New Jersey leads the nation in education spending and student achievement.[1] In 2024, for example, New Jersey eighth graders ranked among the top three states in both mathematics and reading on national tests.[2] Much of the success of New Jersey’s schools can be attributed to the strong effort it makes to fund its schools: the state spends more on K-12 education, as a percentage of its economy, than any other state in the nation.[3]
Despite these successes, New Jersey faces a persistent achievement gap. Black and Latinx/Hispanic students consistently underperform compared to white students, and students from low-income families lag behind their peers.[4] This gap stems partly from lack of funding: New Jersey’s students of color are often in schools that lack the funding they need to provide a quality education.[5]
School funding policy affects more than students, families, teachers, and education advocates. New Jersey spends more on K-12 education than any other budget category as a percentage of state and local spending.[6] All of New Jersey’s taxpayers have an interest in understanding how the state funds its schools.
This explainer provides an overview of school funding in New Jersey: why funding matters, where funding comes from, the state’s role in funding schools, and how school funding can be improved.
Why does funding matter for schools?
Funding matters for schools because schools need money to provide the services and staff necessary to support students. Greater funding leads to better outcomes: higher test scores, increased graduation rates, and better college completion rates.[7] These outcomes produce economic gains and better standards of living while improving health.[8]
Bottomline: Students need well-funded schools to succeed.
Do some schools need more resources than others?
An important principle in school funding is equal educational opportunity: All students should have the same chance to achieve rigorous educational goals, regardless of their backgrounds.
Students who struggle with economic, linguistic, or accessibility barriers face greater educational challenges than others. New Jersey school funding law recognizes three types of students in particular:[9]
- Students from low-income families. These are students who qualify for free or reduced-price lunch (FRPL) under the National School Lunch Program. These students live in households with an income lower than 185 percent of the poverty line.
- Students who are multilingual learners. These students are often referred to as "English language learners" or "Limited English Proficient" students.
- Students with learning disabilities. This includes speech and language impairments, autism, visual and hearing impairments, health impairments, specific learning disabilities such as dyslexia, and others. Federal and state law recognizes 13 special education classifications.
Because these students have more obstacles to their education, they need extra support: smaller classes, specialized educators, social services, health services, remedial instruction, and so on. When a school district has more students facing these challenges, it needs more funding to serve those students’ needs.
Where do New Jersey public schools get their funding?
School funding is a mix of federal, state, and local revenues. Federal funding is a small part of New Jersey’s school funding. Most school funding comes from a mix of local taxes and state aid.
The data above include revenues for charter schools, which are publicly-funded schools that operate independently from traditional school districts. The data does not include private schools.
Why is state funding necessary for schools?
The New Jersey Constitution guarantees all school-aged children in the state access to a “thorough and efficient system of free public schools.”[10] To meet this constitutional mandate, New Jersey’s courts have ruled the state must “...create a funding formula based on curriculum content standards and to demonstrate that the formula addresses the needs of disadvantaged students everywhere...”[11]
New Jersey maintains statewide content standards across multiple content areas with clearly defined learning goals.[12] If a district cannot raise enough local revenue to meet these state standards, the state’s courts have ruled that the state must step in and help.[13]
New Jersey school districts raise their local funds primarily through property taxes, but some districts have higher property values than other districts. Districts with higher property values can raise revenue more easily than districts with lower property values. This puts an unfair burden on less-affluent districts, which must increase their tax rates more than affluent districts to raise the same amount of money.
Here’s how: Imagine two school districts of the same size, but with different districtwide property values per pupil. To raise an equal amount of revenue (in this example, $10,000 per pupil), the district with lower property values has to have a higher tax rate than the district with higher property values.
To make tax rates more fair for less-affluent districts, school districts with lower property values need more revenue from sources outside their district. This is why New Jersey provides state aid to school districts: it allows the state to fulfill its constitutional mandate and it saves local taxpayers from paying extremely high property taxes.
How do New Jersey leaders decide how much state funding a school district will receive?
After years of legal challenges from underfunded school districts, New Jersey state leaders passed the School Funding Reform Act (SFRA) in 2008.[14] The law spells out a formula that determines how much state funding, in the form of state aid, every school district gets. The courts have found that the SFRA formula — which accounts for a variety of student characteristics, district property values, and other factors — allows the state to meet its constitutional mandate, so long as the formula is implemented correctly and the state fully funds it.[15]
How does the state’s school funding formula work?
