Foundation Budget Review Commission

This Report of the Foundation Budget Review Commission is dedicated to the memory of Jack Rennie, a member of this Commission until his untimely death earlier this year.

Jack’s work on behalf of the children of Massachusetts will always be remembered. The Education Reform Act of 1993 is his living memorial. We are inspired by his dream to make Every Child a Winner.And we are inspired by his total commitment to make that dream a reality.

Consultant

Mark D. Abrahams, CPA, President, The Abrahams Group

Education Committee Staff

Constance K. Rizoli, Research Director, Office of Representative Peter J. Larkin

The Foundation Budget Review Commission gratefully acknowledges the excellent work and contributions of our fine colleague Rep. Lida E. Harkins and two fine gentlemen Mark D. Abrahams and Roger Hatch.

Rep. Harkins, House Assistant Majority Whip, served as the co-chair of this Commission during her tenure as House chair of the Joint Committee on Education, Arts and Humanities. Upon her appointment to leadership, she retained her interest and dedication to the Commission as Speaker Finneran’s designee, most notably the work of the subcommittee on Equity and Predictability. Lida's contributions and commitment throughout the Commission's work are sincerely appreciated.

Mark D. Abrahams, CPA, President of The Abrahams Group has provided tremendous support, knowledge and leadership to the commission over the course of the past five months. His organization, research and presentations have afforded the Adequacy, Equity and Predictability, and Regional School Issues subcommittees the opportunity to discuss and clarify the issues heard throughout the Commonwealth and make informed recommendations.

Roger Hatch, Department of Education, Office of School Finance, has contributed an extraordinary amount of time and level of expertise particularly to the subcommittee work on Regional School Issues, but notably to the Adequacy and Equity subcommittees as well. The cooperation of Roger Hatch and the Department in providing data and running projections must be formally recognized as a part of this document.

BACKGROUND AND OBJECTIVES

Section 139 of the FY01 State Budget established the Foundation Budget Review Commission (Commission) responsible “to review the way in which foundation budgets are calculated and to make recommendations to the general court regarding such changes in the foundation formula as may be appropriate. In conducting this review, the Commission shall seek to determine the educational programs and services needed to prepare students to achieve passing scores on the MCAS. The Commission shall examine the assumed percentage for SPED included in the foundation formula and shall make recommendations regarding changes in such percentage or other mechanisms to finance SPED costs including, but not limited to, reimbursement programs or phased-in, standards-based funding programs that increase the state contribution to such costs over a fixed period of years”. Consistent with Section 4 of Chapter 70, the Commission's recommendations shall be filed with the clerks of the senate and house of representatives, who, with the approval of the president of the senate and the speaker of the house of representatives, shall refer such recommendations to appropriate committees of the general court. Within thirty days after such filing, the said committee shall hold a public hearing on the recommendations.

The Commission conducted six public hearings to receive testimony from members of the public. Refer to Appendix A for a summary of public hearing comments. The Commission established three sub committees: (1) Adequacy, (2) Equity and Predictability, and (3) Regional Academic and Vocational School Funding. Each of these topics is discussed herein and summarized below. This document has been compiled from:

· Sub committee discussions at their January 25, February 1, 15, 22 and March 8, 2001 meetings

· Information provided by the Department of Education, particularly the Reauthorization of the Chapter 70 School Finance Formula: Some Technical Issues for Discussion, authored by Jeff Wulfson

· Information compiled by Roger Hatch of the Department of Education at the request of the Foundation Budget Review Commission.

Consistent with the Commission’s mission to make recommendations to the General Court regarding appropriate formula changes, the purpose of this document is to outline the Equity, Adequacy and Predictability and Regional Academic and Vocational School Funding issues in terms of:

ADEQUACY – THE CALCULATION OF THE FOUNDATION BUDGET

The funding provisions of the education reform law, codified in Chapter 70 of the General Laws, were intended to ensure that every public school system had adequate funding, regardless of the wealth of the local community, to provide a quality education to all its students. To accomplish this goal, the Commonwealth committed itself to increases in state education aid over a seven-year period, beginning in FY94 and running through FY00. During this seven-year period, annual state aid for local schools increased from $1.3 billion (FY93) to nearly $2.8 billion (FY00).

In FY01, the state continued to provide funding to keep all districts at foundation level by adjusting for inflation and enrollment, and to allow all districts to receive at least $175 per pupil over last year’s aid through “minimum aid”, bringing Chapter 70 spending up to about $3 billion. Thus, the state is now spending about $1.7 billion more on education aid to school districts than it was spending in 1993, prior to the Education Reform Act. Refer to Appendix B, Chapter 70 Funding History, for further detail. This funding plan resulted in all districts achieving foundation for FY00 and FY01.

The foundation budget is the sum of six factors composing eighteen budget categories, adjusted by a regional wage adjustment factor. These factors are payroll, non-salary expenses, professional development, expanded programs, extraordinary maintenance, and books and equipment. The calculation of the foundation budget is made by the Department of Education and is based on per pupil allowances for each of eighteen spending categories. Refer to Appendix C for a further explanation of the foundation budget.

The central adequacy question to be addressed is whether the resources required for educational adequacy as determined by the foundation budget are sufficient to allow all districts to help all students achieve the state standards and thereby close this achievement gap. Are we spending enough? Is the foundation budget adequate? What existing factors should be changed? What new factors should be added? Should the wage adjustment factor be continued? How should the Commission address the statutory requirement to determine the educational programs and services needed to prepare students to achieve passing scores on the MCAS? How should enrollment be handled in the formula? The adequacy discussion must also consider fiscal restraints including reductions in the personal income tax and property tax levy limits in order to develop practical, implementable solutions.

3. Compute foundation enrollment based on utilizing the average of the most recent three-year, last year actual or projected enrollment, whichever is greater.

Refer to Appendices E, F and G for statements from the Education Advisor to the Governor, Massachusetts Teachers’ Association and Massachusetts Business Alliance for Education, respectively, for additional comments.

EQUITY AND PREDICTABILITY – THE CALCULATION OF LOCAL AND STATE CONTRIBUTIONS

Membership
Chair: Representative Peter Larkin
Paul Reville, Education Reform Review Commission
Mary Frantz, League of Women Voters
Claire Freda, Massachusetts Municipal Association

The foundation budget concept, coupled with large infusions of state aid, has increased educational spending in the state’s poorer communities and has reduced, but not eliminated, the gap between rich and poor districts. The education reform act guaranteed every district an “adequate” foundation budget (see Adequacy) but did not mandate equal levels of funding. There is a difference between equity, the amount of money needed in each community and equality, the same amount of contribution. The concept of "equity" is not clearly defined and therefore open to debate. Equity has generally been defined in terms of ability to pay based on local wealth.

The main goal of Chapter 70 since FY94 has been to ensure that all districts spend at or above their foundation budgets. The equity of the aid distribution can be represented in terms of how much the state subsidizes those foundation budgets. Equity would have been achieved if all communities’ state aid as a percentage of their foundation budgets were inversely related to their wealth factors. The state share of foundation budget moved markedly higher between FY93 and FY01. In FY93, 64 of the 334 communities with wealth below 400 percent of the state average received less than ten- percent funding. By FY01, the lowest share was 14 percent. In FY93, only 11 cities and towns received more than 60 percent funding. In FY01, the number had risen to 88.

It would be unfair to say that the starting point in FY93 was grossly inequitable. In general, wealthy communities received state shares less than twenty percent, and only those with moderate and below-average wealth rose into the thirty to seventy percent range. The pattern in FY01 shows improvement for lower-wealth communities. For higher-wealth communities, the clustering has eroded somewhat. They now receive shares ranging from 14 to 30 percent. Much of this dispersion in the higher wealth range can be attributed to steady infusions of per pupil aid, which give the same amount per pupil to a district at 100 percent of the state wealth average, as to a district at 400 percent.

2) Fairness of Local Required Effort

Chapter 70 requires districts to maintain their effort if they are already at or above their foundation budgets. This effort can be measured by presenting a given year’s required local contribution, in terms of $1000 dollars of RAEV. If this “implicit school tax rate” situation were perfectly equitable, then the required contributions would represent the same unitary “implicit” tax rate. There would be zero correlation between wealth factors and effort.

There has been a huge improvement in spending levels relative to foundation budgets. The entire distribution has shifted toward the higher-expenditure categories. Five districts are actually on track to fall slightly short of their foundation budgets in FY01.These numbers may change if supplemental budgets are voted this spring, as sometimes occurs. The remaining 323 districts will meet or exceed their foundations. Two-thirds (220) of these districts spend more than 10 higher than their foundation. At the very upper end of the spectrum, 31 are above 150 percent, compared to 21 in FY93, with a couple of districts actually approaching 300 percent.

1. Translate Goals Into Aid Calculations

3. Set a floor for low effort communities

7. Share proportionally in local contribution and state aid to finance increases in foundation budgets for over foundation communities

The foundation formula placed the financing of increased foundation budget costs on the community for above foundation communities. The formula should be revised to share proportionally in local contribution and state aid to finance increases in foundation budgets for over foundation communities.

The foundation formula is predicated to bring all districts to foundation through a combination of local and state dollars. The formula should maintain this concept.

