Rising Costs, Falling Literacy: Inflation and the Collapse of Public Education
In the towns of Monmouth County, New Jersey, including Middletown, the public education system is teetering on the brink. Financial challenges, exacerbated by rising costs and dwindling federal and state aid, have compelled school districts to consider significant tax increases. The Middletown Township Board of Education, for instance, has been grappling with budgetary constraints, leading to decisions aimed at increasing property taxes to bridge the funding gap. Similarly, Hazlet is implementing tax hikes to compensate for funding shortfalls and sustain its schools.
Red Bank Borough is confronting a 13% surge in school taxes to offset substantial state funding cuts [source]. The Neptune City Board of Education has voted to exceed the 2% cap on tax increases, seeking nearly $1.5 million to support special education and other critical programs [source].
These local measures are part of a broader trend across New Jersey. Governor Phil Murphy has enacted legislation permitting school districts facing significant state aid reductions to implement one-time tax increases beyond the standard 2% cap. This initiative aims to provide districts like Middletown with the financial flexibility necessary to maintain educational services that were more easily funded during low interest rate environments [source]
These fiscal challenges were not unforeseen. Economic indicators, particularly rising inflation, have long signaled impending strains on public budgets, especially in areas reliant on property taxes. As costs escalate from educational resources to administrative expenses, the financial burden on school districts intensifies. Yet, despite these warnings, a significant portion of the public remains unaware of the underlying economic forces at play.
Illequipped School Boards
Studies consistently reveal a widespread lack of understanding regarding inflation and its implications. The Federal Reserve's Survey of Consumer Finances and the National Financial Capability Study indicate that approximately 40 to 50 percent of Americans struggle with basic economic concepts, including inflation's causes and effects [source]. Further research from the National Bureau of Economic Research suggests that 60 to 70 percent of consumers misinterpret the nature of inflation, often overlooking its long-term impact on savings, purchasing power, and fiscal policy [source].
This widespread misunderstanding hampers both board of education members and voters in their ability to navigate economic landscapes and respond effectively to policy decisions that affect their communities. Consequently, the root issues behind tax increases proposed by local school boards remain unaddressed, as data is difficult to obtain and not easily comprehended by the public, including elected officials.
A Nation That Cannot Read Cannot Govern.
Moreover, the United States faces a concurrent decline in literacy and numeracy, the foundational skills necessary for engaging with complex financial and legislative matters. The U.S. Department of Education's National Assessment of Adult Literacy reports that over 50 percent of U.S. adults read below a 6th-grade level, with about 21 percent functionally illiterate [source]. Numeracy trends are equally concerning. The OECD's Program for the International Assessment of Adult Competencies (PIAAC) ranks U.S. adults near the bottom among developed nations in basic math and problem-solving skills [source].
This convergence of low financial literacy, poor reading comprehension, and declining math abilities poses a structural threat to governance. An undereducated electorate may struggle to comprehend financial data, interpret legislation, or reason through cause and effect, making them more susceptible to misinformation and ineffective policy-making.
This scenario risks initiating a death spiral. An electorate too undereducated to identify or address systemic issues may accelerate institutional decay. As the education system falters under the weight of inflation, taxation, and mismanagement, it simultaneously erodes the very tools - literacy, numeracy, and civic understanding - that are necessary for its own restoration.
Compiled Middletown School Data and Enrollment Analysis
In order to make analysis of the Middletown school budget more accessible to the public, I have compiled all available years of the budget from the New Jersey Department of Education. Additionally, I have conducted a minor analysis of the enrollment data, which highlights significant estimation oversights. The root issues behind the budgetary shortfalls are likely:
Teacher and administration benefit costs rising faster than expected due to inflation (government-reported inflation numbers are often used in financial models, but are arguably highly inaccurate).
Underestimation of the number of students with special needs who were sent to other schools.
Disproportionate cost burden due to special needs education (35% of instruction expenses, despite special needs students comprising only ~19% of the student body).
The Board of Education making assumptions regarding the consistency of federal funding and the reliability of asset sales.
These issues are structural and will require major changes to the education system to resolve. There is likely no scenario in which all students and staff can be given the same accommodations that were possible during a low-interest-rate environment. Please use the following documents to support your own personal analysis. I can be reached at joseph@longshorewealth.com