formal brief

KiM GUADAGNOLt. Governor

State of New JerseyOFFICE OF THE ATTORNEY GENERAL

DEPARTMENT OF LAW AND PUBLIC SAFETY

DIVISION OF LAW

25 MARKET STREET

PO Box 112TRENTON. NJ 08625-0112

PAULA T. DowAttorney GeneralCHRIS CHRISTIE

Governor

ROBERT M. HANNADirector

February 9, 2011

Honorable Peter E. Doyne, A. J . S . C.Superior Court of New JerseyBergen County Justice CenterSuite 425Hackensack, New Jersey 07601-7699

Re: Abbott v. BurkeDocket 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 todistricts is critical factual information that is directly relevant

and indeed necessary to the Special Master's determination of

whether education funding in FY 2011 is constitutional. Absent

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February 9, 2011

consideration of the State's fiscal circumstances and the manner in

which State school aid was distributed, the Special Master, and,

ultimately, the Supreme Court will be making determinations of a

constitutional magnitude without significant facts relevant to the

legislati ve determinations on meeting its constitutional

obligations.PROCEDURAL HISTORY AN STATEMENT OF FACTS'

The State relies upon the procedural and factual

histories provided in its previous briefs to the New Jersey Supreme

Court of July 9, 2010, September 27, 2010, and January 25, 2011,

and briefly summarizes and supplements them only to the extent

necessary for the Court's consideration of the present motion.

Facing a longstanding structural deficit exacerbated by

prior years' repeated reliance on non-recurring revenues, the

Legislature passed and Governor Christie signed the FY 2011

Appropriations Act. The projected revenues and available fund

balance for FY 2011 was $823 million less than for the FY 2010

budget. ~ 2010, ~ 35; Sidamon-Eristoff Certification, ~10. The

Legislature 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 beencombined in the interest of continuity and coherence because theyare inextricably intertwined.

February 9, 2011

of State Fiscal Stabilization Funding (SFSF) received on a one time

basis 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 represents

a greater share than in previous year's budget. ~ 2010, ~ 35;

sidamon-Eristoff Certification, ~18.

To account for the reduction of State school aid, the

Appropriations Act developed a complex means of distributing school

aid among districts that was consistent with - although a necessary

modification of - the SFRA formula. ~ 2010, ~ 35; Sidamon-

Eristoff Certification, ~21-27. Despite the reductions in State

aid from FY 2010, the allocation of school aid was performed in an

equitable and transparent manner.

On June 8, 2010, Plaintiffs filed a Motion in Aid of

Litigant~' Rights before the New Jersey Supreme Court. The State

opposed Plaintiffs' motion because the reductions to school aid

were necessary in light of the dire economic and fiscal

circumstances facing the State and because the necessary reductions

were implemented in an equitable manner designed to minimize and

mi tigate the reduction of funding to poorer districts relying most

heavily on State aid.' Because current levels of school funding

'Indeed, thespending districtsamong the highest,

Abbott districts remain among the highestin the State and the State is the highest, orspending states in the country.

February 9, 2011

did not create the type of gross disparities that provided the

basis for the Court to find prior funding formulas

unconstitutional, the State urged the Court to decline Plaintiffs'

invitation to disregard fundamental principles of separation of

power and constitutional allocation of appropriations authority.

In its presentation to the New Jersey Supreme Court, the

State 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 Commissioner

of the Division of Students Services, Department of Education,

Barbara Gantwerk.

On January 13, 2011, the New Jersey Supreme Court issued

an Order remanding the matter to the Court for the development of

a factual record. The Order directed that the "basis for the

record shall be the level of funding provided in the current school

year...." Order, at 5, ~3. The State was charged with the burden

of proving that "the present level of school funding distributed

through the SFRA formula can provide for a thorough and efficient

education as measured by the comprehensive core curriculum

standards in districts with high, medium, and low concentrations of

disadvantaged pupils." Order, at 5, ~4. The "relative comparison

of funding among districts alone shall not be sufficient to carry

the State's burden." Order, at 5, ~5. The Supreme Court directed

February 9, 2011Page S

the Special Master to issue his report by March 31, 2011. Order,

at 6, HS-6.