REGIONAL ACADEMIC AND VOCATIONAL SCHOOL FUNDING

Membership

Chair: Senator Robert Antonioni
Roger Hatch, Department of Education
Eugene Carlo, Superintendent, Assabet Valley Regional District
Paul Bento, Superintendent, South Middlesex Regional District
Senator Michael Knapik

Regional vocational schools create a special problem under the current formula. Typically only a small proportion of a municipality’s students will be enrolled in a regional vocational district. As a result, it is not uncommon to see large shifts in vocational enrollment from year to year, measured on a percentage basis. These large enrollment shifts, coupled with the hold harmless provisions of the aid calculations, can create large variances in the per pupil aid provided to each of the member towns within a single district. This in turn creates large variances in the amount of local contribution required from each town, variances that cannot be explained by differences in the towns’ ability to pay. In some extreme cases, a member town may have no required local contribution at all. In other cases, a member town’s local contribution can shift significantly from year to year. The following recommendations address the three major problems to be solved.

1)   Disparities in Assessments
2)   Allocating A Community’s Contributions Among Districts To Which It Belongs
3)      Allocating A Community’s Aid Among Districts To Which It Belongs

Regional Academic and Vocational School Funding Recommendations

1) Reduce Disparities in Minimum Contributions At Vocational Regionals, Using the “Zero-Sum Shift.”

Using percentage of foundation budget as a benchmark, this method seeks to bring a community’s FY01 required minimum contribution and FY02 base aid to an “equilibrium” point. If a district’s aid as a percentage of foundation were 40 percent for a municipality as a whole, then aid would be shifted so that its aid was as close to 40 percent as possible for all of the town’s affiliated districts. An equivalent amount of minimum contribution would be shifted to districts losing aid, in order to minimize the budgetary impact. The same amount of aid and contribution would be attributed to any municipality as it currently receives.

2) Reallocate Preliminary Contributions Based Upon the Growth in Foundation Budget.

Once a town’s total preliminary contribution is determined, it would be divided among its affiliated districts based upon increases in the town’s share of foundation budgets at those districts. Both the overall rationale and computation of this method would be easier to explain than the existing approach.

3) Calculate Foundation Gaps at a District Level.

The current formula calculates gaps at a municipal level, and thus mutes the gaps that exist at some lower-spending districts. This prevents full state funding of shortfalls below the foundation. In recent years, this problem has been temporarily addressed in supplemental aid provisions authorized by the final state budget. It would be better for the statutory formula itself to address the problem.

The increase in the municipal revenue growth factor cannot increase greater than the increase in Chapter 70 aid. For example, Chapter 70 aid increased 4.72% in FY 2001. Thus the growth factor was capped at 4.72%. Regardless of the actual growth in municipal revenues, municipal revenue growth factors were not greater than 4.72% in FY 2001. This recommendation would raise the growth factor cap to 150% of the state average. There would still be a cap. But no community would be expected to have a growth factor greater than 150% of the state average.

5) Implement changes after a reasonable transition period, to allow districts to plan for the budgetary impacts.

Most regional superintendents have finalized their FY 2002 budgets and assessments to the various municipalities that comprise their district. Changes to the Chapter 70 formula impacting FY 2002 regional school financing would change the regional assessments for FY 2002. This suggestion would defer the impact of Chapter 70 changes for one year.

6) Eliminate the provision of a 30-day waiting period between the time that the Chapter 70 aid numbers are released and the date that net school spending numbers are available.

Chapter 70, Section 6 requires that the “Commissioner shall file with the house and senate committees on ways and means, not less than thirty days before said reports are transmitted to each municipality and regional school district, copies or a document reporting all of the information contained in said reports.” The elimination of the 30-day period would allow regional superintendents to finalize their budgets sooner, which is essential since multiple municipalities are impacted. Generally, regional superintendents prepare their regional assessments in late January or early February. By eliminating the 30-day waiting period, regional superintendents would have the net school spending and local contribution preliminary numbers in late January. For example, the Governor’s FY 2002 budget was released on January 25, 2001 with the net school spending and local contribution data released by the Department of Education on February 26, 2001. If this recommendation were adopted, regional superintendents would then have the opportunity to present a final budget to the local finance committees of the various municipalities that comprise the regional district with preliminary the net school spending and local contribution data.

The Education Reform Act, passed in 1993, has helped school districts restore programs and hire teachers to reduce class sizes after the budget cuts and resulting teacher lay-offs in the late 1980’s and early 1990’s. The increased funding provided by the Act has also allowed districts to buy textbooks and computers, update libraries and technology, restore building maintenance and provide professional development for teachers.

In June 1993, just as the Education Reform Act was being signed into law, the Massachusetts Supreme Judicial Court handed down a decision in the McDuffy case. The SJC held that the Massachusetts’ constitution requires the state to ensure the education of its children in the public schools without regard to the fiscal capacity of the community or district in which they live. The court held that the state was not providing to children in less affluent communities the education to which they were entitled and stated that it was the responsibility of the Commonwealth to devise a plan and provide funds sufficient to meet this constitutional mandate. The court discussed at length the history of public education in Massachusetts and the Constitution’s requirements, setting out guidelines upon which to judge public education in the Commonwealth. The court retained jurisdiction to determine whether appropriate legislative action had been taken.

In addition to the increased funding, the Education Reform Act imposed, for the first time in this state’s history, rigorous state standards for students, teachers and schools, including development of curriculum frameworks, competency determination for high school graduation, teacher performance evaluations and audits of school performance.

In order to develop and estimate the cost of the foundation budget originally, in the late 1980’s and early 1990’s, prior to the passage of the Education Reform Act, the Massachusetts Business Alliance for Education consulted with a number of superintendents from across the state. The superintendents were asked how much money was necessary to run their school systems at that time. When the Act was passed in 1993, the frameworks and standards were not yet devised and therefore, the cost of implementing them were not included in the initial calculation, nor were the costs of extended school time or early childhood education included.

Eight years after the law was passed, it is clear that many students, particularly in low income urban and rural areas, still have a long way to go to meet the state standards. While the funding disparity that exists between communities has decreased somewhat, there continues to be a large achievement gap between communities in student performance.

The basic approach of the Chapter 70 foundation budget formula was to set the minimum level of spending required for educational adequacy (the foundation budget) for each school district, determine what the local community could afford to contribute and commit state resources to make up the difference.

The first part of the Chapter 70 formula sets the minimum level of spending required for educational adequacy for each public school district, the so-called "foundation budget". The foundation budget is the sum of six factors composing eighteen budget categories, adjusted by a regional wage adjustment factor. These factors are payroll, non-salary expenses, professional development, expanded programs, extraordinary maintenance, and books and equipment. The calculation of the foundation budget is made by the Department of Education and is based on per pupil allowances for each of eighteen spending categories. These per pupil amounts are adjusted annually for inflation and then multiplied by the district’s current enrollment based on the October 1 Foundation Enrollment Report of the prior fiscal year. Each school district has a unique foundation budget, which generally increases on an annual basis. While the foundation budget establishes the minimum required spending level for each school district, the particular amounts in each spending category are intended to serve as guidelines only and are not currently binding on local school districts.

Most of the enrollment data used in the foundation budget calculation is from actual headcounts. The one exception is special education. The foundation formula assumes that 3.5% (three and one half percent of Kindergarten-Full Time, Elementary, Jr/Middle, High School, Bilingual, plus four and one half percent of Vocational) of the students will be in-district SPED and 1% will be tuitioned out (one percent of the sum of Kindergarten-Full Time, Elementary, Jr/Middle, High School, Bilingual, and Hal of Kindergarten Half-Time). Separately from this Commission’s work, the Commonwealth is considering changing how SPED is funded, and such a change could impact the adequacy issue and the foundation formula.

The state, over seven years, made up the difference between the foundation budget and the required local contribution. Districts that were already spending more than the foundation budget (so-called “above foundation districts”) received some increased funding in the form of “minimum aid”. Each year the legislature appropriated the full amount specified in the Education Reform Act to ensure that all school districts would meet their goal. By FY00 educational spending in almost every school district in the Commonwealth was at or above the foundation budget.

Now that every school district is at foundation, this Commission has been appointed in order to reexamine the foundation budget itself to determine, among other things, whether or not the minimum spending amounts set out in the 1993 law are sufficient to ensure that all students are receiving an adequate quality education.

Possible solutions would require that the foundation budget to be increased, including increasing funding to reduce class sizes in grades K-3, expand pre-school education, require full-day kindergarten, expand academic support services and alternative education programs, raise minimum teacher salaries and support special education services. Adjustments must be made to the foundation budget at this time to ensure that the education reform goal and the constitutional standard is met, that is, that all public school districts have adequate funding, regardless of the wealth of the local community.

· Increase the SPED in district enrollment factor incrementally over a period of years. The foundation formula includes a presumed SPED in district enrollment factor of 3.5%. A district’s SPED enrollment factor is determined by multiplying the foundation enrollment by 3.5%. (Table 1 – Simulated Impact of Changes to Foundation Budget Upon Statutory Chapter 70 Formula Aid for the projected impact of increasing the SPED in district factor to 3.75, 4.00 and 4.25)

.· Include a larger factor for Vocational SPED incrementally over a period of years. (See Table 1 for the projected impact of increasing the Vocational SPED factor to 4.75, 5.00 and 5.25).

· Expedite the funding of the SPED Circuit Breaker. Currently the Circuit Breaker standards are planned for January 1, 2002 implementation with Circuit Breaker funding planned for July 1, 2002. DOE should develop plans to provide necessary training for funding implementation for January 1, 2002.