The SFRA is complex. It grants several different types of state aid to school districts. The most important of these is “equalization aid,” which is distributed through this simplified formula:
District Adequacy Budget - Local Fair Share = Equalization Aid
To break down each of these parts:
- District adequacy budget. This is the amount of funding the SFRA formula says a district needs to educate its students at the level the state constitution demands.[16] Districts with more students in poverty or more Multilingual Learners will have larger adequacy budgets.
- Local fair share. This is the amount of money the law says is fair, given the district’s property values and resident wealth, for a district to tax itself for its schools. In general, districts with higher property values (per pupil) will have higher local fair shares than districts with lower property values, because it is easier for affluent districts to raise local revenues than less-affluent districts.[17]
- Equalization aid. When the local fair share is subtracted from the adequacy budget, the amount left is the amount of state funding a district should receive. That funding is called “equalization aid.”[18]
In addition to adequacy aid, the SFRA also grants aid that is “off formula”:
- Categorical aid. This is state aid districts receive even if their budgets could be covered entirely by their local fair share. In other words, categorical aid is aid outside the adequacy budget. Categorical aid includes funding for security, transportation, and, importantly, special education.
The SFRA has several additional provisions that affect the distribution of state aid. However, the adequacy formula, local fair share, and categorical aid are the heart of its funding formula.
It is important to note that even though this formula is spelled out in law, the state never fully funded its obligations through the formula until recently.[19] For years, districts were expected to adequately educate students, even when they weren’t receiving the state aid the SFRA says they should have. In 2024, Governor Phil Murphy announced his budget for FY2025 would “...fully fund New Jersey’s school funding formula…”[20] As we discuss below the SFRA formula is out of date and does not provide the funding needed to meet the state’s current learning standards.
How do poverty and other factors affect the state’s calculation of school funding?
Schools enrolling more students who live in poverty, or who are multilingual learners, require more resources to adequately meet the needs of those students. Smaller class sizes, multilingual instruction specialists, classroom supports, health services, social workers, and other supports for at-risk students all require additional funding. Without it, students facing economic barriers will not have equal educational opportunities.[21]
In the 2024-25 school year, 42 percent of New Jersey students qualified for free or reduced-price lunch, a measure of student poverty — that's more than 550,000 students, nearly half of all students in New Jersey.[22] Eleven percent of students were multilingual learners. These students’ schools need additional funding if they are to provide an adequate education.
To provide that additional funding, the SFRA adequacy formula uses “weighted student enrollment.” The formula starts by giving every student a weight of 1.0. Students who are Multilingual Learners (ML) get an extra weight of 0.5. In other words, when counting up the weighted student enrollment, every ML student counts as a student-and-a-half.
Students who qualify for free or reduced-price lunch (FRPL) are weighted between 0.47 and 0.57 more, depending on the concentration of economic disadvantage in their district.[23] Middle school students are weighted more than elementary students. High school students are weighted more than that, and vocational-technical students even more.
The table below gives an example of how weighted student enrollment works. A hypothetical school district has 1,000 students. Five percent are multilingual language learners, and 10 percent qualify for free or reduced-price lunch. Because ML students are weighted at 0.5, every one counts as a student-and-a-half. Half a student is added to the total weighted student enrollment for each ML student. The FRPL weight of 0.47 adds another 47 students to the weighted count. The result is an additional 72 students are added to the final weighted student enrollment figure.
Calculating Adequacy Budgets
Once the weighted student enrollment is calculated, it is multiplied by the “base cost”: the per pupil amount New Jersey has determined is needed to educate an elementary school student who is not in economic disadvantage and is not a multilingual learner. As our example shows below, the result is that school districts enrolling more students facing economic barriers or ML students will have larger adequacy budgets.
Note that students with learning disabilities are not weighted in the same way as FRPL or ML students. Special education funding is discussed below.
This system can only work if the base amount and weights are correct. If the base cost is lower than what’s actually needed, the district adequacy formula will not provide enough funding for school districts to meet their goals. Furthermore, if the base cost is correct but the weights are too low (and there is not enough additional funding for students who face greater obstacles), districts with high proportions of students who live in poverty or speak English as a second language will have district adequacy budgets that are much lower than they need to be to fully support students.
How does New Jersey fund special education?
Students with learning disabilities are not weighted in the same way as free/reduced-price lunch or ML students in the SFRA adequacy formula. Until recently, the state assumed the same percentage of students in every district would have special education needs, and calculated aid accordingly. This is known as “census-based” funding.[25] The rationale for using it was that, if the state instead weighted students with disabilities like FRPL or ML students, districts would be incentivized to over-classify students, since more state aid would flow to them if they did.
