The Income Tax and School Finance Reform
Prepared by Donald J. Linky for the Center on the American Governor
Harry Ruvoldt Jr. became involved in school finance reform after growing up in Jersey City. He realized the city did not have a strong enough tax base to provide Jersey City children with an adequate education, and he vowed to file a lawsuit challenging the legality of the New Jersey school finance system. Ruvoldt lived two blocks from one of the oldest schools in the state, the Cornelia F Bradford School, PS 16. Ruvoldt noted that he will never forget “those broken windows, that terrible lighting, those kids huddled there.”
As a young lawyer, Ruvoldt had written an article for the New Jersey State Bar Journal entitled “The Right to Learn,” where he asserted the federal and state constitutions contained an implied right to education and the state school finance system needed to secure that right. Most lawyers argued otherwise, saying that if that really was the law, someone would have recognized it and done something about it earlier. Jimmy Ryan, however, agreed with Ruvoldt and urged him to meet with the Jersey City mayor, Thomas J. Whelan. Ruvoldt met with the Ryan, the mayor, City Council President, the mayor’s secretary, and three private practice lawyers, in November 1969, where they talked about the educational opportunities in Jersey City. Ruvoldt argued they should sue the state, but no one agreed other than Ryan.
Mayor Whelan soon faced a public relations problem. The citizens were up in arms about high property taxes in some parts of the city, while teachers were threatening to go on strike for a large pay increase. Other public services, such as fire, police, health, and sanitation, wanted pay increases and the mayor did not know where to get the funds. He announced in the Jersey Journal that he would refuse to provide the funds for Jersey City public schools and the school board would insist that the state was required to fund the operation of Jersey City schools and public schools across the state. They would press their case in a lawsuit. When Ruvoldt read the article, he assumed they had gotten someone else to take the job until Mayor Whelan called him the next night admitting the declaration of a lawsuit was a ruse and he needed Ruvoldt.
New Jersey wasn’t the only state dealing with education inequities. On August 30, 1971, in Serrano v Priest, the United States Supreme Court ruled that the state’s school finance program violated both the United States and California constitutions. Their funding system had heavily relied on property taxes, which created large differences in school revenues and ultimately school quality. The Court ruled that the quality of public education should not be “a function of the wealth of…[a pupil’s] parents and neighbors.” New Jersey began acting before this decision was rendered because New Jersey’s problem stemmed from not having enough revenue to adequately support its public schools. Most states have central cities where businesses and other commercial property can support the schools. However, New Jersey has broadly scattered office properties and little property value. Schools were inadequately and unequally funded because each community paid about 67% of the costs, and the state only paid 28%.
In February 1970, Harry Ruvoldt filed the Robinson complaint in the Law Division of the New Jersey Superior Court. Judge Peter Artaserse, an old friend of Ruvoldt’s lawyer father, was first given the case, as he was in charge of assigning cases to specific judges. Judge Artaserse opted not to keep the case, since he would be retiring soon, and instead gave it to Judge Theodore Botter, assuring him it would be easy. Some saw Botter as a Hudson County politician who owed his career to the local Democratic party, but his decision in Robinson would prove he was just the opposite.
Botter’s decision in Robinson on January 12, 1972, held that New Jersey’s school finance plan violated the equal protection clauses of the federal and state constitutions. His words echoed those of the California Serrano v. Priest decision: “public education cannot be financed by a method that makes a pupil’s education depend upon the wealth of his family and neighbors as distinguished from the wealth of all taxpayers of the same class throughout the state.” While protecting the students, Botter also protected the taxpayers, saying New Jersey’s reliance on property taxes violated the equal protection rights of taxpayers, as well as the state constitution’s clause requiring uniform taxation standards. Botter demanded the State devise a constitutional tax program by the end of the year and gave them a longer deadline for establishing an education program. The attorney general argued that was not enough time and Judge Botter’s decision was wrong, and the case quickly moved to the New Jersey Supreme Court.
On January 9, 1973, oral arguments were heard in the Robinson case. Robinson v Cahill would be the last decision of the “Weintraub Court.” Chief Justice Joseph Weintraub and his court, which remained unchanged for almost a decade, ruled on every aspect of New Jersey law and Robinson was one of their most prominent. Most decisions in the Weintraub court came about in a consensus after a discussion and then circulated copies of the majority and dissenting opinions. Writing the opinions for Robinson worked differently, however. With Serrano v Priest and San Antonio Independent School District v Rodriguez, the United States Supreme Court was embroiled in school funding and the decision in Robinson needed to be based in law and have a substantial diversity of judicial opinion, so Chief Justice Weintraub took it upon himself to write the opinion of the court.