· DOE to ascertain the costs to implement the circuit breaker provisions and to review the trigger thresholds as compared to the 50/50 funding. The costs to be incurred by DOE to compile circuit breaker data are to be funded.

· SPED recommendations should be considered through increased formula factors or categorical grants.

· Redefine elementary enrollment. Elementary enrollment be redefined into two classifications. The first definition would be Lower Elementary Grades (grades 1 – 3). The second definition would be Higher Elementary Grades (grades 4 –5).

· Lower Elementary Grade student teacher ratio be reduced from 22 to 1, to 15 to 1 over a period of years. (See Table 1 for the projected impact of lowering the ratio to 15:1 for lower elementary. Note that this analysis does not measure the impact on space needs or SBA).

· Reduce middle school student teacher ratios (grades 6 – 8) to 22 over a period of 3 years, and to 20 over a period of 5 years. (See Table 1 for the projected impact of lowering the ratio to 15:1 for lower elementary and 20:1 for middle school. Note that this analysis does not measure the impact on space needs or SBA).

· These recommendations should be considered through increased formula factors or categorical grants.

· Include a factor for high enrollment growth districts. Utilize a three-year average or last year actual, or projected enrollment, whichever is higher. (See Table 1 for the impact of changing the computation of foundation enrollment to the greater of FY02 actual, FY00-02 average or the FY03 projected enrollment. Also refer to Table 2 – Impact of Using Projected Enrollment for Foundation Budget Calculations for the projected impact of using projected enrollment).

Low Income

· Include a larger factor for low-income students. Statewide, low income students comprise 25.36% of foundation enrollment. Children in the lower income areas have had consistently demonstrated weaker MCAS performance. The current formula defines low income children in two ways: (1) Low Income Elementary – all pupils in grades 1 through 8 who are eligible for free or reduced price lunches and (2) Low Income Other – all pupils in grades 9 through 12 and one-half of pre-school and half-time kindergarten pupils and all pupils in full-time kindergarten who are eligible for free or reduced price lunches. Low income children are reported by each district as part of the October 1 foundation enrollment form. Because claim forms are collected at the school level, districts may count tuititioned-in pupils in their local counts. Outgoing choice and charter pupils are not assigned low income status by the sending districts because the district does not collect school lunch forms for those pupils. (See Table 1 for the projected dollar impact of doubling the low income factor as well as Table 3 – Low Income Factors in the Chapter 70 Foundation for further analyses).

· Provide a mechanism to adjust high school low income enrollment data so that this information is more closely aligned with low income data from its feeder districts.

Technology

· Include a factor for technology. The current foundation formula does not include a technology factor. See Table 1 for the projected impact of a new technology increment at $30 per pupil.

Early Childhood

· Recognize Full Day kindergarten. Refer to Table 1 for the impact of setting half-time kindergarten rates to full-time kindergarten.

· Increase the teacher salary component of the foundation budget. Refer to Table 1 for the projected impact of raising current teacher salary by $1,000, $2,000 and $3,000

· Adjust the formula so that the wage factor does not jeopardize districts lower than the state average.MCAS

· Expand MCAS remediation factors through categorical grants. Provide these funds with as much flexibility as possible with accountability.

Bilingual

Specific Recommendations

3. Compute foundation enrollment based on utilizing the average of the most recent three-year actual, last year actual or projected enrollment, whichever is greater.

Refer to Table 1 for the projected impact of certain adequacy issues on the foundation budget and Chapter 70 aid. Note that an increase in the foundation budget does not necessarily constitute an increase in Chapter 70 aid.

Impact of Using Projected Enrollment for Foundation Budget Calculations

Defining the “Enrollment Problem”

The current Chapter 70 statute relies upon prior year October 1 pupil headcounts. FY02 Chapter 70, for example, is based upon October 1, 2000 pupils. Faster-growing districts have expressed concern about this “enrollment lag” on the grounds that a given year’s assistance from the state does not reflect the number of pupils actually enrolled during that year.

Long and Short-Term Trends in Enrollment

Before delving into the recent increases in pupil trends, some long-term historical perspective may be useful. Enrollment in Massachusetts’ public schools actually peaked nearly three decades ago. In FY74 there were 1,212,101 K-12 public pupils. The demographics of the “baby boom” dictated that—in spite of other influences such as migration and changing fertility rates—the number of children of school age was destined to decline for some time thereafter. By FY89, the decline bottomed out at 818,769. Since then, the number has risen to 951,886 pupils in FY2000. (These are October 1 headcounts, and are not translated into “foundation enrollments”, an education reform concept, which includes pre-kindergarten, and post-secondary grade levels, but which counts pre-kindergarten and half-time kindergarten as “.5” enrollees.)

Switching to a more recent perspective, foundation enrollment has grown from 820,429 in October 1992, to 959,416 in October of 2000. (Districts’ corrections to their foundation enrollment submissions are currently expected to bring that number down by at least 1,000.) Annual growth has ranged from 2.8 percent to 1.2 percent. Department of Education projections foresee continued growth until October 2002, when enrollment is expected to reach its peak and then remain relatively stable for a number of years.

These trends are not consistent in all regions of the state. The Route 495 corridor has the largest concentration of rapid enrollment growth. Conversely, certain areas of western, central and southeastern Massachusetts are experiencing enrollment declines. Between FY01 and FY02, 197 of the state’s 328 operating school districts had enrollment increases totaling 16,034. Thirty-eight of these were growing by more than five percent. On the other hand, 125 experienced enrollment declines totaling 4,290 children, including 21 districts that went down more than five percent.

It is certainly possible to use projected enrollments in the formula. The “old” (1980’s vintage) Chapter 70 formula was based upon one-year projections. When actual numbers came in a year later, the formula was re-run and districts were adjusted upward or downward on their next year’s Chapter 70 aid. A separate line for prior year adjustments was published on annual cherry sheets.

Projection Methodology

The “cohort-survival” technique is a commonly used approach, which measures the rate of progression from the enrollment in one grade, to that in the subsequent grade the following year. Several years of these ratios can be used in order to mute statistical spikes that may be caused by external circumstances such as the closing of a local parochial school, the opening a large factory or business, a new housing development, etc. The advantage of this “bottom-up” approach is that it allows for projections for individual grades, which is important because the foundation budget incorporates different rates for elementary, middle, and high school pupils.

It is important to note that there are three general steps in arriving at a projected foundation enrollment. First, one computes the foundation headcount. Second, the headcount must be allocated amongst the regular, bilingual and vocational programs. Finally, headcount must be translated into foundation enrollment, which caps pre-kindergarten regular education enrollment at twice the number of special education pupils in that grade, and which then counts the net pre-kindergarten and half-time kindergarten pupils as half-time enrollments.

Results

Projected FY03 foundation headcounts were computed for operating districts. They were then translated into foundation enrollments. In total (including non-operating districts), enrollment was projected to hit 966,897 in FY03, an increase of 7,481 enrollees or .8 percent. Around the state, 206 of 328 operating districts were projected to have a combined increase of 11,252 pupils. Fifteen of them would rise more than five percent. Conversely, 122 districts would have 3,771 fewer pupils in FY03 than the previous year.

These figures were inserted into the FY02 statutory foundation budget. If a district saw a decline in pupils, the FY03 enrollment was used, rather than the higher FY02 figures. The projected pupils were allowed to impact the wage factor. With all other components such as inflation being held constant, the changes in foundation budget were closely tied to the projected change in enrollment. Foundation budgets went up $53 million, which was .8 percent higher than the statutory run.

An Alternative Approach: Three-Year Historical Averages

It has been suggested that a three-year rolling average of enrollments might be an improvement over using projected enrollments. This approach was calculated using FY00, FY01 and FY02 Chapter 70 enrollments.

In an era of increasing enrollments, selecting a three-year average results in a lower state total than would be obtained by using the current actual numbers (in this case, FY02). Total enrollment was 947,813, which is 11,603 pupils less than the current statutory figure of 959,416. Foundation budgets totaled $6,649,810,828 or 1.2 percent less than the statutory calculation.107 districts received higher foundation budgets than the statutory formula assigned them, by a combined $20,770,223. 221 districts received lower foundation budgets, with the reduction totaling $99,340,528.

Defining “Low Income”

Low income children are reported by each district as part of the October 1 foundation enrollment form. Low income status is derived from free and reduced lunch forms submitted by parents to their children’s schools.

Because claim forms are collected at the school level, districts may count tuitioned-in pupils in their local counts. On the other hand, outgoing choice and charter pupils are not assigned low-income status by the sending district, because the district doesn’t collect school lunch forms for those pupils.

Distribution of Low Income

Statewide, low income students comprise 25.36 percent of foundation enrollment. Individual districts range as high as 82 percent (Chelsea). Thirteen districts, all in cities, surpass 50 percent.

Impact of Low Income Enrollment In The Foundation Budget

Low-income pupil counts affect the foundation budget in two significant ways. First, the headcounts reported by districts are assigned the following incremental FY02 foundation dollar amounts for each low-income pupil.

In addition, low income elementary pupils (grades 1-8) generate an additional $470 per pupil for expanded programs. Including the expanded programs amount, low-income elementary pupils are assigned an additional $2,415. Low-income pupils in other grades account for that amount less the $470, or $1,945. In FY02, these pupils account for $555,857,729 in foundation budget dollars.

Doubling the expanded program rate from $470 to $940 per elementary low-income pupil would raise foundation budgets by $83,983,996 statewide.

