A Roadmap for Improving New Jersey's School Funding Formula: The Impact of Census-Based Funding for Special Education

In an effort to reduce state spending on special education in public schools, New Jersey moved to census-based funding as part of the new school funding formula, the School Funding Reform Act (SFRA), adopted in 2008. The census approach funds all districts using the statewide average classification rate and a statewide average "excess cost." This report found that: (1) Classification rates for special education vary greatly among school districts, resulting in the inequitable distribution of resources to fund districts' actual special education enrollment; (2) In 2022-23, districts with classification rates higher than the statewide average received $378 million less than if they were funded on their actual special education enrollment; and (3) Districts with higher-than-average classification rates must divert funding from general education programs or raise additional local revenue to fill the gap for unfunded special education students. In this report, the authors show that census-based funding does not meet the needs of New Jersey school districts and the students, in both special and general education, they serve. The analyses presented in this report demonstrate the need for New Jersey to convene school finance and special education experts to explore and recommend alternative funding models for special education that would better meet the needs of the state's school districts.