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February 21, 2010

Honorable Arne DuncanSecretary of EducationU.S. Department of Education400 Maryland Avenue, SWWashington, D.C. 20202

Honorable Thelma Melendez

Assistant Secretary for Elementary and Secondary EducationU.S. Department of Education400 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 NewJerseys 1.3 million public school children, with a particular focus on the states low-income students, students of color, and students with special needs. On behalf of thesestudents, 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 levelestablished for FY2010 in the States approved application for State Fiscal StabilizationFunds (SFSF). In the event New Jersey refuses to promptly restore formula funding tothe requisite level, the Department should take appropriate measures, including, but notlimited to, delaying release of Phase II SFSF funds and delaying consideration of theStates Race to the Top (RTTT) application, until the State fulfills its commitments underfederal law.1

In June 2009, the Department approved New Jerseys application for SFSF funds for theFY2010 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 aRTTT grant. 74 Fed. Register 221 (Nov. 18, 2009) at 59692, 59720, 59799.

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2009)(Application). In the Application, the State represented that it would useapproximately $956 million in SFSF funds to support the States primary K-12 formula atthe total level of $5.8 billion for FY2010.2 See Application, at 6, 10. Thus, under theStates proposal, % of primary formula funding would consist of federal funds provided

through the SFSF program. Further, the $5.8 billion in primary formula support includesboth funding to restore primary formula funding to the FY2009 level and $150 millionfor an equity and adequacy adjustment required by the States funding formula, theSchool Funding Reform Act of 2008 (SFRA).3 Based on New Jerseys commitment touse SFSF funds to provide primary formula aid at this specified level, and to partiallyimplement an equity and adequacy adjustment in the States new formula, theDepartment 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 Governors Address toSpecial Legislative Session (February 11, 2010) athttp://www.nj.gov/governor/news/news/552010/approved/20100211a.html. This Stateaid 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 %5.8billion to approximately $5.45 billion for FY2010.

As we explain, New Jerseys February 11th cut in FY2010 primary formula aid is notonly inconsistent with the States approved Application, but also subverts Congressionalrequirements for the SFSF program established in the American Recovery andReinvestment Act (ARRA)>

First, it is clear that New Jersey has reduced primary formula aid below the level ofStates commitment assured in the Application, as approved by the Department. Underthe ARRA, Governors shall first use SFSF funds to provide the amount of fundsnecessary to restore in primary formula aid in FY21010 to the greater of the level inFY2008 or FY2009, and to allow existing State formulae increases to supportelementary and secondary education for fiscal years 2010 and 2011 to be implementedand allow funding for phasing in State equity and adequacy adjustments, if enactedunder state law prior to October 1, 2008. P.L. 111-5, (H.R.1), February 17, 2009; 123Stat. 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 SFSFProgram. Application, Attachment II, E-5.3 The $150 million included in the primary formula aid level for FY2010 represents one-third of anequity and adequacy adjustment of $450 million required under the SFRA. As the State indicates in theApplication, the level of State support necessary to fully fund the equity adjustment would have been $6.1billion. Application, at 6.

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Consistent with ARRA requirements, New Jersey, in its Application, committed to usingSFSF funds to restore primary formula aid to the FY2009 level and to partiallyimplement an equity and adequacy adjustment in the funding formula. Further, theDepartment accepted the States commitment, and approved the use of SFSF funds to

enable the State to provide primary formula support at the specified levels. The StatesFebruary 11th mid-year aid cut is clearly contrary to the commitments and assurancesmade by the State to the federal government to secure use of SFSF funds, along with theexpress requirements established by Congress in the ARRA.

Second, in cutting K-12 formula aid on February 11th, the Governor indicates that the aidwill 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 otherthan 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 andsecondary education violates the firm requirements established by Congress in theARRA.

Finally, New Jerseys mid-year cuts in primary formula aid disproportionately impactschool districts with extremely high concentrations of low income students and Black andLatino students. Our analysis shows that 40% of the cut in formula aid is in districtsclassified by the State as high needs due to a student poverty rate of over 40% andstudent achievement levels below state benchmarks. Many of these districts have studentpoverty rates of over 60%. Moreover, 80% of the students in these districts are Black andLatino. Put simply, the States cuts in K-12 formula aid, including SFSF funds, has a

disparate impact on New Jerseys low income students and high poverty districts, andstudents of color, with the latter raising concerns regarding State compliance with TitleVI of the Civil Rights Act of 1964, 42 U.S.C.A. 4200d, and the Departmentsimplementing regulations.

For these reasons, New Jerseys February 11th reductions in primary formula aid areclearly inconsistent with the Congressional objectives of the SFSF program and violatethe federal requirements for the SFSF program; repudiate the States own commitmentsto support K-12 primary and secondary education in its approved Application for SFSFfunds; and will have a disproportionate impact on our states neediest students, schools

and communities. Accordingly, we request the Department to, first, direct New Jersey torestore its primary formula aid to the level contained in the approved Application. In theevent New Jersey does not promptly do so, we further request that the Department takeall appropriate measures, including delaying payment of Phase II SFSF funds andconsideration of the States pending RTTT application, until the State meets itscommitments stated in the Application and required under the SFSF.

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We applaud the efforts of Congress and the Department to assist New Jerseys publicschool children in a time of serious fiscal need. Further, we understand that New Jerseycurrently has fiscal difficulties. However, these difficulties do not justify or permit NewJersey 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 byCongress under the ARRA to support our states 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 ChristieHonorable Russlyn Ali, Assistant Secretary for Civil RightsCharles Rose, General CounselNew Jersey Congressional DelegationNew Jersey Legislature