State of New Jersey OFFICE OF THE ATTORNEY GENERAL PAULA T. DowCHRIS CHRISTIE Attorney General Governor DEPARTMENT OF LAW AND PUBLIC SAFETY DIVISION OF LAW 25 MARKET STREET ROBERT M. HANNAKiM GUADAGNO Director Lt. Governor PO Box 112 TRENTON. NJ 08625-0112 February 9, 2011 Honorable Peter E. Doyne, A. J . S . C. Superior Court of New Jersey Bergen County Justice Center Suite 425 Hackensack, New Jersey 07601-7699 Re: Abbott v. Burke Docket No. M-1293 Dear Judge Doyne: Please accept this letter brief in lieu of filing a formal brief on behalf of the State in response to Plaintiffs motion. The New Jersey Supreme Court has vested the Special Master with the authority to consider "any and all" evidence necessary to determine whether current levels of school funding can provide for a constitutionally mandated thorough and efficient education to New Jersey school children. The fiscal circumstances surrounding the amount of State school aid made available by the Legislature in FY 2011 and the manner in which that funding was distributed to districts is critical factual information that is directly relevant and indeed necessary to the Special Masters determination of whether education funding in FY 2011 is constitutional. Absent HUGHES JUSTICE COMPLEX . TELEPHONE: (609) 984-8464 FAX: (609) 943-5853 New Jersey Is An Equal Opportunity Employer Printed on Recycled Paper and Recyclable
February 9, 2011 Page 2consideration of the States fiscal circumstances and the manner inwhich State school aid was distributed, the Special Master, and,ultimately, the Supreme Court will be making determinations of aconstitutional magnitude without significant facts relevant to thelegislati ve determinations on meeting its constitutionalobligations. PROCEDURAL HISTORY AN STATEMENT OF FACTS The State relies upon the procedural and factualhistories provided in its previous briefs to the New Jersey SupremeCourt of July 9, 2010, September 27, 2010, and January 25, 2011,and briefly summarizes and supplements them only to the extentnecessary for the Courts consideration of the present motion. Facing a longstanding structural deficit exacerbated byprior years repeated reliance on non-recurring revenues, theLegislature passed and Governor Christie signed the FY 2011Appropriations Act. The projected revenues and available fundbalance for FY 2011 was $823 million less than for the FY 2010budget. ~ 2010, ~ 35; Sidamon-Eristoff Certification, ~10. TheLegislature was forced to make reductions in almost all areas of the FY 2011 budget, including reducing the appropriations for SFRA formula aid by $24.7 million and not replacing the $1.057 billion "The Procedural History and Statement of Facts have been combined in the interest of continuity and coherence because they are inextricably intertwined.
February 9, 2011 Page 3of State Fiscal Stabilization Funding (SFSF) received on a one timebasis in FY 2010. ~ 2010, ~ 35; sidamon-Eristoff Certification,~10, ~20. Nevertheless, school aid still comprises more than one-third of the total FY 2011 line item appropriations, and representsa greater share than in previous years budget. ~ 2010, ~ 35;sidamon-Eristoff Certification, ~18. To account for the reduction of State school aid, theAppropriations Act developed a complex means of distributing schoolaid among districts that was consistent with - although a necessarymodification of - the SFRA formula. ~ 2010, ~ 35; Sidamon-Eristoff Certification, ~21-27. Despite the reductions in Stateaid from FY 2010, the allocation of school aid was performed in anequitable and transparent manner. On June 8, 2010, Plaintiffs filed a Motion in Aid ofLitigant~ Rights before the New Jersey Supreme Court. The Stateopposed Plaintiffs motion because the reductions to school aidwere necessary in light of the dire economic and fiscalcircumstances facing the State and because the necessary reductionswere implemented in an equitable manner designed to minimize andmi tigate the reduction of funding to poorer districts relying mostheavily on State aid. Because current levels of school funding Indeed, the Abbott districts remain among the highestspending districts in the State and the State is the highest, oramong the highest, spending states in the country.
