New Jersey school district resists a state takeover

Officials at New Jersey's Lakewood Township School District are fighting back against the state government's effort to take it over.

The district's unusual demographics have led to protracted financial challenges. But district officials argue its problems are not bad enough to warrant a full state takeover. If neither side relents, the case will go to the courts.

Lakewood had $21.44 million of bonds outstandingas of June 30, according to its annual financial report. The Assured Guaranty (AGO)-insured bonds were issued in 2015 and have maturity dates through 2034.

S&P withdrew its underlying rating in 2017. In addition to the Assured Guaranty (AGO) wrap, the bonds are supported by the New Jersey School Bond Reserve Act, upgraded a notch to A by S&P in August in connection with its upgrade of the state government.

Roughly 4,800 students attend Lakewood schools.

Around 50,000 students who live in the district attend private schools, according to a statement posted on the Facebook page of state Sen. Robert Singer, R-Lakewood.

"No other district in the state comes close to this demographic reality, and New Jersey's state funding formula was never designed to account for such a system," said the joint statement, also signed by Assemblyman Avi Schnall, D-Lakewood, Lakewood's mayor, and a special township committee.

The fast growing township is a magnet for Orthodox Jewish people, who largely send their children to private religious schools.

The Lakewood public school student body shows disproportionate rates of poverty, multilingual learners and "other high-need characteristics," according to the school board's statement.

This has created a structural imbalance in the district's budget, and it's become increasingly reliant on loans from the state. In the 2024-2025 budget year, the district reported, it collected $116 million of taxes but had a $304 million budget.

The district had $214.1 million in state aid advance loans at the end of fiscal 2025, according to its most recent annual comprehensive financial report.

Transportation and special education costs consumed more than half of the district's budget in 2017-2018, the state said in its order to show cause for the takeover.

Lakewood School District did not respond to a request for comment about what the takeover means for its bonds.

A spokesperson for the New Jersey Department of Education said the department "cannot speculate on future bond values," adding "please note that the district will continue to exist as an entity."

Statutes governing state intervention do not address whether a district can issue bonds while under state takeover status, the spokesperson said.

Lakewood would be only the fifth school district in New Jersey to come under full state control, according to a published report. School districts in Jersey City, Paterson, Newark and Camden have all been under state takeovers. In those cases, state intervention lasted decades.

The state's intervention plan for Lakewood includes a new superintendent and five new administrators. It would also fire the district auditor and attorney.

The Department of Education's order to show cause referenced a lawsuit the district lost in September. A state administrative law judge found that Lakewood's students "suffer from an ongoing constitutional deprivation" and described a "consistent pattern of neglect and misfeasance by various elected and appointed Lakewood school leaders."

The order cited, among other things, the judge's finding "that the District's financial difficulties were attributable, in large part, to the extraordinary cost the District chooses to bear to pay for transportation for private school students and for tuition for special education students it places in 15 out-of-district private schools."

The district "did not demonstrate it had done everything it could to reduce its ever-growing transportation costs, nor that it had attempted to curb costs associated with educating special education students by educating them in-district," the show-cause order said.

The Lakewood Board of Education said in a statement that the department relied on "outdated and inaccurate information" and failed to show a state takeover is necessary.

The loans that Lakewood takes out from the state require the district to submit to state oversight, the district noted. Lakewood has been under the supervision of eleven state monitors since 2014, according to its statement.

The district has been on an upward trajectory thanks to compliance with the state's suggestions, the school board argued. None of its schools have been designated as "in need of improvement" since 2018, and Lakewood High School exited the state's "Focus School" status in 2023.

Lakewood argued its challenges are not a matter of mismanagement, but of a "failed state funding formula." The school board will formally respond to the order to show cause and demonstrate that a full state takeover is unnecessary, it said in the statement.

This will lead to a hearing before an administrative law judge, who can recommend a course of action to the state education commissioner, according to the Asbury Park Press. If the education commissioner wishes to proceed with the takeover, they must receive approval from the state Board of Education. Lakewood would then have the opportunity to appeal the decision and take it to a higher court.