The second way in which low income enrollment directly affects the foundation budget is in the wage factor calculation. If a community’s wage factor falls below 100 percent, and if it also exceeds the state average low income percentage of total enrollment, then it is brought all the way up to 100 percent. This calculation affects 38 communities, and raises their foundation budgets by a combined $39,400,002.

The underlying philosophy of the foun dation formula is that the financing of public schools continues to be a shared obligation. The foundation formula first looks to the municipality, and then to the state, for financial support for the schools. The Commonwealth made up the difference between the foundation budget and what the cities and towns can afford. Thus the foundation formula:

· Establishes a targeted spending level for each school district (foundation budget).

· Computes what the local community can afford to contribute (local contribution).

· Commits state resources to make up the difference through various aid categories (state aid).

State contributions totaled 30% of actual net school spending in FY 1993 and 42% in FY 2001.

The concept of "equity" is not clearly defined and therefore open to debate. Equity has generally been defined in terms of ability to pay based on local wealth. Historically, the Commonwealth has used different measures of local wealth. The current foundation formula (FY01) utilizes EQV adjusted for income on all properties. In addition, the current formula utilizes a “valuation ratio,” a factor in the calculation of overburden aid. The valuation ratio is the adjusted equalized valuation divided by FY01 foundation enrollment divided by the state average adjusted equalized valuation per pupil. A community with a valuation ratio greater than 120 is considered wealthy. Conversely a community with a valuation ratio less than 95 is considered less wealthy. The proposed House 1 formula utilizes EQV adjusted for income on residential properties only. Other factors have been EQV/pupil, EQV/capita and EQV/weighted pupil. Each measure results in different “equity” among communities. Another indicator to measure equity is the percentage of state aid (or local contribution) as a percent of foundation budget. Thus the ability to pay is what the foundation formula says a community should pay in a given fiscal year.

DID “EQUITY” IMPROVE BETWEEN FY93 AND FY01?

There are three types of equity: taxpayer equity, state aid equity and pupil or student equity. Each is briefly discussed below.

Measuring Equity

To determine whether there has been any improvement in equity, one must choose among the various statistical measures of equity. This analysis relies upon “residentially adjusted equalized valuation per pupil.” While not universally accepted, this ratio has met with generally positive response.

Equalized valuation is almost universally used in state aid programs, in preference to actual assessed valuations. The Massachusetts Department of Revenue (DOR) computes this statistical construct every two years, so that communities’ property values can be measured on an equal basis at one point in time, instead of on the staggered three-year revaluation schedule mandated by the Commonwealth. DOR bases the computation upon analysis of property sales, relative to those properties’ assessed values.

Equalized valuation is unsurpassed as a tool for comparing all 351 cities and towns’ “stock” of wealth—property value. However, it fails to recognize that property value itself is an artificial concept. A home is not a liquid asset, and it fails to provide a tangible “flow” of income to pay for property taxes. The FY93 education reform law initiated the process of adjusting equalized value by the ratio of a community’s 1989 per capita income compared to the state average. The Governor’s FY02 budget proposal refines that approach so that only the residential share of equalized valuation is adjusted by income. This recognizes that resident taxpayers pay property taxes on the values of their own homes, but not on the values of the businesses and factories that comprise the non-residential portion of equalized valuation.

“Residentially adjusted equalized valuation” (RAEV) can be related to the number of pupils that the town is required to educate (foundation enrollment). This ratio, when compared to the statewide average, is used to derive a “wealth factor.” A town at 100 percent can be said to have an “average” level of wealth available to pay for its student population. One at 200 percent is twice as wealthy as the average community.

For the following analysis, FY01 RAEV per pupil was computed using 2000 residentially adjusted equalized valuations, using an average of 1996 to 1998 income per household member for reporting taxpayers. This is derived from the FY02 House 1 budget proposal, which marks the first time that DOR income tax data has been directly incorporated into a state aid program. The main weakness of this statistic is that not all residents are required to file taxes; therefore, the measure may skew a town’s apparent wealth by excluding low-income and elderly residents. On the other hand, its strength is that it is much more current than the latest available US Census income per capita, now more than ten years old. (To analyze FY93 school data, it did make sense to use a community’s income per capita relative to the state average, from the 1990 US Census.) The assistance of the Department of Revenue in compiling both the 1996-1998 income data, and the 1992 and 2000 residential share of equalized valuation, is gratefully acknowledged.

Taxpayer Equity

Each community’s Chapter 70 aid, required local contribution, RAEV per pupil and resulting wealth ratio, are shown for both FY93 and FY01 on Table 4. At least two perspectives on these data are needed to explore the degree of taxpayer equity: 1) the fairness of the aid distribution, supported by all of the Commonwealth’s taxpayers, and 2) the fairness of the required local contribution, where the burden is borne by local taxpayers and businesses.

The accompanying scattergrams show the relationship between community wealth and both state aid and required tax effort, for both FY93 and FY01. In all four charts, towns whose wealth factor exceed four times the state average are excluded from the analysis.

Figures 1 and 2 shows a “rising tide lifts all ships” effect. The state share of foundation budget moved markedly higher between FY93 and FY01. In FY93, 64 of the 334 communities with wealth below 400 percent of the state average received less than ten- percent funding. By FY01, the lowest share was 14 percent. In FY93, only 11 cities and towns received more than 60 percent funding. In FY01, the number had risen to 88.

It would be unfair to say that the starting point in FY93 was grossly inequitable. In general, wealthy communities received state shares less than twenty percent, and only those with moderate and below-average wealth rose into the thirty to seventy percent range. The pattern in FY01 shows improvement for lower-wealth communities. Visual review reveals that the poorer cities and towns on the left side of the graph show a tighter “clustering” in FY01 than in FY93. The inverse statistical correlation strengthened from -.70 to -.83.

For higher-wealth communities, the clustering has eroded somewhat. They now receive shares ranging from 14 to 30 percent. The correlation dropped from -.34 to -.13. Much of this dispersion in the higher wealth range can be attributed to steady infusions of per pupil aid, which give the same amount per pupil to a district at 100 percent of the state wealth average, as to a district at 400 percent.

2) Fairness of Local Required Effort

There has been a slight lessening in the equity of tax effort required to meet required local contributions, between FY93 and FY01. Visual review of the two figures shows that more of the lower-wealth communities tax at higher levels in FY01 than in FY93. The overall pattern continues: higher-wealth towns meet their contributions using smaller portions of their income and tax base. Statistically, the correlations between wealth factors and implicit tax rates became more powerful on both ends of the wealth scale. For those below 100 percent, the correlation was -.16 in FY93 and -.36 in FY01. For those above 100 percent, it was -.76 in FY93 and -.81 in FY01. On both counts, correlations were moving away from zero, not towards it.

The predominant goal of Chapter 70 since FY94 has been to bring all districts to a point where they are spending at levels that are at least equal to their foundation budgets. It is a rare case where state lawmakers were given the opportunity to specify a long-term policy goal whose annual progress and achievement could be precisely measured.

Measuring Pupil Equity

Chapter 70 created a new expenditure measure called “net school spending.” It encompasses nearly all of a school district’s operating expenditures, and includes those municipal outlays that indirectly benefit school districts. It does not include transportation or capital expenditures, because those are funded through separate state aid accounts. “Required” net school spending is stipulated in each year’s Chapter 70 formula, and equals the sum of required minimum contribution plus Chapter 70 aid. In FY00 and FY01, this requirement equaled or surpassed foundation budget for every school district in the Commonwealth.

The Massachusetts Department of Education collects detailed expenditure and budget data from school districts annually. This allows for close review of compliance with the net school spending requirements.

Most districts spend at levels well in excess of what the state dictates. Statewide, districts have budgeted $455 million more than their FY01 required levels. If we are to gauge where districts truly stand in relation to their foundation budgets, it makes sense to include this extra effort. For the following analyses budgeted, rather than required, FY01 net school spending is used. It is derived from Schedule 19 FY01 budget information submitted by each district on its “End of Year Pupil and Financial Report.”

Since the goal of the formula is to achieve foundation-level spending, the best way to assess the formula’s impact is to compare FY93 net school spending as a percentage of foundation, to the comparable figure for FY01. FY01 budget data must be qualified as tentative, of course, because budgets sometimes are amended or not fully expended. Also, about 30 districts’ budget data is unacceptable for analysis as this is written; their data is estimated.

In FY94 and FY95, there was a flurry of regionalization, which makes direct comparison of districts from FY93 to FY01 difficult. For those communities that joined regions, their local data from FY93 was merged with that of their fellow member towns to arrive at an aggregate number for each newly formed regional district.

Results

Figure 5 shows that there has been a huge improvement in spending levels relative to foundation budgets. The entire distribution has shifted toward the higher-expenditure categories shown toward the right of the graph. Five districts are actually on track to fall slightly short of their foundation budgets in FY01. These numbers may change if supplemental budgets are voted this spring, as sometimes occurs.

The remaining 323 districts will meet or exceed their foundations. Two-thirds (220) of the districts spend more than 10 higher than their foundation. At the very upper end of the spectrum, 31 are above 150 percent, compared to 21 in FY93, with a couple of districts (Provincetown and Rowe) actually approaching 300 percent.

Table 5 lists each district’s foundation budget and net school spending for FY93 and FY01, as well as the change in the spending as percentage of foundation. These data are plotted on the scattergram in Figure 6. Diamonds indicate districts’ percentages in FY01; for any district its FY93 percentage is on the diagonal line directly above or below it. Diamonds above the line show the 300 districts that have improved their spending percentage since FY93. Those below the diagonal represent the 28 that have slipped lower.