February 9, 2011 Page 4did not create the type of gross disparities that provided thebasis for the Court to find prior funding formulasunconstitutional, the State urged the Court to decline Plaintiffsinvitation to disregard fundamental principles of separation ofpower and constitutional allocation of appropriations authority. In its presentation to the New Jersey Supreme Court, theState relied upon certifications of the State Treasurer, Andrew P.Sidamon-Eristoff, the Director of the Office of School Funding,Department of Education, Yut se Thomas, and Assistant Commissionerof the Division of Students Services, Department of Education,Barbara Gantwerk. On January 13, 2011, the New Jersey Supreme Court issuedan Order remanding the matter to the Court for the development ofa factual record. The Order directed that the "basis for therecord shall be the level of funding provided in the current schoolyear...." Order, at 5, ~3. The State was charged with the burdenof proving that "the present level of school funding distributedthrough the SFRA formula can provide for a thorough and efficienteducation as measured by the comprehensive core curriculumstandards in districts with high, medium, and low concentrations ofdisadvantaged pupils." Order, at 5, ~4. The "relative comparisonof funding among districts alone shall not be sufficient to carrythe States burden." Order, at 5, ~5. The Supreme Court directed
February 9, 2011 Page Sthe Special Master to issue his report by March 31, 2011. Order,at 6, HS-6. Following the New Jersey Supreme Courts Order, casemanagement conferences were held before the Court on January 18,2011, and January 21, 2011. On February 2, 2011, the Court entereda Case Management Order (CMO) directing the commencement of theremand hearing on February 14, 2011, and conclusion of the remandhearing by March 11, 2011. CMO, ~10. Thus, the Parties were givena month to prepare for the remand hearing. At the case management conference of January 21, 2011,the Special Master informed the parties that it did not find theStates fiscal situation to be within the purview of the SupremeCourts Order. In response, the State moved before the SupremeCourt asking the Court to clarify its Order as to the ability ofthe Special Master to consider the States fiscal situation and formodification of its Order to allow for a reasonable period of timefor the State to develop and present its case. In its February 1,2011 Order, the Supreme Court denied the States motion forclarification, "save for the recognition that the Special Master isauthorized to entertain any and all evidence as he sees fit in theproper completion of his assigned task." February 1, 2011 Order at3. Accordingly, the request for additional time for the State toprepare and present its case was denied but the Special Master was
February 9, 2011 Page 6permitted to consider "any and all evidence" that he determines is"proper" in the completion of the remand hearing. In noticing witnesses that may be providing testimony inthe remand hearing, the State identified the Treasurer and an OMBBudget Manager to provide testimony regarding the States FY 2011Budget including the fiscal circumstances surrounding the adoptionof that Budget as well as how school aid was actually allocated inthat Budget. The State further provided the plaintiffs withproposed stipulations of fact that would encompass that testimony. The State also identified Assistant Commissioner BarbaraGantwerk as a witness who may be called to testify at the remandhearing. Her testimony would be for the purpose of describing theamounts of federal aid available to all of the districts in theState in FY 2011 through the Individuals with DisabilitiesEducation Act (IDEA) aid and additional Title I and IDEA aiddistributed under American Recovery and Reinvestment Act of 2009(ARRA) . A certification was filed with the Supreme Court byAssistant Commissioner Gantwerk that addressed the Title I and IDEAaid and additional Title I and IDEA aid distributed under ARRA but The State does not intend to call the Treasurer to testify ifthe parties could reach agreement on those stipulations. The Statewas considering having the OMB Budget Manager available to testify,if necessary, to provide the Special Master a completeunderstanding of the highly technical and novel approach used toallocate State school aid for FY 2011.
February 9, 2011 Page 7solely for the Abbott districts. The testimony of these witnesses will provide the SpecialMaster with important information regarding the fundingdeterminations made by the Legislature and additional fiscalresources available to school districts in FY 2011. Without thisinformation, the Special Master will be viewing the FY 2011 withoutthe proper context or a full understanding of the manner in whichthe Legislature chose to meet its constitutionally delegatedresponsibilities. plaintiffs, however, have filed a motion in limine to barthe introduction of evidence from these three witnesses.Plaintiffs argue that the supreme Court order precludes the SpecialMaster from being able to consider this evidence. This brief isfiled on behalf of the State in opposition to Plaintiffs motion. The State intends to provide plaintiffs with a document thatwould incorporate this information for all districts and wouldupdate the data provided to the Supreme Court regarding the Abbottdistricts. To the extent that the plaintiffs will agree to thesubmission of this evidence without testimony, AssistantCommissioner Gantwerk will not need to testify. The allocations to districts through the federal EducationJobs Fund Act was not included in the Gantwerk Certification andshe would not be called to testify as to the distribution of thosefunds. Rather, Kevin Dehmer, a POlicy/Fiscal Analyst in theDivision of Finance, Department of Education will testify as tothose amounts in the event that .the plaintiffs will not agree toits submission into evidence without testimony.
