Jersey City officials from the Board of Education and City Council held their second joint meeting to discuss funding the Jersey City public school district.
A main topic was the Payroll Tax which the city collects on behalf of the school district from local companies. But Mayor Steven Fulop said the legislation creating the tax is so flawed that the city has no way of forcing companies to pay, making it practically optional.
“It’s important to discuss a major flaw, like when everybody says ‘we’ll audit these companies’ or ‘get more people to pay’ the city, and the Board of Education via that legislation was given no tools in order to enforce the legislation,” Fulop said.
“For all intents and purposes, the payroll tax is an optional tax for people to pay because there’s no mechanism for the city or for the board of education to audit and do an accounting of how many employees actually work at an individual business which is a major problem.”
The tax has been a local ordinance for two and one half years, approved by the City Council in November 2018.
The ‘optional’ tax
State Sen. Sandra Cunningham introduced legislation, which was signed into law by Gov. Phil Murphy, allowing Jersey City to implement a payroll tax to help offset the cost of cuts in school funding.
The ordinance establishing the tax imposes a 1 percent payroll tax on an employer’s gross payroll to benefit Jersey City public schools. Employers are required to file and pay the new tax on a quarterly basis. Employees of the municipality, school district, and those who live in Jersey City are exempt from the tax, but not subcontractors for the city or schools.
Before it first went into effect, it was estimated that the district would receive close to $100 million each year, but according to Fulop it’s never been that high.
“Last year … we certified $58 million and then $30 million from what the surplus fund which we drew down on, “ he said. “This year, despite the pandemic, we also certified $58 million, and we used the remainder of the surplus fund which I believe is close to $7 million. Next year, we’ll certify whatever that number is, but there will be no more surplus, which is a challenge.”
He noted that the city has no way of knowing how many employees work for any given company, and thus it’s up to companies to volunteer that information accurately.
He said he reached out to the governor’s office to suggest that the state collect the tax because the state has access to quarterly information via insurance and unemployment filings which would “obviously clean up any problems, and it would obviously increase the amount that we collect every single year.”
But he said it is not an easy fix because he was told it could require a constitutional amendment and statewide support.
He said the city’s largest employers voluntarily comply with the tax “for fear of being shamed.”
As far as using municipal tax dollars from the city budget, he said that he was on board as long as there was “a clear program.”
“If somebody thinks, anybody here collectively on the council or board of education, that there is a place that we should be cutting the municipal budget, we are happy to explore it,” he said. “If you think that the number is 600 police officers as opposed to 900 police officers, email it over. Say it. If you think that we are overfunded in Health and Human Services, say it. Send it over. If you think that we should cut recreation, say it. Send it over. To date, when we talk about ‘the city should send money over here’ or ‘give money over there, ’ there hasn’t been one concrete example on where that money should come from.”
In 2018, the state approved the School Funding Reform Act of 2008 changing the way state aid to school districts is calculated and distributed.
Under the updated funding formula, the state Department of Education now allocates more money to districts that were considered underfunded by the previous formula, while gradually reducing aid to districts like Jersey City that were identified as being overfunded.
According to Board of Education President Mussab Ali, the district will face a loss of $250 over the next three years.
He said that if instead the state made the same cuts over a longer period of time, it would be more manageable.
He further explained that the New Jersey School Development Authority has also underfunded the district by almost $1 billion, which is the subject of ongoing litigation.
“We’ve seen that the city has approved tons of housing units all over the city, but at the same time as an SDA district, we do not have the ability to bond, and we do not have the ability to build new schools,” Ali said, noting that new families would continue to move to Jersey City, and the district cant sustain that with the funding it currently has from the SDA.
He called for reform at the SDA.
“When you think about the solution, there is no easy way out,” said Ali. “I think that’s part of the reason that I’m appreciative that the city council is here today because I think for too long the board of education has kind of had this burden of fixing this problem on its own and that too often people have pointed fingers at us and said, ‘look, why don’t you find a solution,’ ‘why don’t you figure this out,’ not understanding the complexities of school funding and not understanding just how large this problem is.”
To help find solutions to the funding crisis, the board and the city council formed three subcommittees: operations, legislative, and financial.
Ali said he was thankful for the collaborative effort between the two government bodies but warned: “the road ahead is tumultuous.”
“As we move forward, decisions will have to made, numbers will have to be drawn up, and that’s going to require asks of both the city council as well as the school board, and my only hope is in anticipation of those challenges we recommit to our goal and recommit to the idea that the children of Jersey City and that education in this city is something that matters to everyone here.”