Why does the NJ Schools Development Authority face a budget shortfall in the billions?

The New Jersey Schools Development Authority, an agency responsible for capital improvements such as renovations, expansions and new construction in 31 school districts throughout the state, faces a shortfall in the billions of dollars for the work needed in each of its districts.

As New Jersey's state budget season begins, the impact of limited funding at the authority is a reason for lawmakers to be on high alert when considering their options this spring.

Those districts became the responsibility of the state as a result of a series of lawsuits known as Abbott v. Burke. The 31 struggling urban school districts for which the state was ordered to fund construction and renovations in 1998 are now known as the SDA districts.

The districts, which include Garfield, Newark and Paterson, now fall under the purview of the SDA and have been faced with extensive issues related to overcrowding and aging facilities.

Districts in North Jersey wait years in many cases for work to be done to help fix the problems affecting students. The Dayton Avenue Educational Campus in Passaic opened in 2022 after four years of work, and Garfield has been waiting to break ground on a school for more than a year.

Last summer in Paterson, a ceiling collapse prompted the shutdown of School 3. The 302 students who attended the school were transferred, and officials had to decide what to do with the 124-year-old building. Officials estimated that it would cost $2.1 million and 16 weeks to fix the problem at the Main Street school. The district has about five schools older than School 3.

In a report submitted to the New Jersey Supreme Court last year, retired Judge Thomas Miller, writing in his capacity as a court-appointed special master, said there is "currently no ongoing or long-term mechanism for financing needed facilities projects in the SDA districts in future years."

The state’s highest court denied a motion last year from the nonprofit Education Law Center asking for the state to be forced to fund school construction. The Attorney General’s Office said that intervention was unnecessary because the agency continues to build schools and had already alerted the Legislature about its need for more money.

No new funds in 2024 budget

But the fiscal year 2024 budget, which runs until the end of June, does not include a dedicated funding source. There is an allocation from the Murphy administration of $1.9 billion to the SDA through the Debt Defeasance and Prevention Fund for fiscal years 2024 through 2029. That allocation will send the SDA $250 million in fiscal years 2024 and 2029 and $350 million each year in between.

According to the authority, there are three active capital projects and another 19 that were approved as part of its 2022 Statewide Strategic Plan. The authority bought a former parochial school to address one of those projects, and that opened last fall, but the rest are at various stages of development, the agency said. It also has 13 emergent projects going on — two under construction and 11 in the design phase.

SDA officials estimate the cost for all of those projects to be more than $2 billion. But those are just the projects from that 2022 plan already underway.

Theresa Luhm, managing director of the Education Law Center, noted that there are also 50 aging buildings acknowledged in the plan, and in a legal certification filed early last year, the authority gave a rough estimate for the replacement cost of those facilities of around $5 billion.

That puts the necessary funds at more than $7 billion, without adjusting for inflation. The agency received $1.55 billion in the state budget for fiscal year 2023, which ran from July 1, 2022, through June 30, 2023, for school facilities projects, emergent needs and capital maintenance in SDA districts.

“That money's gone already. It's committed to those 19 projects, so nothing else can really get added to the construction pipeline,” Luhm said.

Luhm also pointed out that $75 million was set aside for district projects, capital maintenance and emergent repair projects; $50 million of that is for SDA districts and $25 million is for regular operating districts, which is “nowhere near the need, and it certainly is not enough money to build any schools.”

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What are elected officials saying?

State Senate Majority Leader Teresa Ruiz said that not enough is being done to address the conditions in outdated school buildings.

Without a revenue source to keep up with the conditions students face, Ruiz thinks the solution may be to bond for the funding to address the problem, adding that the nonpartisan Office of Legislative Services is starting to draft the framework of a bill.

The bill is in such an early form that Ruiz hasn’t attached any money to it. She said discussions would have to be done in a collaborative way to figure out exactly what funding would look like.

The Schools Development Authority has been funded through bonds in the past, most recently about $12.5 billion in 2007.

“It's time. We have a crisis with our school buildings and districts when the weather conditions are bad outside. It's also raining inside of the schools,” Ruiz said. “When you have a building that was built before Abraham Lincoln took office, we still have an outstanding issue.”

While Ruiz advocates for her district and for students throughout the state, she is quick to point out that this is not a problem unique to New Jersey, that failing school buildings exist and that lawmakers “can't keep turning a blind eye.”

“COVID made more prevalent than ever how outdated schools are with HVAC issues, buildings with no windows, buildings that were constructed so many moons ago that spaces were so small that school districts couldn't bring back all the students but had to do it on a hybrid alternate schedule because you couldn't sit 6 feet apart, because you don't have that footprint,” she said.

The Abbott ruling obligated the state to fund the SDA districts, which “we haven't met it and we are not meeting,” Ruiz said.

April 2023: NJ is not doing enough to ensure funding for Schools Development Authority, report says

As NJ delays or defers, costs rise

The short-term funding solutions that have been used in the past are part of a broader pattern, said Peter Chen of New Jersey Policy Perspective.

“The state recognizes that there are long-term infrastructure costs that it needs to invest in and sort of tries to delay or defer that cost in a way that ends up piling up those needs until the costs become very high,” he said.

Chen noted that school districts have also benefited from federal pandemic aid, but with that money gone on both the local and state levels, a conversation about a new source of revenue needs to happen, because “otherwise we're just going to continue the same pattern of kicking things down the road and then hoping they go away on their own.”

“There are real challenges that the Legislature is going to have to address, and it's going to be a set of competing needs,” he said. “What do we do about schools, pensions, transit and basic infrastructure issues. There's a huge amount of investment that's needed, and you can't magically generate money to pay for them.”

Staff Writer Ashley Balcerzak contributed to this story.

Katie Sobko covers the New Jersey Statehouse. Email: sobko@northjersey.com

This article originally appeared on NorthJersey.com: NJ Schools Development Authority facing budget shortfall in billions