February 9, 2011 Page 8 LEGAL ARGUMNT POINT I PLAINTIFFS MOTION SHOULD BE DENIED BECAUSE THE STATES FISCAL CIRCUMSTANCES ARE NOT ONLY HIGHLY RELEVAN BUT ESSENTIAL TO A FAIR CONSIDERATION OF THE CONSTITUTIONALITY OF STATE SCHOOL AID IN FY 2011. Declining revenues, a severe national recession andlongstanding structural deficit, exacerbated by prior yearsrepeated reliance on non-recurring revenues, constitutionallycompelled reduced spending in the FY 2011 budget. Sidamon-EristoffCertification, ~5, ~7, ~9, ~16. While school aid continues torepresent one-third of the line-item appropriations, and a greatershare than in the previous years budget, State school aid couldnot be held harmless from reductions. ~ 2010, ~ 35; Sidamon-Eristoff Certification, ~18. Accordingly, adjustments were made toschool funding under the SFRA. The context for making thosemodifications and a full understanding of what modifications weremade is critical to a complete understanding of and the ability toproperly assess the constitutionality of State school aid for FY2011. The Special Master in this remand is being asked todetermine whether a statute (in this case the Appropriations Act)providing State school aid is unconstitutional because it violatesthe thorough and efficient clause of the New Jersey Constitution.
February 9, 2011 Page 9The State contends that finding can only be made if the SpecialMaster concludes that the formula creates or supports grossdispari ties between poor urban districts and weal thy suburbandistricts. Such gross disparities is the only factual situation inwhich the Supreme Court has made such a determination. Abbott v.Burke, 149 N.J. 145, 191 (1997) (Abbott iv) (Poorer urban districtsspending at 89% of the wealthier suburban districts and fundingformula at issue "arrests any movement toward funding equality");Abbott v. Burke, 136 N.J. 144, 447 (1994) (Abbott III) (relativedisparity in expenditures at 84%); Abbott v. Burke, 119 N.J. 287(1990) (Abbott II) (on the average, wealthier districts spend 40%more per pupil than poorer districts). The manner in which Statefunds were allocated in FY 2011 is highly relevant to thatdetermination. While the SFRA had to be modified in FY 2011 given thefiscal circumstances, the distribution of State aid was consistentwith the underlying formula and relative weights for students withspecial needs, i. e., at-risk and limited English proficient (LEP).Moreover, the reductions were accomplished by looking at generalfund budgets rather than State aid thus minimizing the impact ofthe reductions on districts that are heavily dependent on Stateaid, including the poor urban districts. To ignore this allocationmethod, and the underlying causes for the reductions that required
February 9, 2011 Page 10such an allocation method, would be to exclude from the recordhighly relevant factual information supportive of the States legalarguments and would leave the Supreme Court without a full andcomplete record on which to consider those arguments. Plaintiffs argue that the Special Master is precludedfrom considering this highly relevant evidence based on thelanguage in the Supreme Courts Order issued in response to theStates motion for clarification and for additional time. TheState filed a motion with the Supreme Court for clarification ofits remand order to permit the Special Master to consider theStates fiscal circumstances in determining whether the presentlevel of school funding is constitutional. The Order, however,should not be read as precluding consideration of the fiscalevidence. In fact, the Order specifically references the fiscalevidence as something the Court intends to consider. withoutpermitting this evidence in the Remand Hearing, the Special Masterwould be preventing the State from updating, expanding andproviding more complete information on the States fiscalcircumstances. Moreover, the Order granted the States motion in so faras it clarified that "the Special Master is authorized to entertainany and all evidence as he sees fit in the proper completion of hisassigned task." February 1, 2011 Order, at 3. Had the Supreme