Recently, Governor Phil Murphy proposed using actual special education enrollment numbers in place of census-based funding.[26] The SFRA law remains unchanged as of this writing. Whether actual counts of students with disabilities will be used in the future depends on the actions of state leaders over the next year.
A portion of special education funding is categorical aid and “off formula.” In other words, districts receive that funding, even if they have enough local funding to provide an adequate education for their students.[27] This is one of the primary reasons why even the most affluent districts, whose local fair share easily covers their budgets, still get some state funding. The SFRA also provides “extraordinary special education aid” for districts that enroll students who have exceptionally high-cost needs.[28]
Does the school funding formula provide enough money for students to meet the state’s standards?
The SFRA formula recognizes that students in poverty, multilingual learners, and students with disabilities need more resources to be able to meet the state’s standards. The formula can only provide New Jersey’s schools with what they need if it has been calibrated correctly. Specifically: the base amount has to match the true per pupil amount needed to provide an education that meets constitutional standards to students in grades K through 5, and the weights must accurately reflect the additional costs of providing equal educational opportunity to all students.
Evidence shows that the SFRA weights are not correct. Therefore, districts with higher concentrations of poverty often do not receive the funding they need.[29] Since the original law passed in 2008, New Jersey has raised its educational standards. This means more money is needed to provide an adequate education for all students.[30] Resetting the weights to reflect the actual costs of meeting New Jersey’s current standards is necessary for the SFRA to remain in compliance with New Jersey’s constitution.
How are charter schools funded?
Charter schools are independent schools that operate separately from traditional public school districts. If a resident student chooses to attend a charter school, their home school district “passes through” 90 percent of the funding for that student, based on their characteristics (ML, FRPL, special education).[31] The funding includes both state aid and local revenues. The charter funding formula matches the SFRA adequacy formula closely, passing through more funding when more students with special needs enroll in a charter.
The theory behind only giving 90 percent of the per student funding amount is that public school districts have fixed costs that don’t decline when students leave to attend charter schools. If a few students leave a school, the school still has to be heated, cooled, cleaned, and maintained at the same cost. This raises per pupil costs for the district. Districts are also required, by law, to provide transportation to resident students enrolled in charters, and to administer the disbursement of payments to those charters.[32]
It is critically important that, for the fiscal health of school districts, these additional costs are reflected in the state’s school funding system. To date there has been no state-sponsored study done to determine the actual fiscal impact of charter schools on public school districts. This is a serious oversight that must be addressed.
Other states offer vouchers for private school; how would they affect school funding in New Jersey?
Private school vouchers would almost certainly raise costs for New Jersey taxpayers and would not close school funding gaps in the state.[33]
In other states that have implemented voucher programs, a large proportion of students receiving vouchers were already enrolled in private schools. Because these students would attend private school even without a voucher, subsidizing them becomes an additional burden on the state budget.[34]
Recent studies have also shown students in large-scale voucher programs perform significantly worse on standardized tests than their public school counterparts, even when controlling for student differences.[35] Worse results for more money is a bad deal for New Jersey.
How can we improve school funding in New Jersey?
There are several steps the state can and should take to improve school funding:
- Make funding data transparent. The school funding formula calculations are not published publicly and are difficult to understand and interpret. The state should create an easy-to-read version of this data, as it has for other fiscal and education data.
- Update the funding formula. The state should hire outside experts to evaluate the calibration of the school funding formula so the base and weights in the formula are set correctly.
- Fix special education funding. The state should convene a task force on special education funding with a mandate to improve the school funding formula’s accounting for students with learning disabilities.
- Study charter school costs. The state should undertake a study of the fiscal impact of charter schools on school districts so financial harm from charter school enrollments are reduced.
- Reject school privatization. The state should firmly reject any attempt to bring vouchers, education savings accounts, or other forms of school privatization into New Jersey.
End Notes
[1] Rosenberg, L., N.J. schools are No. 1 in the nation, new ranking says. nj.com. May. 07, 2025.
[2] National Center for Education Statistics. The Nation’s Report Card, State Profiles, New Jersey. Ranks are based on figures rounded to the nearest point. Department of Defense schools are excluded.
[3] School Finance Indicators Database. State School Finance Profiles. 2025.
[4] Gross, H.NJ students fail to regain ground lost during pandemic. NJ Spotlight. Jan. 29, 2025.
[5] Baker, B.D. and Weber, M.A.. Separate and Unequal: Racial and Ethnic Segregation and the Case for School Funding Reparations in New Jersey. New Jersey Policy Perspective. 2021.
