NJ School Funding Formula Needs Overhaul, Education Chief Says

New Jersey’s school funding formula is broken, and the state’s top education official said so directly to legislators in Trenton on April 15.

Education Commissioner Lily Laux told the Assembly Budget Committee that the formula, written into law in 2008, has outlived its usefulness. It doesn’t reflect what schools actually cost to run today, she said, and the whipsaw aid swings it produces have forced some districts to shut down school buildings entirely.

“This question of how we are looking at what schools really need is one that I think requires all of us to look carefully to say, are there better ways to do it,” Laux told the panel.

That’s not a small admission. Laux isn’t a backbencher. She runs the New Jersey Department of Education, and she was sitting in front of the Assembly Budget Committee making the case that the funding system her own agency administers needs a structural overhaul.

The hearing landed alongside Gov. Mikie Sherrill’s proposal for a record $12.4 billion in formulaic school aid covering the July-to-June fiscal year. Big number. But Laux’s testimony made clear that dollar totals don’t fix design flaws. Lawmakers pressed her on specifics. What would reform actually look like? She didn’t hand them a blueprint, but she didn’t retreat either.

“The implementation and the reality of how it supports our schools today is something that needs another look,” she said.

Here’s how the current system works, according to the New Jersey Monitor: districts are required to raise a portion of their own funding through local property taxes. The state fills in the gap, providing whatever aid is constitutionally required to guarantee students a thorough and efficient education. Each district’s local “fair share” obligation is calculated from property values and household income levels, among other factors.

The trouble started building after 2018, when the phase-out of transitional aid began. Couple that with property reassessments and the pandemic-era housing boom, and you get some districts suddenly staring at recalculated fair-share figures that pushed state aid sharply downward. Property values jumped, so the formula decided those communities could afford to pay more. Whether actual tax burdens shifted proportionally was a separate question the formula didn’t bother asking. That’s the structural mismatch Laux called out.

She said she’d still give the formula a passing grade overall. It’s not a total failure. But passing isn’t good enough when school budgets are getting squeezed.

The New Jersey Legislature has patched around the edges. Lawmakers have let some districts punch through the state’s standard 2% property tax cap when funding gaps got severe enough. The current fiscal year’s budget language caps most aid decreases while holding aid increases to no more than 6%. Sherrill’s 2026 spending plan keeps those guardrails in place.

There have been real improvements built into the formula, too. It now calculates special education aid off actual enrollment counts rather than a statewide average, which advocates had pushed for years. Property value calculations shifted to a rolling three-year average, smoothing out some of the year-to-year volatility.

None of it has been enough. School districts across New Jersey are still operating without reliable multi-year aid projections, and that’s not a budgeting inconvenience. It’s a planning crisis. Can’t hire staff, can’t sign contracts, can’t promise a community that the school program they’re counting on will still be funded two years from now.

Premiums on stability are high in this business. Superintendents aren’t asking for more money. They’re asking to know what money’s coming. Laux, at least, acknowledged April 15 that the system producing that uncertainty is the one that needs fixing.