Defining a Fair Share of Aid

The basic tenet of this approach is that the state share of foundation budget should be inverse to the wealth of the community. Wealth is defined as a community’s residentially-income-adjusted equalized year 2000 property valuation, divided by its FY01 foundation enrollment (RAEQV per pupil).

Defining a Fair Level of Local Effort

Ideally, the amount of local tax effort needed to reach foundation, after a fair share of aid was determined, would be a roughly equivalent implicit school tax rate for lower and moderate-wealth communities.

Figure 8 shows how much each community needed to spend in implicit school tax rates in FY01 to reach foundation, given their actual aid. Those amounts are shown as triangles. There is much variation, with as much as ten dollars per $1,000 separating communities at the same wealth ratio level. The same figure shows what the implicit rates would be if aid were allocated on the “fair share” paradigm described above. Those amounts are shown as diamonds. There is vast improvement in the equality of rates.

SUMMARY

Specific Recommendations

1. Translate Goals Into Aid Calculations

If there were agreement that the mix of aid and local effort described above represented a satisfactory equity goal, it could guide annual aid calculations. For example, if a community could be shown to be receiving too little aid, it might receive some increment that would bring it closer to its target, with corresponding reduction in its minimum contribution. Conversely, if it could be shown that a community was receiving too much aid, it could be exempted from or limited to certain aid increases that it would otherwise receive. Refer to Table 6 for the projected “fair share” aid increment.

Many districts meet their contributions using smaller portions of their income and tax base. However, a number of districts expend large amounts of contributions relative to their wealth. The formula should provide relief to high effort communities.

3. Set a floor for low effort communities

A number of communities are spending low amounts of effort relative to their wealth. The formula should be revised to establish a floor for low effort communities. These communities would be given a number of years to raise their local contribution to reach this floor. The establishment of the floor and the determination of which communities would be required to increase their local contributions will require further study.

The current formula utilizes 1989 Average Income data. The formula should be changed to utilize more current data like the DOR 1996 – 1998 income data.

The current formula provides an income adjustment to total EQV, including residential, commercial and industrial properties. The formula should be changed so that only the residential share of equalized valuation is adjusted by income. This recognizes that resident taxpayers pay property taxes on the values of their own homes, but not on the values of the businesses and factories that comprise the non-residential portion of equalized valuation.

Local contributions cannot grow greater than the increase in growth of state aid. This possible solution would lift the cap on the growth of the MRGF. In FY01 the growth factor was capped at 4.72%. See Table 7 - Raising the Cap on the Growth Factor – Impact Upon FY02 Statutory Chapter 70.

7. Share proportionally in local contribution and state aid to finance increases in foundation budgets for over foundation communities

The foundation formula is predicated to bring all districts to foundation through a combination of local and state dollars. The formula should maintain this concept.

Every community is granted a holdharmless provision that it will receive in state aid at least the amount it received the previous year. Between FY01 and FY02, 138 districts lost enrollment. The foundation formula should provide state aid that follows the child. An increase in enrollment could result in an increase in state aid. Conversely a decrease in enrollment could result in a decrease in state aid.

REGIONAL ACADEMIC AND VOCATIONAL SCHOOL FUNDING

STATEMENT OF THE PROBLEM

We have heard much over the years about “the regional allocation problem” in Chapter 70. There are actually three separate issues concerning the treatment of regional districts in the formula that are problematic.

1) Disparities in Assessments

This language has been interpreted to mean that base aid is calculated and accrued separately at each district to which a community belongs. The result of this approach has been to continue to provide base aid plus annual minimum aid increments to regional district members whose enrollments may have dropped considerably since FY93, which was the starting point for current calculations. As a town’s local contribution to each of the districts to which it belongs is dependent on how much aid exists in those districts, there are now some pronounced disparities in contributions within regional districts. This situation is most visible in vocational regionals, where enrollment numbers are smaller and more volatile. The disparity between the highest and lowest FY01 required contributions per pupil are shown in Figure 9.

2) Allocating A Community’s Contributions Among Districts To Which It Belongs

A community’s contribution is determined first for the town as a whole (the preliminary contribution). This amount must be distributed among anywhere from one to four affiliated districts to which the town may belong, including local, academic regional, vocational regional and agricultural districts.

In FY96, the Department of Education began using the current “reallocation percentage” to distribute an upcoming year’s town total preliminary contribution. It recalculates the prior year local contribution at each affiliated district based upon a town’s current enrollment at regionals, which was not known at the time of the prior year’s calculations. These recalculated amounts are used to derive an updated, enrollment-sensitive, reallocation percentage. In many ways, it is a perfectly defensible methodology compared to some alternatives that have been considered. Unfortunately, it is very difficult to explain. An example is shown in Table 8.

3) Allocating A Community’s Aid Among Districts To Which It Belongs

In addition to the above three problematic areas, the regions, both academics and vocationals also face a timing problem. Chapter 70 requires a 30-day review period between the time the preliminary estimates and the net school spending figures are announced. The 30-day period was stipulated for the benefit of the state legislature. Historically however the legislature has not made an adjustment within this 30-day period. The 30-day period typically begins in late January and ends in late February. Regional superintendents generally prepare their assessments in late January without knowing the net school spending or local contribution amounts.

POSSIBLE SOLUTIONS

· A community’s contribution to each of the districts to which it belongs should be inversely related to its “ability to pay.” This school finance precept has guided court decisions and state aid policy for decades, yet it must be clearly stated here, because it cannot be assumed that there is unanimity about this objective. Ability to pay is defined here as 2000 residentially-adjusted equalized valuation per FY02 Chapter 70 foundation pupil, as proposed in the Governor’s FY02 budget.

· Disparities in minimum contributions per pupil should be reduced in vocational districts, where current disparities are most severe.

· Annual increases in contributions should be closely related to changes in foundation budgets. Foundation budgets were chosen rather than enrollments, in order to recognize the higher costs associated with pupils in vocational districts. The goal here is that dollars should first be directed to where the needs have increased the most.

A description of a possible solution to each of the three “regional allocation” problems follows.

1. Reducing Disparities in Assessments: The “Zero-Sum Shift”

Just as vocational districts have large disparities in aid and assessments among members, communities differ in the levels of aid and contribution going to their various affiliated districts. Both problems could be reduced—although not solved completely—under the “zero-sum shift” described below and in Table 9.

There are two guiding concepts involved. First, a community should expect to receive base aid at the same proportion of foundation budget for its children at each of its regional districts as it receives at its local district. (Likewise, the local contribution’s share of foundation budget should be the same for all of the community’s districts.) Second, no community should receive any less or any more base aid in total than it currently does.

The “zero-sum” shift would first calculate, for the town as a whole, the percentage of FY02 foundation budget represented by FY02 base aid as well as FY01 required contribution[1]*. Next, it would identify how far above or below these averages it is at, for each of the districts it belongs to. These percentages would then be translated into dollar amounts by applying them to the foundation budget. The town’s excess and shortfall in dollars would be summed for the town as a whole. An amount of aid to shift would be determined, by taking the lesser of the total excess aid and the total shortfall in contribution[2]**. This total amount would be reallocated among the town’s districts based upon a pro-rated share of how far above or below the town average they are.

As an example, we choose Monson, which has a local K-12 district and also belongs to the Pathfinder Vocational Regional District. Monson’s base aid, as a percentage of foundation (column E) is 58.96 percent for the town as a whole. The local district receives 60.2 percent. This 1.24 percent excess above the average translates into $105,610 (column G). Pathfinder’s 46.66 percent share, when applied to Monson’s share of the Pathfinder foundation budget, yields $106,428 of underfunding (H).

Monson’s townwide local contribution (F) represents 43.56 percent of foundation budget. The local district’s share, at 41.52 percent, is $173,745 below what it would be if calculated at 43.56 percent (L). Pathfinder’s contribution percentage is 63.68 percent, or $174,092 (K) above the town standard.

The town’s total amount of aid in excess of the average ($105,610, column G) is less than the amount of contribution below the average ($173,745, column L)). Therefore, the lower of the two numbers is used as the amount to be shifted. $105,610 of aid is taken away from the Monson local district (M), and added to the base aid at Pathfinder (N) on Monson’s behalf. In return, Pathfinder’s contribution from Monson is lowered by $105,610 (O) and the equivalent amount is added to the local district’s contribution requirement (P). Neither of the townwide figures for base aid ($5,531,304, columns C and Q) nor contribution ($4,087,275, columns D and R) have been affected.

Summary

This approach can be shown to reduce the disparities in both base aid per pupil and minimum contribution per pupil within vocational regionals (Figure 10).

This would ideally be a one-time adjustment. It would create a more equitable baseline situation from which to go forward in future years. To repeat this adjustment every year would add unwanted complexity to an already mysterious set of calculations.

2. Allocating A Community’s Contributions Among Districts To Which It Belongs

A number of possible improvements to the current method were considered for this analysis, but discarded for reasons briefly cited below. These options include:

· Remove vocational districts from the formula and create a separate vocational formula. This would be a radical change, and an admission that there is no good “fix” to the allocation problem.

· Apply the growth factor uniformly to prior year’s contributions. This plan would be refreshingly simple to explain, but it would eliminate any sensitivity to enrollment changes.