Following the New Jersey Supreme Court's Order, case

management conferences were held before the Court on January 18,

2011, and January 21, 2011. On February 2, 2011, the Court entered

a Case Management Order (CMO) directing the commencement of the

remand hearing on February 14, 2011, and conclusion of the remand

hearing by March 11, 2011. CMO, ~10. Thus, the Parties were given

a 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 the

State's fiscal situation to be within the purview of the Supreme

Court's Order. In response, the State moved before the Supreme

Court asking the Court to clarify its Order as to the ability of

the Special Master to consider the State's fiscal situation and for

modification of its Order to allow for a reasonable period of time

for the State to develop and present its case. In its February 1,

2011 Order, the Supreme Court denied the State's motion for

clarification, "save for the recognition that the Special Master is

authorized to entertain any and all evidence as he sees fit in the

proper completion of his assigned task." February 1, 2011 Order at

3. Accordingly, the request for additional time for the State to

prepare and present its case was denied but the Special Master was

February 9, 2011

permitted 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 in

the remand hearing, the State identified the Treasurer and an OMB

Budget Manager to provide testimony regarding the State's FY 2011

Budget including the fiscal circumstances surrounding the adoption

of that Budget as well as how school aid was actually allocated in

that Budget. The State further provided the plaintiffs with

proposed stipulations of fact that would encompass that testimony.'

The State also identified Assistant Commissioner Barbara

Gantwerk as a witness who may be called to testify at the remand

hearing. Her testimony would be for the purpose of describing the

amounts of federal aid available to all of the districts in the

State in FY 2011 through the Individuals with DisabilitiesEducation Act (IDEA) aid and additional Title I and IDEA aid

distributed under American Recovery and Reinvestment Act of 2009

(ARRA) . A certification was filed with the Supreme Court by

Assistant Commissioner Gantwerk that addressed the Title I and IDEA

aid 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

solely for the Abbott districts.'

The testimony of these witnesses will provide the Special

Master with important information regarding the funding

determinations made by the Legislature and additional fiscal

resources available to school districts in FY 2011. Without this

information, the Special Master will be viewing the FY 2011 without

the proper context or a full understanding of the manner in which

the Legislature chose to meet its constitutionally delegated

responsibilities.plaintiffs, however, have filed a motion in limine to bar

the introduction of evidence from these three witnesses.'

Plaintiffs argue that the supreme Court order precludes the Special

Master from being able to consider this evidence. This brief is

filed 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

LEGAL ARGUMNT

POINT I

PLAINTIFFS' MOTION SHOULD BE DENIED BECAUSETHE STATE'S FISCAL CIRCUMSTANCES ARE NOT ONLYHIGHLY RELEVAN BUT ESSENTIAL TO A FAIRCONSIDERATION OF THE CONSTITUTIONALITY OFSTATE SCHOOL AID IN FY 2011.

Declining revenues, a severe national recession and

longstanding structural deficit, exacerbated by prior years

repeated reliance on non-recurring revenues, constitutionally

compelled reduced spending in the FY 2011 budget. Sidamon-Eristoff

Certification, ~5, ~7, ~9, ~16. While school aid continues to

represent one-third of the line-item appropriations, and a greater

share than in the previous year's budget, State school aid could

not be held harmless from reductions. ~ 2010, ~ 35; Sidamon-

Eristoff Certification, ~18. Accordingly, adjustments were made to

school funding under the SFRA. The context for making those

modifications and a full understanding of what modifications were

made is critical to a complete understanding of and the ability to

properly assess the constitutionality of State school aid for FY

2011.

The Special Master in this remand is being asked to

determine whether a statute (in this case the Appropriations Act)

providing State school aid is unconstitutional because it violates

the thorough and efficient clause of the New Jersey Constitution.

February 9, 2011

The State contends that finding can only be made if the Special

Master concludes that the formula creates or supports gross

dispari ties between poor urban districts and weal thy suburban

districts. Such gross disparities is the only factual situation in

which the Supreme Court has made such a determination. Abbott v.

Burke, 149 N.J. 145, 191 (1997) (Abbott iv) (Poorer urban districts

spending at 89% of the wealthier suburban districts and funding

formula at issue "arrests any movement toward funding equality");

Abbott v. Burke, 136 N.J. 144, 447 (1994) (Abbott III) (relative

disparity 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 State

funds were allocated in FY 2011 is highly relevant to that

determination.

While the SFRA had to be modified in FY 2011 given the

fiscal circumstances, the distribution of State aid was consistent

with the underlying formula and relative weights for students with

special needs, i. e., at-risk and limited English proficient (LEP).

