school districts, reflects a private sector competitive market model.  In discussing this model for school choice, Baker, Green and Richards (2008) report “Tiebout proposes that local, rather than centralized, government financing of public services could result in a form of competitive marketplace that would yield more optimal pricing of public goods through local tax policy and more appropriate alignment of consumer preferences and the quality of public goods.”  Tiebout (1956) explains this difference, “At the central level the preferences of the consumer-voter are given, and the government tries to adjust to the pattern of these preferences, whereas at the local level various governments have their revenue and expenditure patterns more or less set.” Taxpayers, therefore, will choose the district that best meets their needs when choosing among school districts of varying levels of educational quality.


Today, the Tieboutian choice is manifested in the difference between local funding versus state or federal funding and the corresponding state or federal control that comes along with it.  The fundamental problem with centralized funding, whether state or federal is that it leads to a one-size-fits-all approach for education but one that fits no district.  Baker, Green and Richards (2008) explain, “The local property tax empowers local voters to express what they want for their local public schools.”  But “when property taxes become statewide taxes, the political advantages of empowering local citizens and promoting competition and sorting among jurisdictions is lost.”  This mass standardization of policy often leads to state and federal funding guidelines that are incongruous with the needs and priorities of local school districts.


The specific needs of individual school districts vary to such a large degree that they render uniform state and federal policy formulas inadequate.  Instead, public school districts need a mass customization of educational funding, control and policy that can only derive from local funding and governance.  Oates (1972) supports the notion that public education should be provided at the lowest level.  Kenny (1982) also argues for the provision of public education by local school districts.  Because there is no reliable connection between state and federal policy makers and the local provision of education, accountability requires local decision making.


A reduction in local school district control over the levying and allocating of property taxes decreases accountability and adversely affects public school quality.  Because reductions of property tax revenues whether through state imposed limitations or via the substitution of state or federal funds reduces the level of local investment in the school district, the stake held by local taxpayers is similarly reduced.  Fischel (2001) explains this using taxpayers without children in the public schools, “At the local level, they are willing to support, or at least not oppose, high levels of spending because better schools add to the value of their homes.  At the state level, voters without children do not perceive such an offsetting benefit to their taxes.”  Having a lowered sense of ownership in their schools, taxpayers become more complacent as the proportion of state and federal funding increases.  This causes a corresponding reduction in the level of accountability required by the stakeholders and the quality of their public schools’ education declines as a result.


Fischel (2001) explains that taxpayers resemble investors as they want their major asset, their home, to appreciate in value.  Home owners have a vested interest in the success of their local schools because the credit rating of a school district’s host municipality is largely dependent on the financial soundness and credit worthiness of its schools.  Indeed, the higher is a municipality’s credit rating the lower is its debt service expense. 


Taxpayers hold local schools accountable not just to improve the quality of education but more importantly to offset risks to their property’s value which can not be easily diversified.  The more accountability a local school district provides, the more local taxpayers support the public funding of public education.  Local school districts, therefore, will efficiently provide public education as a result of taxpayers’ exercising their Tieboutian choice.


Baker, B. D., Green, P., & Richards, C. E.  (2008). Financing Education Systems, Upper Saddle River, New Jersey:  Pearson Education, Inc. 

Fischel, W., (2001) The Homevoter Hypothesis: How Home Values Influence Local Government Taxation, School Finance, and Land-Use Policies, Cambridge, Massachusetts: Harvard University Press.  

Kenny, L. W., (1982) Economies of scale in schooling, Economics of Education Review, 2:1-24. 

Oates, W. E., (1972) Fiscal Federalism, New York: Harcourt Brace Jovanovich.

Tiebout, C. M., (1956) A Pure Theory of Local Expenditures, The Journal of Political Economy, 64, 416-424.

The Capitalization of Local School District Quality

Saturday, December 5th, 2009

The benefits that taxpayers derive form their local school district quality and property taxes are capitalized in their property values.  Because taxpayers strive to protect and improve their property values, they constantly evaluate the quality of their school district so as to maximize their property values.  If their school district’s quality deteriorates or is expected to decline, typical Tieboutian taxpayers will “vote with their feet.” 


By voting with their feet taxpayers choose the local school district that best meets their needs and one that will contribute to their property values.  But taxpayers vote not only with their feet but also on school district operating budgets, capital projects and board of education members.  Through the exercise of these votes, taxpayers control the quality of education provided by their local schools as well as the level of property taxes levied.  Their collective decisions lead to a Pareto efficient allocation of local public education.  In this context, Baker, Green and Richards (2008) state that the “Tiebout model represents the most basic form of school choice.” 


But states tend to make educational policies especially school finance regulations that are too uniform for the wide variety of school districts with their wide disparities in needs and priorities.  It is decentralized or local control rather than centralized or state control over public education, therefore, that causes, supports and sustains the efficient allocation of a school district’s financial and human resources.  Local control leads to the provision of the maximum level of educational quality and accountability. 


California exemplifies the downside of state control.  Fishel (2001) argues that the Serrano v. Priest ruling destroyed the connection among local control, property taxes and school district quality because California taxpayers essentially lost their ability to hold local school districts accountable.  Furthermore, Fishel (2001) contends that the Serrano decision not only lead to the passage of Proposition 13 but also to the centralization of school finance in California.  The adverse impact on local school districts of California’s centralization of school finance has never been as clear as it is today while the state faces bankruptcy.  Because the state forced local school districts to be overly dependent on unsustainable state funding, the state’s fiscal crisis has brought many districts to the brink of financial collapse. 


Tiebout (1956) argues that because crowding and congestion affect the provision of public goods and services, it is inefficient to provide public education at a centralized level whether state or federal.  Public education is more efficiently provided at the local level.  Fischel (2001) agrees with his assessment of school finance in California in which taxpayers lost control over local schools and property taxes which led to reduced levels of taxpayer involvement in and support for public education.  Fischel (2001) concludes “the apparent quality of public education has declined nationwide as the states’ share of funding for it has risen.”  It is essential that taxpayers have control over their local schools so they will be motivated to properly fund, support and improve public education. 




Baker, B. D., Green, P., & Richards, C. E.  (2008). Financing Education Systems, Upper Saddle River, New Jersey:  Pearson Education, Inc. 

Fischel, W., (2001) The Homevoter Hypothesis: How Home Values Influence Local Government Taxation, School Finance, and Land-Use Policies, Cambridge, Massachusetts: Harvard University Press.  

Tiebout, C. M., (1956) A Pure Theory of Local Expenditures, The Journal of Political Economy, 64, 416-424.