· Use the current approach, but don’t reallocate the prior year’s required contributions for regional members. This reallocation is very confusing, but its value is that it does make the current formula more sensitive to shifts in enrollment at regionals. To ignore it would make the method less, not more, responsive to enrollment change.

· Tie annual increases to disparities within communities in how much they contribute as a percentage of foundation budget to each of their affiliated districts. This is the same concept that was the basis for the zero-sum shift described above. In addition to becoming quite complex to implement, this approach failed to reduce disparities within vocational regionals

3. Allocating Contributions: the Foundation Link

This proposed method directs increases in minimum contributions to a town’s affiliated districts based upon the increases and the overall amounts of those districts’ foundation budgets. The concept should be readily explainable to both public officials and the public at large. New local dollars are assigned first to the districts that are experiencing increased needs. If there is not enough new money to cover the increased foundation budget, then districts with declining foundation budgets are level-funded at their previous year’s contribution. If money does remain after those increases are met, then the net available contribution is pro-rated based upon each district’s share of the current foundation budget, and even those with foundation budget declines receive some new local money.

Table 11 demonstrates the twelve steps needed to compute the FY02 preliminary contribution. Within each community, the increase in the town’s share of affiliated districts’ foundation budgets between FY01 and FY02 is determined (column D), as well as each of those districts’ share of the total increase (E). The town’s overall preliminary contribution appears in column F, and is derived from the current formula’s definitions that rely upon the municipal revenue growth factor, gross standard, and foundation budget.

The change in the contribution between FY01 and FY02 is shown in column G. If there is an increase, it is divided among districts in the following priority. First, towns sending students to Essex Agricultural School continue to be required to meet a fixed assessment calculated by the Department of Education (column H). Second, the remaining contribution (I) is assigned to districts where the foundation budget is increasing, based upon their share of the increase (E). If the available new contribution exceeds the total increase, then the net available contribution is pro-rated among all of a town’s districts (J), based upon their share of FY02 foundation budget (C).

Four communities (Brimfield, Brookfield, Peru and Savoy) showed decreases in required contribution. Their decreases are allocated proportionately among affiliated districts (K) based upon the same foundation share (C) that was used for those with net available increases. The preliminary contribution (L) is the sum of the prior year’s minimum contribution (A), the three columns allocating the increased FY02 contribution (H, I and J), and the last column showing any necessary decreases in contribution (K).

Summary

The method does slightly improve the relationship between ability to pay and contribution per pupil. Pearson correlations increase from .791 to .796 for local districts; .709 to .713 for academic regionals, and .359 to .422 at vocationals.

Table 12 shows the preliminary contributions per pupil as they would appear if the current statutory approach was unchanged, and what they would be under this optional proposal. On the whole, disparities at vocational regional districts appear to be about the same as they would be if the current statute were used (compare Figures 14 and 15). It should be noted that neither of these simulations was based upon the “zero-sum shift” described above. Had that redefinition of the starting point for FY02 calculations been in effect, the results of these simulations would likely have shown smaller disparities in the FY02 contributions.

Finally, the foundation link’s computations directly relate new local contributions to foundation budgets.

Allocating A Community’s Aid Among Districts To Which It Belongs

This problem can be solved by computing aid calculations at the district, rather than the town level. The FY02 House 1 proposal used the district approach, although it did not retain two of the components (overburden aid and equity aid) in the current formula that pose the greatest problems in this regard. Assuming that the formula is on schedule for some change in its aid calculations, whatever the final components may be, it is therefore too early to make a specific recommendation on this problem. However, it is useful to highlight its importance as well as to suggest that the problem is something that can be corrected fairly easily once the specifics of any new Chapter 70 formula begin to take shape.

The following recommendations are offered for the Commission’s consideration. The analyses above were prepared for consideration by the Foundation Budget Review Commission’s “Regional Allocation” subcommittee and do not necessarily represent an endorsement by the Department of Education or the Board of Education.

2) Reallocate Preliminary Contributions Based Upon the Growth in Foundation Budget. Once a town’s total preliminary contribution is determined, it would be divided among its affiliated districts based upon increases in the town’s share of foundation budgets at those districts. Both the overall rationale and computation of this method would be easier to explain than the existing approach.

3) Calculate Foundation Gaps at a District Level. The current formula calculates gaps at a municipal level, and thus mutes the gaps that exist at some lower-spending districts. This prevents full state funding of shortfalls below the foundation. In recent years, this problem has been temporarily addressed in supplemental aid provisions authorized by the final state budget. It would be better for the statutory formula itself to address the problem.

5) Implement changes after a reasonable transition period, to allow districts to plan for the budgetary impacts. Most regional superintendents have finalized their FY 2002 budgets and assessments to the various municipalities that comprise their district. Changes to the Chapter 70 formula impacting FY 2002 regional school financing would change the regional assessments for FY 2002. This suggestion would defer the impact of Chapter 70 changes for one year.

6) Eliminate the provision of a 30-day waiting period between the time that the Chapter 70 aid numbers are released and the date that net school spending numbers are available. Chapter 70, Section 6 requires that the “Commissioner shall file with the house and senate committees on ways and means, not less than thirty days before said reports are transmitted to each municipality and regional school district, copies or a document reporting all of the information contained in said reports.” The elimination of the 30-day period would allow regional superintendents to finalize their budgets sooner, which is essential since multiple municipalities are impacted. Generally, regional superintendents prepare their regional assessments in late January or early February. By eliminating the 30-day waiting period, regional superintendents would have the net school spending and local contribution preliminary numbers in late January. For example, the Governor’s FY 2002 budget was released on January 25, 2001 with the net school spending and local contribution data released by the Department of Education on February 26, 2001. If this recommendation were adopted, regional superintendents would then have the opportunity to present a final budget to the local finance committees of the various municipalities that comprise the regional district with preliminary the net school spending and local contribution data.

FIGURE 9

TABLE 8

TABLE 9

FIGURE 10

FIGURE 11

FIGURE 12

FIGURE 13

TABLE 10

TABLE 11

TABLE 12

FIGURE 14

FIGURE 15

[1] The required FY01 contribution does not reflect excess debt, which is intended to be a temporary amount each year. FY01 contribution is chosen rather than FY02, because the shift would occur prior to the derivation of FY02 contributions in the formula.

[2] The lesser of the aid and contribution is taken as the amount to shift, in order to preserve affected districts’ total net school spending. A loss of $100 in aid should be offset by an equivalent amount of contribution shifted from the districts that would be the recipients of that additional aid.

Adequacy Issues From the Needham Public Hearing
· Special education is under-funded.
· State support for non-regional transportation should be increased.
· Elements/factors in the foundation budget do not accurately reflect actual school spending.
· METCO has been historically under-funded.
· Low income and bilingual populations are not treated adequately.
· The funding lag created by using the October 1 headcount causes high enrollment growth communities to make cuts.
· Several teachers testified in favor of the MTA agenda, including class size reduction and higher salaries.

Adequacy Issues From the Worcester Public Hearing
· The foundation budget under-funds preschool, transportation, and SPED.
· Items that should be included in the foundation budget include: non-SPED alternative education programs, ESL students not enrolled in a transitional bilingual education program, extended school hours, MCAS remediation, attendance and dropout incentives, and industry sensitive inflation factors.
· Adequacy should be defined using accountability benchmarks.
· Teachers spoke in support of the MTA agenda, including class size reduction and salaries.

Adequacy Issues From the Holyoke Public Hearing
· SPED costs, especially as relates to inclusion, have increased greatly.
· Aid should be distributed on a per-pupil basis, with weighting shifts for various categories of students.
· Transportation reimbursement for large, non-regional districts should be increased.
· School safety represents a new concern that was perhaps not taken into account when Ed reform was passed.
· A technology factor should be included in the foundation budget in order to help districts make informed decisions about improving student achievement.
· The foundation budget does not reflect the actual cost of education in small, rural communities.
· There should be a cap on the gross standard of effort.

Adequacy Issues From the Billerica Public Hearing
· Additional money is required for assistants’ salaries, books, and equipment.
· SPED appropriations for reimbursements must match the expenditures that are generated by the foundation formula; if the formulas are not funded, they should be discarded.
· MCAS remediation grants have too many strings attached; the remediation funds should be built into the formula.
· Non-SPED alternative education, ESL, and an industry sensitive inflation factor should be included in the formula.
· There is growing concern about the looming teacher shortage; teachers will be harder to find and it will cost more money to attract and retain them.
· If funding levels are not maintained for poor, urban districts, those districts will have to start undoing the benefits achieved during education reform.
· Preschool services, SPED, and low income adjustments are all understated in the current formula; alternate education programs, service for ESL students outside of transitional bilingual ed., and industry sensitive inflation factors are all left out of the current formula.
· The formula should use a three-year rolling average to project enrollment and offset some of the impact of growth.
· Health insurance costs, energy costs, reduced Chapter 636 funds, and teacher salary increases are creating fiscal pressures.

Adequacy Issues From the Fall River Public Hearing
· Lower class size has been proven to have beneficial longitudinal effects (Tennessee study).
· Transportation should be fully funded.
· Charter schools should be funded by the state.
· The challenges of educating urban youth should not be underestimated.
· Chapter 70 aid increases should be considered unrestricted, without earmarks

Adequacy Issues From the Boston Public Hearing
· EQV disproportionately harms the towns on the Cape due to the inflated property values of a small percentage of the seasonal homes. The weight of per capita income factors in the formula should be increased in relation to EQV
· Using EQV and an income adjustment is a fair practice.
· The state should adopt the goal of reaching an overall cost share of 50/50 between state and local.