The New Jersey Supreme Court decision on April 3rd did not entirely uphold that of the superior court. Weintraub found that the finance program was not invalidated by the equal protection clause and that it did not violate the taxation provision of the state constitution. While the court did not find an equal education requirement in the state or federal constitutions, it did find that should the quality of education in any school district not meet the equality requirement in the education clause, the state had an obligation to bring it back to a “thorough and efficient” level. They agreed “[it is] clear that there is a significant connection between the sums expended and the quality of the educational opportunity…we accept the proposition that the quality of educational opportunity does depend in substantial measure upon the number of dollars invested.” None of the current programs outright broke the law defined in the constitution, but they provided for an unequal education under the education clause and needed to be reformed.
The decision in Robinson created many proposals by the Byrne Administration which changed the policies governing local education programs, state aid to schools, and the state tax system. The education element was handled by Assistant Commissioner Shine and refined by the Joint Education Committee. Herb Starkey, a consultant for the Department of Education, played a major role in establishing the school aid provisions and the Byrne task force cleared every recommendation. The tax program, however, was formed by the task force and the administration. The Supreme Court decision put school finance reform and tax policies on the agenda of all the policy-making institutions of government.
On May 15, 1974, Governor Byrne addressed a joint session of the Assembly and Senate on the Robinson case. He spoke of the need to guarantee each child an opportunity to get a quality education regardless of local property values. He gave an overview of the forthcoming goal-setting and assessment process to be released by the Joint Education Committee and the school aid program devised by Herb Starkey. He also urged the legislature to adopt an income tax program to relieve property taxes and satisfy the court’s order. While Byrne spoke vaguely about the personal income tax, his goals were clear. The legislatures had opinions on different aspects of the program, but when voting time came on July 15, the Assembly passed the income tax proposal 41-38. It was opposed by a few Republicans and some traditionalist Democrats. A few days later, on July 18, the Senate held a caucus to discuss the tax plan. In order to moderate the debate, the senate president took on a neutral position, but immediately after the caucus ended he held a press conference during which he vocally expressed his opposition to Byrne’s plan. His opposition was so vehement that a senate vote was never formally taken. There were never enough guaranteed votes to pass the income tax.
In 1974 the legislative session ended with no new tax programs or education bills. The court mandated deadline of December 31, 1974 came and went and the legislature was in violation of a supreme court order and now needed to face the constitutionality of the current tax and education funding programs.
A new assembly was elected in November 1975 and moved into its chambers in January 1976. It was headed by Democratic Speaker Joseph LaFonte and majority leader William Hamilton. They took a new approach to solving the school funding issue still facing the government. Rather than leaving the tax program creation to the executive branch, they assigned it to the assembly tax committee. LaFonte and Hamilton recognized the need for property tax relief as well as a new education funding formula. They let the tax committee to create the tax package because they realized the package needed to be approved by the legislature, so it only made sense for members of the legislature to be the ones to devise it.
In March 1976, a tax package was ready for voting. On Monday, the 15th, a bill was put forward to adopt a personal income tax that would only be used for the reduction of local property taxes, repeal specialized taxes, and support public schools. A special voting session began that afternoon and lasted all night into Tuesday morning. The bill passed and moved to Trenton for voting by the senate that had continuously voted down Byrne tax proposals.
On May 13, 1976, the New Jersey Supreme Court issued their seventh decision in the Robinson case. It read “On and after July 1, 1976, every public officer, state, county, or municipal, is hereby enjoined from expending any funds for the support of any free public school.” The senate still had not passed a constitutional funding plan for the schools, and the courts refused to allow another school year go by without one. The schools would close if there was not adequate funding for the next academic year.
June 30 found many of the legislators sitting in a courtroom – a federal district courtroom where the constitutionality of the Robinson VII decision was being contested. The judges decided, nine to two, not to overturn the supreme court decision. After that decision, the assembly met from Wednesday night, all of Thursday, and continued until 1 pm on Friday afternoon. In that time, four different tax plans were voted down. One came close at 4:45 am on Friday, which managed to gather 37 of the 41 needed votes. For the next seven days, assembly members continued revising and voting on tax plans while the school system remained closed. Finally, a program that reduced the homestead property tax, had tax credits for renters, senior citizens, and parents of college students and a revenue-sharing program, limitations on expenditure increases, a tax convention, and a 2 to 2.5 percent income tax that, unless renewed, expired in two years. At 8:05 pm, the tally board in the assembly chamber registered the forty-first vote in favor of the tax package. The senate leadership promised it would accept the new plan, and it did so two days later.
It took six years, from the first filing of the Robinson v Cahill to the first withholding of income taxes on September 3, 1976, for the state to revolutionize the way public schools were funded and to assure uniformity of educational quality. The fight for fair funding and taxes wasn’t over, though, it would be reignited in the 1980s with the Abbott v Burke case, which asserted that the school funding plan was unconstitutional when it was applied to the poorest of towns in New Jersey. That battle continued for even longer, lasting well into the 21st century as the Education Law Center fought for equal, high quality educations for every student in the state.