Tom's River homeowners are about to be hit with a nearly 13% property tax hike as a bitter battle plays out between the school district and the state.

The district, which is the sixth largest in New Jersey, tried to file for bankruptcy after taking a big cut in state aid, but the Department of Education intervened, saying Tom's River needed to raise taxes instead.

Senior correspondent Joanna Gagas has the latest on the feud and what it means for the schools.

This shows, right?

Claiming of bankruptcy, two voted down budgets.

It shows that there's a there's a problem.

There's something happening here.

What's happened is the Tom's River Regional Board of Education voted down the latest budget that was developed after state aid allocations were announced.

The district has faced year-over-year cuts under the school funding formula totaling $175 million.

without raising taxes.

Superintendent Michael Sida says they were simply insolvent.

If there was no tax increase and we didn't seek protection under chapter 9, it would have been the end of Tom Regional Schools.

We're talking over 300 more staff members that would have been laid off.

We're talking um class sizes in 150 to one in the elementary schools.

Unsustainable things.

We would have been done.

The district has already cut 250 positions, slashed programs, sold a school building, among other things.

So, when it came time to approve the budget, the Tom's River Board of Education told New Jersey's Department of Education that it was filing Chapter 9 bankruptcy rather than impose a nearly 13% property tax increase on residents.

What we are doing is telling you that you're not messing with our kids and you're not messing with our taxpayers and this is your problem that you need to solve.

But the DOE stepped in and blocked Tom's River from filing for bankruptcy and instead approved their budget by imposing the 12.9% property tax increase.

They issued a statement saying they were compelled to adopt the final budget and that the board's failure to do so marked a violation of several statutory and regulatory requirements, adding while the department acknowledges the difficulty inherent in school district budgeting decisions, this is not only an expectation but is required under state law and that this marks the second consecutive school district budget the department has been forced to adopt for the board.

This troubling pattern indicates deeper and systemic concerns about the ability of the board and district administrators to meet their most basic responsibilities.

Tom's River Board of Ed President Ashley Lamb shot back at that allegation, pointing to the 2% property tax cap that she says has hamstrung her district.

We are sitting on a fiscal cliff that you put us on.

You would not allow us to raise taxes when we needed to.

You continue to cut our aid.

You will not share the formula.

And then you're blaming it on us.

We did not create this issue.

They created this issue and now they want to point the finger at us because they don't want anybody to look at what they're doing.

Lamb makes no bones about claiming political favoritism in the funding formula allocation.

We're the lowest spending, most efficient district in the entire state of New Jersey.

So, we spend roughly in the neighborhood of $13,000 per child for a regular education student to educate them.

There are districts that are spending twice that.

And why are they spending twice that?

I think that most of the state is paying monumental taxes and the secret funding formula is funneling that money to the areas that elect the governor.

In response, the DOE said the budget they approved was the tentative budget the district submitted to them in May.

But when they approved the budget last year, it also came with a tax increase, this one 9%, making the total property tax increase more than 22% in 2 years.

Beachwood resident and parent advocate Melissa Morrison has a hard time with that.

Even if she does understand the complicated nature of passing these budgets, even with this tax increase with our kids, they're not gaining anything more from it.

The school district isn't gaining anything.

It's to keep it right where it is.

There are many political factors that are in the property tax funding formula that make it convoluted and not work.

I don't think there is anybody who created it that had an intent for what it did.

I'm not bl I'm not saying there's a conspiracy.

I'm saying it doesn't work.

And if we break it down to basic fundamentals and we focus on the purpose which is the which are the children and what it costs to educate them based on the average cost of teacher salary based on all these things.

We can spend a lot less money in the state of New Jersey on a much better education.

Tom's River has filed a lawsuit against the state claiming it can't provide a thorough and efficient education under the current funding model.

That lawsuit has yet to have its first hearing in court, but this district stands ready to fight.

For NJ Spotlight News, I'm Joanna Gagis.