Equity issues from the Needham Hearing
· Several people testified in support of the Suburban Coalition plan, which calls for a minimum state contribution level of 25% at a projected cost for Fiscal 02 of $100M.
· Above foundation districts are being forced closer to foundation.
· The tax burden is higher in suburban communities than it is in urban communities.
· Schools should be funded with greater reliance on the broader, more progressive state income tax instead of on the regressive property tax.

Equity issues from the Worcester Hearing
· High enrollment growth communities face tough choices and often must pit competing municipal interests against education.

Equity issues from the Holyoke Hearing
· Poor, above-foundation districts need fiscal relief from the state.
· The cost of charter schools should be shared equally by all school districts since placement is random.

Equity issues from the Billerica Hearing
· The state should adopt a 10-year plan that will result in full state funding of public K-12 education.

Equity issues from the Fall River Hearing
· EQV disproportionately harms the towns on the Cape due to the inflated property values of a small percentage of the seasonal homes. The weight of per capita income factors in the formula should be increased in relation to EQV
· Using EQV and an income adjustment is a fair practice.
· The state should adopt the goal of reaching an overall cost share of 50/50 between state and local.

Equity issues from the Boston Hearing
· The approach should be changed to reflect today’s situation now that all communities are at foundation levels.
· Two selectpersons from Brookline endorsed the MMA proposal, which has not been formally adopted by the organization’s membership at this time.
· The urban districts still require the lion’s share of state resources.
· Growth communities have had an inequitable burden placed upon them, which results in divisive politics.
· While most of the aid from education reform has flowed to poor urban districts, spending gaps still exist.
· There should be a 25% floor for state aid to all communities (Suburban Coalition proposal).

Regional/Vocational issues from the Needham Hearing
· State aid should go directly to the regional school district.

Regional/Vocational issues from the Worcester Hearing
· The excess debt provision creates inequities among the towns of a regional district.
· Members of a regional district have different net school spending requirements, which creates inequities among member towns.
· A regional district should be treated as one entity.
· Regional districts should use the regional agreement to apportion costs to member towns.

Regional/Vocational issues from the Billerica Hearing
· The state should encourage regionalization as a means of breaking down existing differences between communities.
· The SPED factor should be increased for vocational schools.

Regional/Vocational issues from the Fall River Hearing
· The formula should be adjusted for regional districts so that costs are distributed according to regional agreements.
· The foundation budget is inadequate for vocational schools; the costs of providing vocational training and meeting the requirements of MCAS are excessive.

Regional/Vocational issues from the Boston Hearing
· Chapter 70 aid belongs to the municipalities, not to regional districts; reallocation of aid within the regions should not occur.

The foundation budget is a complex formula. This attachment describes the calculation of the formula’s current (FY01) line items.

The foundation enrollment is computed based on the following student grade levels and percentages. The foundation enrollment is based on the October 1 enrollment as reported on the Foundation Enrollment Report, School Choice Claim Forms and Charter School Claim Forms filed by districts for the next foundation budget.

A. Pre-school - All special needs pre-school pupils plus the number of regular day pre-school pupils not to exceed twice the number of special needs pre-school pupils.

B. Kindergarten Half Time - The number of regular day and special needs kindergarten pupils in half-time programs.

C. Kindergarten - Full Time - The number of regular day and special needs kindergarten pupils in full-time programs.

D. Elementary - All regular day and special needs pupils in grades one through five.

E. Junior High /Middle - All regular day and special needs pupils in grades six through eight.

F. High School - All regular day and special needs pupils in grades nine through twelve.

G. Special Education-In-School - Three and one half percent of Column M Total not including Column A - Pre-school or Column J - Vocational, plus four and one half percent of Column J - Vocational.

H. Special Education - Tuitioned out - One percent of the sum of Kindergarten-Full Time (C), Elementary (D), Jr/Middle (E), High School (F), Bilingual (I), and Half of Kindergarten Half-Time (B).

K. Low Income Elementary - All pupils in grades one through eight who are eligible for free or reduced price lunches.

L. Low Income Other - All pupils in grades nine through 12 and one half of pre-school and half-time kindergarten pupils and all pupils in full time kindergarten who are eligible for free or reduced price lunches.

M. Total - One half of Column A - Pre-School and one half of Column B - half-time kindergarten plus Column C, D, E, F, I, and J.

The calculation of the foundation budget is based on per pupil allowances for each of nineteen spending categories. These per pupil amounts are adjusted annually for a regional wage adjustment factor, inflation and then multiplied by the district’s current enrollment based on the October 1 Foundation Enrollment Report of the prior fiscal year. The Foundation Budget establishes spending targets by grade (pre-school, kindergarten, elementary, junior high and high school) and program (special education, bilingual, vocational and low income). Grade and program spending targets are intended to serve as guidelines only and are not binding on local school districts. The aggregate of the nineteen categories equals the foundation budget.

1. Teaching salary for classroom teachers (see foundation teaching staff below).

2. Support Staff salary for counselors, librarians and other teachers for support duties in any fiscal year. The foundation support staff is the sum of:

· 725/100,000 multiplied by the sum of the foundation kindergarten enrollment and the foundation pre-school enrollment; plus

· 145/10,000 multiplied by the sum of the foundation elementary enrollment and the foundation bilingual enrollment; plus

· 1/25,000 multiplied by the foundation junior high/middle school enrollment; plus

· 42/10,000 multiplied by the sum of the foundation high school enrollment and the foundation vocational enrollment; plus

3. School Aide salary for assistants to teachers and support staff in any fiscal year. The number of foundation assistants is the sum of:

· 6/1,000 multiplied by the sum of the foundation kindergarten enrollment and the foundation pre-school enrollment; plus

· 12/1,000 multiplied by the sum of the foundation elementary enrollment and the foundation bilingual enrollment; plus

· 2/1,000 multiplied by the foundation junior high/middle school enrollment; plus

· 8/10,000 multiplied by the sum of the foundation high school enrollment and the foundation vocational enrollment; plus

4. School Principal salary for principals and assistant principals in any fiscal year. The foundation principals is the sum of:

· 15/10,000 multiplied by the sum of the foundation kindergarten enrollment and foundation pre-school enrollment; plus

· 3/1,000 multiplied by the sum of the foundation elementary enrollment and the foundation bilingual enrollment; plus

· 35/10,000 multiplied by the foundation junior high/middle school enrollment; plus

· 35/10,000 multiplied by the sum of the foundation high school enrollment and the foundation vocational enrollment.

5. Clerical salary for all staff performing clerical duties. The foundation clerical staff is the number of staff allotted within a district's foundation budget in any fiscal year for clerical duties. The foundation clerical staff is the sum of:

· 275/100,000 multiplied by the sum of the foundation kindergarten enrollment and the foundation pre-school enrollment; plus

· 55/10,000 multiplied by the sum of the foundation elementary enrollment, the foundation bilingual enrollment, the foundation junior high/middle school enrollment, the foundation high school enrollment and the foundation vocational enrollment; plus

· 1/200 multiplied by the sum of the assumed in-school special education enrollment and the assumed tuitioned-out special education enrollment.

6. School Health Care Staff salary for all staff performing health care related duties. The number of staff allotted within a district's foundation budget to perform health care related duties in any fiscal year. The foundation health care staff is the sum of:

· 1/1,000 multiplied by the sum of the foundation kindergarten enrollment and the foundation pre-school enrollment; plus

· 2/1,000 multiplied by the sum of the foundation elementary enrollment and the foundation bilingual enrollment; plus

· 15/10,000 multiplied by the sum of the foundation junior high/middle school enrollment, the foundation high school enrollment and the foundation vocational enrollment.

7. Central Office Professional salary for all professional staff performing central office duties in any fiscal year for central office duties. The foundation central office professional staff is the sum of:

· 15/1,000 multiplied by the sum of assumed in-school special education enrollment and assumed tuitioned-out special education enrollment; plus

8. Custodial Staff salary for all staff performing custodial duties in any fiscal year for custodial duties. The foundation custodial staff is 1/10 multiplied by the sum of the foundation teaching staff and the foundation support staff.

9. Employee Benefits - the amount allotted within a district's foundation budget for the purchase of employee benefits and other insurance in any fiscal year related to salaries for all staff in lines 2 through 9. The foundation benefits is the sum of the following:

· $4,320 multiplied by the wage adjustment factor multiplied by the sum of the foundation teaching staff, the foundation support staff, the foundation assistants, the foundation principals, the foundation clerical staff, the foundation health care staff, the foundation central office professional staff and the foundation custodial staff; plus

· $460 multiplied by the sum of the foundation teaching staff, the foundation support staff, the foundation assistants, the foundation principals, the foundation clerical staff, the foundation health care staff, the foundation central office professional staff and the foundation custodial staff; plus

11. Expanded Program Allotment for educational services for low-income pupils. The expanded program allotment is determined by multiplying the number of low-income elementary and middle school students in a district by the wage adjustment factor by $380.

12. Professional Development Allotment for teachers and support staff in any fiscal year. The professional development allotment in any year is 3% multiplied by the amount allotted in that year in a district's foundation budget for foundation teaching staff payroll and the foundation support staff payroll.

13. Athletics - the amount allotted within a district's foundation budget for athletic expenses in any fiscal year. The foundation athletic expenses is the sum of:

· $200 multiplied by the sum of the foundation high school enrollment and the foundation vocational enrollment.

