For the third time in 21 years, New Jersey courts have handed state officials a ruling that may require large new expenditures on public schools, but this time analysts say the resulting budget pain appears manageable.
"I don't think they have a money problem; they have a political problem," said Hyman Grossman, a managing director at Standard & Poor's Corp.
Grossman said New Jersey has several "entirely doable and feasible" options available to respond to this week's ruling by the state Supreme Court, which found that a spending disparity between rich and poor school districts violates the state Constitution.
State officials and independent analysts have offered estimates ranging from $450 million to $625 million on what is needed to eliminate the gap. The high end of the scale represents about 4% of the state's $15.8 billion fiscal 1995 budget.
But in a move that greatly relieved pressure on Gov. Christine Todd Whitman, the court said the administration could wait until fiscal 1998 to end the spending disparity. In addition, the ruling said this year's budget, already very tight, need not be affected, but initial steps toward reform must be taken beginning with the fiscal 1996 budget.
The fiscal year begins July 1.
Robert Kurtter, a vice president of state ratings at Moody's Investors Service, said that while the court ruling "in and of itself does not appear to be a budget buster, it certainly has a cumulative effect along with the other spending pressures the state is facing."
New Jersey is already dealing with increased budget strains from plans to assume a larger share of local court costs, a jump in debt service Created by a 1992 debt restructuring growing Medicaid costs, and new correctional facilities about to come on-line, Kurtter said.
"But Whitman, in a statement released after the court ruled Tuesday, said any additional school funding that might be needed to address the ruling "could be found through a reallocation of existing resources."
Whitman said the school spending problem will not impede her pledge to cut New Jersey's income tax rate 30% by the end of her first three years in office in fiscal 1997.
Whitman has several options available to deal with the court ruling without breaking her budget pledges, Grossman said. They appear fiscally doable, he said, but carry serious political baggage that could affect whether they are actually implemented.
For example, the governor could simply deduct the money needed from state aid programs to wealthy districts and reroute it to the 28 districts the court said were being re-elected by the state, Grossman said. Whitman could also try to carve out a chunk of the income tax and dedicate the revenue to needy school districts.
"The [choices] may step on some some political toes," he said. "That's not for a bond analyst worry about."
In a reference to the touchy issues likely to dominate the debate, Whitman pledged Tuesday "not to repeat the mistake of the former administration," which created a new school funding formula in 1990 before the courts had even rifled on the constitutionality of the formula already in place.
The Supreme Court ruled later that year that the old formula was in fact unconstitutional, but this week's ruling found that the solution former Gov. Jim Florio devised was inadequate as well.
Florio also took heat from the public in 1990 because his school spending solution, known as the Quality Education Act, featured a $1.1 billion increase in income taxes. A major grassroots revolt emerged around the issue, criticizing Florio for pushing the reforms into law without adequate public input.
"I will not repeat the mistake of the QEA in excluding the public from the formulation of this funding formula or in stifling debate on this most important of issues," Whitman said. "I will invite public scrutiny and debate on this formula at every opportunity with full confidence that this input will only improve the formula."
