New Jersey State Legislature
Office of Legislative Services
Office of the State Auditor
DEPARTMENT OF EDUCATION
July 1, 2014 to May 31, 2016
We found state aid payments to local school districts were calculated in compliance with the
applicable Appropriations Acts, and were reported properly in the accounting system. However,
since the Appropriations Acts superseded the School Funding Reform Act of 2008 (SFRA), the
funding was not calculated in compliance with the SFRA. In making these determinations, we
noted K-12 formula aid and Preschool Education Aid were not always commensurate with the
districts’ student populations and demographics. We also found the department has not resolved
significant conditions noted in our prior report regarding Special Education Categorical Aid and
Preschool Education Aid.
The SFRA formula distributes aid based on district enrollment and student demographics
(income, special education, language barriers, etc.), as well as other factors such as district
wealth and property values. The SFRA formula aid has not been distributed per statute since
fiscal year 2009. Starting in fiscal year 2010, the Appropriations Acts began superseding
part, or all, of the formula. During fiscal years 2015 and 2016, no data from either year was
applied to the formula to determine funding. Consequently, there were significant differences
between actual funding and what the SFRA dictates.
Pursuant to the SFRA, Special Education Aid is provided to school districts to support the
costs of providing services to general special education students. As indicated in our prior
report, utilizing an average classification rate is only reasonable if districts have an
insignificant deviation from the average. Our review of districts with 100 or more special
education students in fiscal years 2015 and 2016 found that 234 districts (59 percent) and 258
districts (64 percent), respectively, had an actual classification rate that deviated more than
10 percentage points from the statewide average classification rate of 14.78 percent. As a
result, district funding is not commensurate with actual enrollment of classified students in
Per the SFRA, Preschool Education Aid is provided only to districts that received Early
Childhood Program Aid, Early Launch to Learning Initiative Aid, or Preschool Expansion
Aid in fiscal year 2008. As noted in our prior report, these districts annually project their
preschool enrollment and receive a fixed amount of aid for each student based on placement.
Our review noted that every district overestimated their projected enrollment in fiscal year
2015, resulting in overpayments to 32 districts totaling $25.7 million. In fiscal year 2016, 33
districts overestimated their projected enrollment, resulting in 30 districts being overpaid a
total of $32.9 million.
The department, in most cases, concurs with our findings and recommendations. They disagreed
with our finding related to Special Education Aid.