[6] Urban Institute. State Fiscal Briefs: New Jersey. Sep. 2025.
[7] Baker, B.D. & Knight , D. Does Money Matter In Education? Third Edition. Albert Shanker Institute. January 2025.
Northwestern Institute for Policy Research. The Benefits of Increased School Spending. March, 2017.
[8] Raghupathi, V., Raghupathi, W. The influence of education on health: an empirical assessment of OECD countries for the period 1995–2015. Arch Public Health 78, 20. 2020.
Learning Policy Institute. Student Mental Health and Education [Fact sheet]. 2025.
Learning Policy Institute. How Money Matters: Education Funding and Student Outcomes [Fact sheet]. 2025.
Hanushek, E.A., Ruhose, J., & Woessmann, L. “Economic Gains from Educational Reform by US States.” Journal of Human Capital 11:4, 447-486. 2017.
[9] N.J. P.L. 2007, Chapter 260. “The School Funding Reform Act.”
[10] New Jersey State Constitution (1947).
[11] Abbott, et al. v. Fred G. Burke, Commissioner of Education, et al. (Abbott XX).
[12] NJ Dept. of Education. New Jersey Student Learning Standards. 2025.
[13] Education Law Center. The History of Abbott v. Burke.
[14] N.J. P.L. 2007, Chapter 260. “The School Funding Reform Act.”
[15] Baker, B.D. & and Weber, M. Reforming School Funding in New Jersey: Equity For Taxpayers, Excellence For Students. Trenton, NJ: New Jersey Policy Perspective. 2024.
[16] Baker, B.D., & Weber, M.A. Unlocking Academic Success: Revitalizing New Jersey’s School Funding Formula for Student Achievement. New Jersey Policy Perspective. 2023.
[17] The SFRA’s local fair share formula takes into account both property values and resident income. These two factors are closely correlated, but there are variations. This explains why two districts with the same property value per pupil but different income per pupil might have different local fair shares.
[18] N.J. P.L. 2007, Chapter 260, Section 10. “The School Funding Reform Act.”
[19] Fuller, C. Understanding New Jersey School State Aid Funding. New Jersey School Boards Association. 2024.
[20] State of New Jersey, Governor Phil Murphy. Governor Murphy Highlights Record School Funding Increase in Fiscal Year 2025 Proposed Budget Plan Feb. 29, 2024.
[21] Baker, B. D., & Knight, D. Does money matter in education? Albert Shanker Institute. 2025.
[22] Data source: NJ Department of Education. Fall Enrollment Reports. 2024.
[23] The SFRA formula has a “combo” weight for students who are both multilingual learners and qualify for free or reduced-price lunch. For simplicity’s sake, we omit this weight from our example.
[24] NJDOE, Education Adequacy Report, p.5. 2025.
[25] Farrie, D. & Ciullo, N. The Impact Of Census-Based Funding For Special Education. Education Law Center. April 2024.
[26] Gross, H. NJ school aid destined for big changes? NJ Spotlight. Feb. 26, 2025.
[27] That proportion is stated as one-third in the SFRA law. (N.J. P.L. 2007, Chapter 260. “The School Funding Reform Act.” ) In reality, however, districts have not always received this amount, as the SFRA formula was underfunded.
[28] N.J. P.L. 2007, Chapter 260, Section 13. “The School Funding Reform Act.”
[29] Baker, B.D. & and Weber, M. Reforming School Funding in New Jersey: Equity For Taxpayers, Excellence For Students. Trenton, NJ: New Jersey Policy Perspective. 2024.
[30] Baker, B.D., & Weber, M.A. New Jersey School Funding: The Higher the Goals, the Higher the Costs. New Jersey Policy Perspective. Feb. 2, 2022.
[31] Rubin, J.S. New Jersey Charter School Funding. Rutgers University SOAR Repository. 2015.
[32] N.J.S.A. 18A:36A-12. “Charter School Program Act Of 1995”
[33] Weber, M. (2024) No Matter What You Call Them, Private School Vouchers Are Bad for New Jersey. New Jersey Policy Perspective. Apr. 16, 2024.
[34] Weber, M. (2024) No Matter What You Call Them, Private School Vouchers Are Bad for New Jersey. New Jersey Policy Perspective. Apr. 16, 2024.
[35] Lubienski, C., Faulkner, P., Canbolat, Y., & Curlin, J. Summary of Research on School Vouchers. Center for Evaluation and Education Policy, Indiana University, Bloomington. 2023.