February 9, 2011 Page 11Court intended to preclude the State from presenting evidence ofthe States fiscal situation, the Supreme Court could haye deniedthe States motion without further comment. In crafting theadditional language, the Supreme Court has authorized the SpecialMaster, in his discretion, to consider "any and all" eyidence.Thus, it is within the Special Masters discretion whether or notto entertain this evidence. The special Master should exercise its discretion bypermitting the State to introduce fiscal eyidence that the Statecontends is highly relevant to the issue of whether State schoolfunding in FY 2011 is constitutional. without knowledge of thefiscal circumstances requiring a reduction in school aid and thebasis upon which aid was distributed, the Special Master would bemaking findings of fact and drawing conclusions of law based onthose facts without the relevant context in which to view them.Giyen "the radical interference with the legislatiye power that isinyolved in the constitutional determination of insufficiency,"Abbott II, supra, 119 N.J. at 321, the determination should not bemade without full consideration of all available information. Furthermore, precluding this evidence would be extremelyprejudicial to the State. This is particularly true given the timeframe established by the Supreme Court for the remand hearing andthe expansion of the districts at issue from the Abbotts to all New
February 9, 2011 Page 12Jersey school districts. The fiscal evidence explains why and howState funding was provided to all school districts in New Jersey inFY 2011. Although the State is in the process of developingadditional evidence to support the constitutionality of thereductions in State aid, the State had not been provided the timenecessary to fully develop that evidence. Abbott II was the lastschool funding case decided by the supreme Court that involved achallenge to the entire financing system rather than just as itrelates to the Abbott districts. In that remand, from the time ofthe Supreme Court Order until the Administrative Law Judge issuedhis Initial Decision was three years. Abbott v. Burke, 1989 S.L.D.234. In this remand, the Supreme Court has given the State lessthan three months. Moreover, instead of the plaintiffs having theburden of proving the statute is unconstitutional, as was the casein these other remands, the Court has placed this burden on theState not only with regard to the Abbott districts, but for alldistricts. The State is confident that the amount of funding beingprovided in FY 2011 meets the constitutional threshold. New Jerseyspends per pupil well-above almost all of the other states even Even in the school funding in which the remands were focusedsolely on the Abbott districts, the State has never been required,in the time frame provided here, to develop the type of factualevidence necessary to meet its burden. See Abbott v. Burke, 153N.J. 480 (1998) (Abbott V); Abbott III, supra.
February 9, 2011 Page 13when adjusted by the Comparable Wage Index or by personal wealth.See, ~, ~~www. edsource. org/data-per-puil-spend-compare-using-cwi. html (last visited on February 9, 2010) "" (New Jersey ranksnumber one in the nation on unadjusted per-pupil expenditure andranks third when adjusted by the SWI); Education Finances 2008,U. S. Census Bureau (New Jersey ranks second in unadjusted per-pupil expenditure and ranks fourth when adjusted based on personalincome). As the Supreme Court noted in Abbott II, Measured by any accepted standard, New Jersey has been generous in the amount of money spent for education. We currently spend more dollars per student for education than almost any other state. Given that fact, this Court could not conclude that the State has failed to provide for a thorough and efficient education in all school districts. To do so would mean that our State Constitution has invented a standard so different from, and substantially higher than, the rest of the country that even though we spend almost the most, constitutionally that is not enough. The dilemma is that while we spend so much, there is absolutely no question that we are failing to provide the students in the poorer urban districts with the kind of education anyone could call thorough and efficient. The Comparable Wage Index (CWI) was developed by ProfessorLori Taylor of Texas A&M University and reflects the salary costsof college-educated, full-time workers in non-education fields.Cite. The CWI served as the model for the Geographic CostAdjustment used in the SFRA. Abbott v Burke, 199 N.J. 140, 220-221 (Abbott XX) (Special Master Opinion/Recommendations) . This publication is available at ~~ww2. census. gov/govs/school/08f33publ.pdf (last visited February 9, 2011) "".
