Lakewood school budget approved, but it hinges on asking NJ for $104M loan

LAKEWOOD – As the Board of Education gave final approval to a $309 million budget for next year, which includes a $104 million state loan request, officials admit that may not be the final word on the spending plan or how much the district borrows from the state.

There is a concern that the district could end the current year in a deficit if the state does not approve the final financing needed to fill a current $43 million budget gap by next month.

The district last faced a shutdown in July 2019 when a one-day closure affected summer classes after an emergency loan was needed to fill a $30 million gap.

“Our budget is really not approved until the state treasurer approves the loans,” State Monitor Robert Finger said at Tuesday night’s meeting where the board approved the budget.

Funding woes: In Lakewood schools, funding drama leaves more questions than answers

The final amount of loans is also unclear, officials said, noting that the $104 million loan request for the 2024-2025 school year could increase if money set aside for that budget is needed for the current 2023-2024 school year, which ends next month.

When the board approved the current 2023-2024 budget, it included a request for a $93 million loan from the state. So far, the state has only promised a $50 million loan, which was approved last fall. That still leaves a $43 million deficit in the current spending plan.

Assistant Business Administrator Kevin Campbell said Tuesday that the state treasurer, who must approve and administer all loans, is considering allowing the district to use a $33 million surplus that is now set aside for the proposed 2024-2025 budget to help fill the deficit in the current 2023-2024 budget.

If that occurs, the $104 million loan request for the 2024-2025 budget could increase to as high as $137 million, the largest Lakewood school loan ever.

Toms River schools chief: $26.5M NJ aid gap could make September reopening impossible

“If we do that, next year’s (loan request) would not be $104 million it would be a minimum of $137 milion,” Finger said. “We should have an answer before the end of May, certainly no later than the beginning of June because they need to make sure that we do not end the year in a fund balance deficit. They need to give whatever loans are needed to ensure we do not end the year in a deficit.”

Lakewood has relied on state loans for nearly 10 years, drawing criticism and concern from district officials and outside observers. Currently, the district owes $132 million and has $9.3 million set aside for loan payments in the proposed 2024-2025 spending plan.

If the $104 million is approved for next year the loan debt would approach $236 million, or more if that loan amount is increased.

“The reality is this is unsustainable,” Finger said when the budget was introduced in March. “We’re at the point even right now if you look at Monmouth and Ocean counties, our loan repayment is more than some of their entire budgets, it is only going to keep getting larger and larger.”

'We need help right now': Jersey Shore school officials beg NJ lawmakers for state aid fix

The proposed $309.1 million budget for 2024-2025 is a $34 million increase over the current year spending plan, or 12.6%, according to Campbell’s presentation.

It includes an $11 million increase in charter school funding; a $12 million increase in out-of-district tuition; a $9 million increase in state loan repayments; and a $5 million increase in non-public school transportation.

The budget proposal would increase school taxes by 2.6% for an average property tax hike of $166 on a home assessed at $349,284.

The spending plan includes no layoffs or service cuts, officials said, if the entire loan and other funding occurs.School district officials have been urging the state to change its aid formula, while both an appeals court and even the state auditor agree a change is needed.

Lakewood is one of the fastest-growing municipalities in the state. Its population has more than doubled since 2000 to nearly 140,000 people. Its public schools annually face a financial crisis in part because of crushing costs to bus many Orthodox Jewish students to private schools on separate buses for boys and girls.

What sets Lakewood apart is the makeup of its student enrollment. The district has 5,164 public students and 42,307 non-public school students.

The state Department of Education determines how much it sends each school district through a complex formula based on how many public school students are enrolled and the wealth of the district.

The district’s entire state aid for 2024-2025 is projected at about $45 million, about $1 million less than the current allocation, according to the district.

Critics contend the state aid formula does not take into account Lakewood’s large non-public school population, which approaches 50,000 students.

“Lakewood school district may be considered a district confronted by severe fiscal distress and could benefit from the creation of an additional state aid category,” state auditor David Kaschak wrote in a July 2023 report.

In March 2023, a state appeals court ruled that Lakewood public schools do not receive adequate state funding. The appeals court declared that the district is “severely strained” by its obligation to provide transportation and special education to thousands of non-public school students.

The appeals court decision relates to the nine-year-old Alcantara case, a lawsuit filed by Paul Tractenberg, a former Rutgers law professor and founder of the Education Law Center, and attorney Arthur Lang, a former Lakewood High School teacher.

Their complaint challenged the state’s funding, claiming the district’s legal obligation to provide transportation and other services to more than 40,000 non-public school students requires more state aid.

In the decision handed down on March 6, 2023, the three-person appellate court declared that then-Education Commissioner Angelica Allen-McMillan must review the district’s situation and come up with a way to improve its funding.

Last fall the appeals court set an April 1 deadline for a new funding formula plan for Lakewood to be submitted by the Department of Education.

This article originally appeared on Asbury Park Press: Lakewood Schools state loan reliance grows in new budget