Saving the city by giving up the schools
March 1st, 2009 | 
Author: A Modest Proposal to fix the budget and still keep the Water Works
In “Invest the Trenton Water Works proceeds in the future not the past” I argued that the proceeds from the sale of the Water Works should not be applied directly to the 2010 and 2011 budgets. I allowed that it was too late to fix the 2009 budget and therefore $20M of the proceeds should be used to patch this year’s gaping budget hole.
If a group of Trenton citizens have their way, the sale will be delayed until a public vote can be taken and it’s not certain at all that the public will go along with the administration’s plan. We’d be left with a huge problem. Therefore, we’d better come up with plan B for patching the 2009 budget.
No, make that plan C. Plan A would have been to for the city to have been serious about managing the risk in its budgets starting 10 years ago when times were good. Trenton’s voters never demanded accountability for the long term fiscal health of the city and look where it’s gotten us. We pay only 14% of our total municipal and school costs and that’s just not tenable. (see “Trenton’s budget is in worse shape than you think”).
We’ve been hooked on the drug of state aid for far too long!
Let’s review how big a $20M budget gap is. There are roughly 26,500 households in Trenton (US Census bureau). So, our budget gap equates to $750 per household. That’s a staggering amount of money. To be clear, no matter what happens with the Water Works sale, Trentonians will eventually face this additional tax burden given the city’s current cost structure.
Mayor Palmer has argued that by not selling the Water Works, taxes will have to go up over 1000% from ($90 to $1090 per $100,000 of assessed value) and that by selling it we avoid the problem. That’s not quite true. The Mayor’s proposal is to avoid the tax hike for the next 3 years, but after that (and presumably when the Mayor’s out of office) we’ll face an even larger $30M budget deficit (according to administration numbers). Furthermore, state law prohibits such large swings in taxes anyway.
However, we need to make some big changes, no matter what. The problem is that to fix 2009 we’ll have to take drastic action if the citizen initiative succeeds.
So, what to do?
Cede the schools to the state
Of the $291M Trenton school budget, we currently pay only $21M or roughly 7.2%. Stopping payment on our portion will force hardship on the school system and will likely force the state to take it over. But, it’s possible our children will be in better care. It’s sort of like a mother giving up her child. Since she knows she can’t take of it, it’s in the best interest of the child to let someone else have it.
Hopefully, the state will have additional resources from the Obama stimulus plan to provide direct school aid. We can only hope that our Education President and Education Governor can find the money to take care of our kids.
Some day, when we get our budget back under control and have built a local economy strong enough to support education, maybe we can have another chance. But we’re a long way from that. Our local economy needs (as measured by assessed value) to grow by 300% before we are out of fiscal danger. Until then, every year we are at the mercy of a fickle state budget, inflation and an uncertain economy. We’ve got a lot of work to do to get ourselves clean and off the drug of state subsidy. Unfortunately, just like an addicted parent, it’s going to be better to go through rehab alone so we don’t endanger our kids any further.
I know this proposal sounds draconian. However, let’s face the fact that we could go bankrupt and now have no where else to turn. Parents and elected officials have to realize that the options at this point are horrid. We can gut the basic functioning of the city which will prevent any hope of revitalization or we can cut the police and fire departments and risk falling into anarchy. Allowing a state takeover of the schools is the safer alternative.
Posted in Schools, Taxes and Budgets | 
Tags: budget, Mayor Palmer, NJ, Schools, Trenton, Trenton Water Works
My Dear Fellow Dan,
Let me surprise you by agreeing that the profits from the latest water rate hike should be leveraged in a manner that would fill the current budget gap. That would buy us the time to work on a sustainable way to address the 2010-11 budgets. The problems with the COT budget are structural, and therefore recurrent, which renders the selling off of a income producing operation in a one-shot deal, a bad idea. We will face the same problems in the coming years with fewer resources and an even greater dependence property taxes to support the city’s budget.
Not to mention the fact that the sale will subject our neighbors in the townships to the tender mercies of a for profit company with a monopoly on their water system. Now I know this is where we have a philosophical difference. You have often expressed a steadfast belief in the free market system, whereas I on the other hand, abhor the creation of monopolies. One look at what happened to our cable bills over the years or your electric bill which are also monopolies, I think you can understand my reasoning.
You are quite right to observe that we are now out of time. Drastic measures are called for. But I don’t think that seeking a state take-over of the schools is the answer. Allow me to offer an alternative. It is time to face the fact that we can no longer afford to operate separate city departments in each of Mercer’s municipalities. Imagine what it would mean if we could remove the street department, police and fire administration, and yes, operation of the school district from the city budget. As you know, these are the largest portions of our property tax bills. The hard reality of these economic times forces us to consider the consolidation of these services on a county-wide basis as a rational means to address the budget challenges that we all face. Yes our county taxes will go up, but our property taxes will come down by much more, resulting in a net tax cut leaving more money in the pockets of all taxpayers. I note with interest that Hightstown and East Windsor are already engaged in this process. Assemblyman Gusciora has pending legislation that approaches this issue. We simply can no longer afford the parochial indulgence of “home rule” of all duplicative municipal operations. Consider the cost of the “4 on-4 off” feature of our police contract that has cost as much as $11 million in one year for police over-time. If that money alone was available to us now, would we be facing this gaping hole in our budget?
Finally I don’t consider state aid as a drug. The application of payment-in-leiu-of-taxes (PILOT) monies that we get from the state has historically been inadequate and arbitrarily determined. We need a realistic and consistent formula for the payment of these funds that allow for the planning of the city budget to proceed in a stable and predictable way instead of waiting breathlessly each year to see what they “give” us based on the extant political climate.
Your observation that Trenton residents only pay 14% of the cost of our schools today does not take into account that for 47 years state education monies were applied in a discriminatory fashion to advantage suburban school systems. That fact is the basis for the Abbott v. Burke NJ Supreme court decision to compensate the “Abbott” school districts like Trenton for generations of discriminatory allocation of state education funding. Funny how no one complained when for 47 years a disproportionate amount of our tax monies were going to “gold plate” suburban schools while ours were allowed to deteriorate. In the past few years the application of Abbott monies resulted in that distorted looking 14% figure. I believe that will change when the school construction portion of the Abbott monies is phased-out after the schools are built.
I always enjoy engaging with you Dan because it proves that Conservative Republicans and Liberal Democrats can seek constructive solutions together without sharp weapons or gunfire. I am your,
LT ‘02 Fellow – Algie
Trenton cannot refuse to pay its school levy. The state would come in, force us to pay the taxes, and then maybe take over the district.
I’ll admit to not actually know the legal process for Trenton bailing on its school obligation.
This would be a great homework assignment for someone though.
It would be good to know the legal processes (with reference to statutes) that would govern the process
Also, would be good to start informing the public on the legal processes for state takeover of the city and for bankruptcy.
The more informed we are about these doomsday scenarios the better we can judge the options in front of us.
Unfortunately, I have neither the aptitude or time to do this homework on behalf of the citizens of Trenton.