Moreover, the reductions were accomplished by looking at general

fund budgets rather than State aid thus minimizing the impact of

the reductions on districts that are heavily dependent on State

aid, including the poor urban districts. To ignore this allocation

method, and the underlying causes for the reductions that required

February 9, 2011

such an allocation method, would be to exclude from the record

highly relevant factual information supportive of the State's legal

arguments and would leave the Supreme Court without a full and

complete record on which to consider those arguments.

Plaintiffs argue that the Special Master is precluded

from considering this highly relevant evidence based on the

language in the Supreme Court's Order issued in response to the

State's motion for clarification and for additional time. The

State filed a motion with the Supreme Court for clarification of

its remand order to permit the Special Master to consider the

State's fiscal circumstances in determining whether the present

level 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 fiscal

evidence as something the Court intends to consider. without

permitting this evidence in the Remand Hearing, the Special Master

would be preventing the State from updating, expanding and

providing more complete information on the State's fiscal

circumstances.

Moreover, the Order granted the State's motion in so far

as it clarified that "the Special Master is authorized to entertain

any and all evidence as he sees fit in the proper completion of his

assigned task." February 1, 2011 Order, at 3. Had the Supreme

February 9, 2011

Court intended to preclude the State from presenting evidence of

the State's fiscal situation, the Supreme Court could haye denied

the State's motion without further comment. In crafting the

additional language, the Supreme Court has authorized the Special

Master, in his discretion, to consider "any and all" eyidence.

Thus, it is within the Special Master's discretion whether or not

to entertain this evidence.

The special Master should exercise its discretion by

permitting the State to introduce fiscal eyidence that the State

contends is highly relevant to the issue of whether State school

funding in FY 2011 is constitutional. without knowledge of the

fiscal circumstances requiring a reduction in school aid and the

basis upon which aid was distributed, the Special Master would be

making findings of fact and drawing conclusions of law based on

those facts without the relevant context in which to view them.

Giyen "the radical interference with the legislatiye power that is

inyolved in the constitutional determination of insufficiency,"

Abbott II, supra, 119 N.J. at 321, the determination should not be

made without full consideration of all available information.

Furthermore, precluding this evidence would be extremely

prejudicial to the State. This is particularly true given the time

frame established by the Supreme Court for the remand hearing and

the expansion of the districts at issue from the Abbotts to all New

February 9, 2011

Jersey school districts. The fiscal evidence explains why and how

State funding was provided to all school districts in New Jersey in

FY 2011. Although the State is in the process of developing

additional evidence to support the constitutionality of thereductions in State aid, the State had not been provided the time

necessary to fully develop that evidence. Abbott II was the last

school funding case decided by the supreme Court that involved a

challenge to the entire financing system rather than just as it

relates to the Abbott districts. In that remand, from the time of

the Supreme Court Order until the Administrative Law Judge issued

his Initial Decision was three years. Abbott v. Burke, 1989 S.L.D.

234. In this remand, the Supreme Court has given the State less

than three months.' Moreover, instead of the plaintiffs having the

burden of proving the statute is unconstitutional, as was the case

in these other remands, the Court has placed this burden on the

State not only with regard to the Abbott districts, but for all

districts.The State is confident that the amount of funding being

provided in FY 2011 meets the constitutional threshold. New Jersey

spends 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

when 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 ranks

number one in the nation on unadjusted per-pupil expenditure and

ranks 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 personal

income). As the Supreme Court noted in Abbott II,

Measured by any accepted standard, New Jerseyhas been generous in the amount of money spentfor education. We currently spend moredollars per student for education than almostany other state. Given that fact, this Courtcould not conclude that the State has failedto provide for a thorough and efficienteducation in all school districts. To do sowould mean that our State Constitution hasinvented a standard so different from, andsubstantially higher than, the rest of thecountry that even though we spend almost themost, constitutionally that is not enough.The dilemma is that while we spend so much,there is absolutely no question that we arefailing to provide the students in the poorerurban districts with the kind of educationanyone 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

(Abbott II, supra, 119 N.J. at 392) .

Since Abbott II, billions of dollars have been targeted toward the

poorer urban schools. Now, instead of being some of the lowest

spending districts, the Abbott districts are among the highest

spending.

