February 21, 2010

Honorable Arne Duncan

Secretary of Education
U.S. Department of Education
400 Maryland Avenue, SW
Washington, D.C. 20202

Honorable Thelma Melendez

Assistant Secretary for Elementary and Secondary Education
U.S. Department of Education
400 Maryland Avenue, S.W.
Washington, D.C. 20202

Re: Request to Require New Jersey to Restore FY10 Primary

Formula Aid to Approved SFSF Program Level

Dear Secretary Duncan and Assistant Secretary Melendez:

Education Law Center (ELC) works to advance equal educational opportunities for New
Jersey’s 1.3 million public school children, with a particular focus on the state’s low-
income students, students of color, and students with special needs. On behalf of these
students, we write to request that the U.S. Department of Education (Department)
immediately direct New Jersey to restore K-12 primary formula aid to the level
established for FY2010 in the State’s approved application for State Fiscal Stabilization
Funds (SFSF). In the event New Jersey refuses to promptly restore formula funding to
the requisite level, the Department should take appropriate measures, including, but not
limited to, delaying release of Phase II SFSF funds and delaying consideration of the
State’s Race to the Top (RTTT) application, until the State fulfills its commitments under
federal law. 1

In June 2009, the Department approved New Jersey’s application for SFSF funds for the
FY2010 school year. See Application for Initial Funding under the SFSF Program,
http://www2.ed.gov/programs/statestabilization/stateapps/nj.pdf (filed May 28,

1
The Department has made approval of both phases of its SFSF application a precondition for award of a
RTTT grant. 74 Fed. Register 221 (Nov. 18, 2009) at 59692, 59720, 59799.
2009)(Application). In the Application, the State represented that it would use
approximately $956 million in SFSF funds to support the State’s primary K-12 formula at
the total level of $5.8 billion for FY2010. 2 See Application, at 6, 10. Thus, under the
State’s proposal, % of primary formula funding would consist of federal funds provided
through the SFSF program. Further, the $5.8 billion in primary formula support includes
both funding to restore primary formula funding to the FY2009 level and $150 million
for an equity and adequacy adjustment required by the State’s funding formula, the
School Funding Reform Act of 2008 (SFRA). 3 Based on New Jersey’s commitment to
use SFSF funds to provide primary formula aid at this specified level, and to partially
implement an equity and adequacy adjustment in the State’s new formula, the
Department approved the application and released the requested amount of SFSF funds.

On February 11, 2010, New Jersey, through an Executive Order issued by the Governor,
advised local school districts that State formula aid would be reduced by a total of $476
million for FY2010. Office of the Governor, Press Packet from Governor’s Address to
Special Legislative Session (February 11, 2010) at
http://www.nj.gov/governor/news/news/552010/approved/20100211a.html. This State
aid reduction includes $350 million in primary formula aid supported by SFSF funds, or
% of the total aid cut. As a result, New Jersey has cut primary formula aid from %5.8
billion to approximately $5.45 billion for FY2010.

As we explain, New Jersey’s February 11th cut in FY2010 primary formula aid is not
only inconsistent with the State’s approved Application, but also subverts Congressional
requirements for the SFSF program established in the American Recovery and
Reinvestment Act (ARRA)>

First, it is clear that New Jersey has reduced primary formula aid below the level of
State’s commitment assured in the Application, as approved by the Department. Under
the ARRA, Governors “shall first” use SFSF funds to provide the amount of funds
necessary to “restore” in primary formula aid in FY21010 to the greater of the level in
FY2008 or FY2009, and “to allow existing State formulae increases to support
elementary and secondary education for fiscal years 2010 and 2011 to be implemented
and allow funding for phasing in State equity and adequacy adjustments,” if enacted
under state law prior to October 1, 2008. P.L. 111-5, (H.R.1), February 17, 2009; 123
Stat. 115, as amended by P.L. 111-8 (H.R.1105), the Omnibus Appropriations Act 2009,
Division A, Sec. 523; March 11, 2009; 123 Stat. 524, Title XIV, Sec. 14002(a)(i)(II).
2
The State designated “equalization aid” in its funding formula as “primary” for purposes of the SFSF
Program. Application, Attachment II, E-5.
3
The $150 million included in the primary formula aid level for FY2010 represents one-third of an
equity and adequacy adjustment of $450 million required under the SFRA. As the State indicates in the
Application, the level of State support necessary to fully fund the equity adjustment would have been $6.1
billion. Application, at 6.

2
Consistent with ARRA requirements, New Jersey, in its Application, committed to using
SFSF funds to restore primary formula aid to the FY2009 level and to partially
implement an equity and adequacy adjustment in the funding formula. Further, the
Department accepted the State’s commitment, and approved the use of SFSF funds to
enable the State to provide primary formula support at the specified levels. The State’s
February 11th mid-year aid cut is clearly contrary to the commitments and assurances
made by the State to the federal government to secure use of SFSF funds, along with the
express requirements established by Congress in the ARRA.

Second, in cutting K-12 formula aid on February 11th, the Governor indicates that the aid
will be used to balance the overall State FY2010 budget. Thus, primary formula aid,
which includes a substantial infusion of SFSF funds, will be diverted for purposes other
than to support primary and secondary education. While New Jersey, like other states,
faces revenue and fiscal challenges with its overall budget, the use of school formula
funding, supported by federal SFSF funds, for any purpose other than for primary and
secondary education violates the firm requirements established by Congress in the
ARRA.

Finally, New Jersey’s mid-year cuts in primary formula aid disproportionately impact
school districts with extremely high concentrations of low income students and Black and
Latino students. Our analysis shows that 40% of the cut in formula aid is in districts
classified by the State as “high needs” due to a student poverty rate of over 40% and
student achievement levels below state benchmarks. Many of these districts have student
poverty rates of over 60%. Moreover, 80% of the students in these districts are Black and
Latino. Put simply, the State’s cuts in K-12 formula aid, including SFSF funds, has a
disparate impact on New Jersey’s low income students and high poverty districts, and
students of color, with the latter raising concerns regarding State compliance with Title
VI of the Civil Rights Act of 1964, 42 U.S.C.A. §4200d, and the Department’s
implementing regulations.

For these reasons, New Jersey’s February 11th reductions in primary formula aid are
clearly inconsistent with the Congressional objectives of the SFSF program and violate
the federal requirements for the SFSF program; repudiate the State’s own commitments
to support K-12 primary and secondary education in its approved Application for SFSF
funds; and will have a disproportionate impact on our state’s neediest students, schools
and communities. Accordingly, we request the Department to, first, direct New Jersey to
restore its primary formula aid to the level contained in the approved Application. In the
event New Jersey does not promptly do so, we further request that the Department take
all appropriate measures, including delaying payment of Phase II SFSF funds and
consideration of the State’s pending RTTT application, until the State meets its
commitments stated in the Application and required under the SFSF.

3
We applaud the efforts of Congress and the Department to assist New Jersey’s public
school children in a time of serious fiscal need. Further, we understand that New Jersey
currently has fiscal difficulties. However, these difficulties do not justify or permit New
Jersey to ignore the requirements for use of SFSF funds or to repudiate its legal
commitments to the Department to utilize the substantial SFSF funds provided by
Congress under the ARRA to support our state’s public schools.

If you have questions, or we can assist in this matter, please do not hesitate to contact me.

Sincerely,

David G. Sciarra, Esq.

Executive Director

cc: Governor Christopher Christie

Honorable Russlyn Ali, Assistant Secretary for Civil Rights
Charles Rose, General Counsel
New Jersey Congressional Delegation
New Jersey Legislature