February 9, 2011 Page 14 (Abbott II, supra, 119 N.J. at 392) .Since Abbott II, billions of dollars have been targeted toward thepoorer urban schools. Now, instead of being some of the lowestspending districts, the Abbott districts are among the highestspending. Given the high level of expenditures in the Abbottdistricts, and throughout the State, plaintiffs claim that areduction of State aid equal to less than five percent of adistricts general fund budget is of such a magnitude thatdistricts can no longer provide a thorough and efficient educationis, on its face, suspect. with a statistically sound sampling ofdistricts to determine how much general fund budgets were actuallyreduced, the educational programs effected by way of anyreductions, how the process for making those reductions wasundertaken and the effect of these one-year reductions on studentoutcomes, the State would be able to demonstrate the reductions didnot effect districts ability to provide a thorough and efficienteducation. In light of the diversity of district size,configuration and percentages of economically disadvantagedstudents, that sample would need to be substantial. Obviously,putting together those proofs would require more time than allottedby the Supreme Courts January 13, 2011 Order. Our subsequentrequest for additional time, however, was denied by the Supreme
February 9, 2011 Page 15Court by its Order dated February 1, 2011. Thus, instead of a fulland complete record on which to decide this significantconstitutional issue with broad ramifications throughout the State,the proofs before the Special Master will be quite limited. Plaintiffs will be providing testimony of select mainlylow-spending districts that do not represent a statistical samplefrom which to draw any broader conclusions. The State will, atbest, be able to present generalized data that views all districtsand the relationships between spending, performance and at-riskpopulations. To limit the record by precluding information thatthe State believes is critical to a fair determination of theconstitutionality of its distribution of State school aid in FY2011 would even further deprive the State of a reasonableopportuni ty to present its case. Finally, permitting the State to introduce this evidencewould not be prejudicial to the plaintiffs. The Special Master, inconsidering the evidence, can give it as much weight as he deemsappropriate. Regardless of the weight given to the evidence in this forum, allowing its introduction will ensure that a complete record will be available to the Supreme Court on the fiscal circumstances. Given that the Court has specifically stated its intention to consider the question of what effect the fiscal condition may have on plaintiffs entitlement to relief, the most
February 9, 2011 Page 16current and complete evidence should be included in the remandrecord. Accordingly, the motion in limine as to the fiscalevidence should be denied. POINT II EVIDENCE RELATED TO THE FEDERAL DOLLARS THAT ARE AVAILALE TO NEW JERSEY SCHOOL DISTRICTS IN FY 2011 SHOULD BE CONSIDERED BY THE SPECIAL MASTER IN THE REMA PROCEEDING The State intends to present evidence at the remandhearing as to the resources that are available to New Jersey schooldistricts through federal government programs. The Supreme Courtfound that this type of evidence, as a practical matter, could notbe ignored. Abbott XX, supra, 199 N.J. at 173. Ignoring thissource of funding would be particularly inappropriate because someof the federal programs were specifically designed to assist statein supporting education during these difficult fiscal times. SeeEducation Jobs Fund Act, Public Law No. 111-226 (2010); ARRA.Plaintiffs narrow reading of the Supreme Courts remand ordershould be rejected by this forum and the State should be permittedto have this evidence included in the record. Plaintiffs argue that because the Supreme Court remandorder speaks in terms of funding "through the SFRA" that all other revenues that districts may have to support their educational program in FY 2011 should be disregarded. Such a cramped reading
February 9, 2011 Page 17of the remand order would preclude the special Master fromconsidering what revenues the districts actually had available tothem for FY 2011 and whether the reductions they may allegeresulted from the reduction in State aid for FY 2011 could havebeen averted if additional available revenues had been allocated tosupport those areas. Federal funds are an integral part of aschool districts budget. They support special education services,provide supplemental programs for at-risk students and, through theEducation Jobs Fund, are targeted to preventing the staffreductions that may have otherwise occurred in FY 2011. To ignorethese available revenues would provide the Special Master, andultimately the Court, with a skewed picture of the districtsfiscal capacity and ability to provide the constitutionally-mandated level of education. Moreover, plaintiffs are incorrect in claiming that thepresentation of information on federal funds will be the same asthat presented to the Supreme Court in Assistant CommissionerGantwerks certification. The Gantwerk Certification addressed thefederal funds distributed to Abbott districts under Title I, theIDEA and ARRA. The remand hearing has broadened the scope of the As previously noted, the allocations to districts through theEducation Jobs Fund Act was not included in the GantwerkCertification and she is not being called to testify as to thedistribution of those funds. The State intends to present theamount each district received through the Education Jobs Fund Act
February 9, 2011 Page 18proofs as to all districts in the State. Accordingly, the amountsof federal funds available to the remaining districts is not beforethe supreme Court. Furthermore, even as to the Abbott districts,the information in the Gantwerk Certification is not the mostcurrent. Rather than "superfluous," federal revenues provide animportant source of funding to support the educational programs ina district. Evidence of these available revenues is necessary toprovide as complete a record as possible in the allotted time frameon which the Special Master and the Supreme Court will evaluate theconstitutionality of school funding for FY 2011. CONCLUSION For the reasons set forth herein, Plaintiffs motionshould be denied. Respectfully submitted, PAULA T. DOW ATTORNEY GENERAL OF NEW JERSEY By: /!1:~r041Q.~_) Assistant Attorney Generalc: David Sciarra, Esq. Lawrence S. Lus tberg, Esq. John D. Rue, Esq. Counsel for Amici Curiaeby a document and, if necessary, through the testimony of KevinDehmer.