Given the high level of expenditures in the Abbott

districts, and throughout the State, plaintiffs' claim that a

reduction of State aid equal to less than five percent of a

district's general fund budget is of such a magnitude that

districts can no longer provide a thorough and efficient education

is, on its face, suspect. with a statistically sound sampling of

districts to determine how much general fund budgets were actually

reduced, the educational programs effected by way of any

reductions, how the process for making those reductions was

undertaken and the effect of these one-year reductions on student

outcomes, the State would be able to demonstrate the reductions did

not effect districts' ability to provide a thorough and efficient

education. In light of the diversity of district size,configuration and percentages of economically disadvantaged

students, that sample would need to be substantial. Obviously,

putting together those proofs would require more time than allotted

by the Supreme Court's January 13, 2011 Order. Our subsequent

request for additional time, however, was denied by the Supreme

February 9, 2011

Court by its Order dated February 1, 2011. Thus, instead of a full

and complete record on which to decide this significant

constitutional issue with broad ramifications throughout the State,

the proofs before the Special Master will be quite limited.

Plaintiffs will be providing testimony of select mainly

low-spending districts that do not represent a statistical sample

from which to draw any broader conclusions. The State will, at

best, be able to present generalized data that views all districts

and the relationships between spending, performance and at-risk

populations. To limit the record by precluding information that

the State believes is critical to a fair determination of the

constitutionality of its distribution of State school aid in FY

2011 would even further deprive the State of a reasonable

opportuni ty to present its case.

Finally, permitting the State to introduce this evidence

would not be prejudicial to the plaintiffs. The Special Master, in

considering the evidence, can give it as much weight as he deems

appropriate. 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 fiscalcondition may have on plaintiffs' entitlement to relief, the most

February 9, 2011

current and complete evidence should be included in the remand

record. Accordingly, the motion in limine as to the fiscal

evidence should be denied.

POINT II

EVIDENCE RELATED TO THE FEDERAL DOLLARS THATARE AVAILALE TO NEW JERSEY SCHOOL DISTRICTSIN FY 2011 SHOULD BE CONSIDERED BY THE SPECIALMASTER IN THE REMA PROCEEDING

The State intends to present evidence at the remand

hearing as to the resources that are available to New Jersey school

districts through federal government programs. The Supreme Court

found that this type of evidence, as a practical matter, could not

be ignored. Abbott XX, supra, 199 N.J. at 173. Ignoring this

source of funding would be particularly inappropriate because some

of the federal programs were specifically designed to assist state

in supporting education during these difficult fiscal times. See

Education Jobs Fund Act, Public Law No. 111-226 (2010); ARRA.

Plaintiffs' narrow reading of the Supreme Court's remand order

should be rejected by this forum and the State should be permitted

to have this evidence included in the record.

Plaintiffs argue that because the Supreme Court remand

order 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

of the remand order would preclude the special Master from

considering what revenues the districts actually had available to

them for FY 2011 and whether the reductions they may allegeresulted from the reduction in State aid for FY 2011 could have

been averted if additional available revenues had been allocated to

support those areas. Federal funds are an integral part of a

school districts budget. They support special education services,

provide supplemental programs for at-risk students and, through the

Education Jobs Fund, are targeted to preventing the staff

reductions that may have otherwise occurred in FY 2011. To ignore

these available revenues would provide the Special Master, and

ultimately the Court, with a skewed picture of the districts'fiscal capacity and ability to provide the constitutionally-

mandated level of education.

Moreover, plaintiffs are incorrect in claiming that the

presentation of information on federal funds will be the same as

that presented to the Supreme Court in Assistant Commissioner

Gantwerk's certification. The Gantwerk Certification addressed the

federal funds distributed to Abbott districts under Title I, the

IDEA 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

proofs as to all districts in the State. Accordingly, the amounts

of federal funds available to the remaining districts is not before

the supreme Court. Furthermore, even as to the Abbott districts,

the information in the Gantwerk Certification is not the most

current. Rather than "superfluous," federal revenues provide an

important source of funding to support the educational programs in

a district. Evidence of these available revenues is necessary to

provide as complete a record as possible in the allotted time frame

on which the Special Master and the Supreme Court will evaluate the

constitutionality of school funding for FY 2011.

CONCLUSION

For the reasons set forth herein, Plaintiffs' motion

should be denied.

Respectfully submitted,

PAULA T. DOWATTORNEY GENERAL OF NEW JERSEY

By: /!1:~r041Q.~_)Assistant Attorney General

c: David Sciarra, Esq.Lawrence S. Lus tberg, Esq.John D. Rue, Esq.Counsel for Amici Curiae

by a document and, if necessary, through the testimony of KevinDehmer.

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