14. Extra-curricular Activity Expenses. The amount allotted within a district's foundation budget for extracurricular activity expenses in any fiscal year. The foundation extracurricular activity expenses is the sum of:

· $25 multiplied by the sum of the foundation elementary enrollment and the foundation bilingual enrollment; plus

· $45 dollars multiplied by the sum of the foundation high school enrollment and the foundation vocational enrollment.

15. Utility and Ordinary Maintenance Expenses for utility charges and maintenance supplies in any fiscal year. The foundation utility and ordinary maintenance expenses is $3,300 multiplied by the sum of:

· the sum of the foundation teaching staff and the foundation support staff; plus

16. Special Needs Tuition - the amount allotted within a district's foundation budget for special education tuition in any fiscal year. The value is the product of $13,500 and the assumed tuitioned-out special education enrollment.

17. Miscellaneous Expenses - the amount allotted within a district's foundation budget for miscellaneous activity expenses in any fiscal year. The foundation miscellaneous activity expenses is the sum of:

18. Book and Equipment Allotment for books, equipment, supplies and computers. The book and equipment allotment is the sum of:

· $150 multiplied by the sum of the foundation kindergarten enrollment and the foundation pre-school enrollment; plus

· $250 multiplied by the sum of the foundation elementary enrollment, the foundation bilingual enrollment and the foundation junior high/middle school enrollment; plus

19. Extraordinary Maintenance Allotment is the amount allotted within a district's foundation budget for extraordinary maintenance costs in any fiscal year. The extraordinary maintenance allotment is $2,200 multiplied by the sum of the foundation teaching staff and the foundation support staff.

The Foundation Teaching Staff is the number of staff allotted within a district's foundation budget for teaching duties in any fiscal year. The foundation teaching staff, calculated using the above enrollments, is the sum of the following:

· the sum of the foundation kindergarten enrollment and the foundation pre-school enrollment divided by 44; plus

· 3/100 multiplied by the average number of low-income students attending schools in the district over the preceding two fiscal years.

The Foundation Vocational Staff is the number of teachers, support staff principals, clerical staff, health care staff and custodial staff assigned to a vocational school or program or an agricultural school allotted within a district's foundation budget in any fiscal year.

The Foundation Payroll is the amount allotted within a district's foundation budget for the teaching staff, support staff, assistants, principals, clerical staff, health care staff, central office professional staff, and custodial staff in any fiscal year. The foundation payroll is the wage adjustment factor multiplied by the sum of:

· $38,000 multiplied by the sum of the foundation teaching staff and the foundation support staff; plus

· $62,000 multiplied by the sum of (1) foundation principals, and (2) 1/1,500 multiplied by the foundation central office professional staff; plus

The Foundation Non-Salary Expenses is the sum of foundation athletic expenses, foundation extracurricular activity expenses, foundation utility and ordinary maintenance expenses, foundation benefits, foundation special education tuition, and foundation miscellaneous expenses.

Net school spending is the total amount spent for the support of public education as reported by the district to the Department of Education, including teacher salary deferrals and tuition payments for children residing in the district who attend a school in another district or other approved facility, determined without regard to whether such amounts are regularly charged to school or non-school accounts by the municipality for accounting purposes. Net school spending excludes any spending for long term debt service, school lunches, or student transportation. Net school spending does not include tuition revenue or revenue from activity, admission, other charges or any other revenue attributable to public education.

The spending gap is the difference, if any, between the foundation budget and net school spending. If the net school spending exceeds the foundation budget, the district is over foundation. If the foundation budget exceeds net school spending, the district is under foundation.

Excess Debt is the difference, if any, between (i) the municipality's share of long-term debt service in support of school construction and (ii) the statewide average of local share of long-term debt service in support of school construction, on a per pupil basis, multiplied by the foundation number of pupils in the town. For regional school districts, the excess debt service amount is allocated amongst member municipalities according to the provisions of the regional school district agreement. The excess debt service amount for a municipality is the sum of the municipality's share of excess debt service amounts for all of the regional districts of which it is a member. For FY00, the excess debt provision is the long-term debt obligation for school construction reduced by State School Building Assistance that exceeds the FY99 state per pupil average of $130.

For FY01, the excess debt provision is the long-term debt obligation for school construction reduced by State School Building Assistance that exceeds the FY00 state per pupil average of $160.

The Department of Revenue's 1998 estimate of each city and town's property tax base.

The US Census' estimate of the per-capita income in each city and town in 1989. The state average per capita income was $17,224.

The equalized property valuation of the municipality multiplied by the most recent average annual per capita income for the municipality, divided by the average annual per capita income for the commonwealth for the same period, as reported by the United States bureau of census. This element is currently calculated using the 1998 equalized valuation multiplied by the 1989 average income per capita divided by the State average income of $17,224.

The amount of local effort that would have been raised in FY94 with a school tax rate of $9.40, increased by the FY95 - FY00 municipal revenue growth factor (MRGF). This element is calculated using the FY92 equalized property valuations as published by the Department of Revenue. In subsequent fiscal years, the gross standard of effort is the gross standard of effort of the previous fiscal year, increased by a percentage equal to the municipal revenue growth factor.

The MRGF is the change in local general revenues calculated by subtracting one from the quotient calculated by dividing the sum of (1) the maximum levy for the fiscal year estimated by multiplying the levy limit of the prior fiscal year by a factor equal to one hundred two and one-half percent plus the average of the percentage increases in the levy limit due to new growth adjustments over the last three available years as certified by the department of revenue or as otherwise estimated by the division of local services of the department of revenue where it appears that a municipality may not be entitled to increase its minimum levy limit by two and one-half percent. If the highest percentage during such three years exceeds the average of the other two years' percentages by more than two percentage points, then the lowest three of the last four years is be used for such calculation; (2) the amount of general revenue sharing aid for the fiscal year; and (3) other budgeted recurring receipts not including user fees or other charges determined by the division of local services to be associated with the provision of specific municipal services for the prior fiscal year, by the sum of (1) the actual levy limit for the prior fiscal year; (2) the amount of general revenue sharing aid received for the prior fiscal year; and (3) other recurring receipts not including user fees or other charges determined by such division of municipal services to be associated with the provision of specific municipal services budgeted by the municipality for the fiscal year preceding the prior fiscal year, if any. For the purposes of this calculation, the levy limit will exclude any amounts generated by overrides applicable to any year after the fiscal year ending June 30, 1993. In the absence of an actual levy limit for the prior fiscal year, the actual levy limit for the prior fiscal year is estimated by multiplying the actual levy limit of the fiscal year preceding the prior fiscal year by a factor equal to one hundred two and one-half percent plus the average of the percentage increases in the levy limit due to new growth as specified above. Such factor will not be greater than the factor determined by subtracting one from the quotient calculated by dividing total state school aid for the current fiscal year by total state school aid for the prior fiscal year. In making any of the calculations required by this definition, the division of local services may substitute more current information or such other information as would produce a more accurate estimate of the change in a municipality's general local revenues and the department will use such growth factor to calculate preliminary contribution, minimum contribution and any other factor that directly or indirectly uses the municipal growth factor.

The MRGF is an effort to estimate the change between certain categories of projected FY01 revenue. Calculates the allowed levy limit at 102.5% of FY00 levy limit plus the lowest 3 of last 4 years' growth. Also estimates the FY01 revenue increase in local receipts not attributable to the provision of services (i.e. water). Also measures increases in 3 cherry sheet items between FY00 and FY01: lottery, additional assistance and state owned land.

FY01 GROSS STANDARD OF EFFORT (COLUMN 13)

The amount of minimum state school aid available to a municipality in any fiscal year, which is fifty dollars multiplied by the district foundation enrollment in fiscal year nineteen hundred and ninety-four, and twenty-five dollars multiplied by the district foundation enrollment every year thereafter until fiscal year two thousand and one. For FY01, the computation is foundation enrollment times $175 (up from $150 per pupil in the preliminary numbers).

This element is an alternate to the Gross Standard of Effort (Column 13). For any year, the lesser of (1) the gross standard of effort for that year and (2) the foundation budget for the year minus the sum of base aid and federal impact aid for that year. The standard of effort for any municipality is to be allotted among the districts to which that municipality belongs.

The minimum local contribution required in FY00 per section 262 of Chapter 60 of the Acts of 1994.

The minimum local contribution required in FY00 per section 262 of Chapter 60 of the Acts of 1994. The net school spending of a municipality in any fiscal year minus the sum of state school aid and federal impact aid, less equity aid, for that fiscal year as projected by the department of education. In any city or town that deferred a portion of its teachers' salaries in the fiscal year ending June thirtieth, nineteen hundred and ninety-three or that had its regional school assessment reduced as a result of a deferral of teachers' salaries in a regional school district in said fiscal year, the local contribution for said fiscal year will be reduced by the amount of such teachers' salary deferral and reduced regional school assessment, if any. The department will publish tables allotting each municipality's local contribution in fiscal year nineteen hundred and ninety-three amongst the districts to which the municipality belongs.

The preliminary contribution is the product of (a) the minimum required local contribution of the prior fiscal year, and (b) one plus the municipal revenue growth factor, which product is to be increased by the excess debt service amount of the prior fiscal year if said amount was used to reduce the minimum required local contribution in the prior fiscal year; provided, that said preliminary local contribution will not be greater than the gross standard of effort amount. For any district in which net school spending is less than the foundation budget amount and the prior year local contribution is greater than the gross standard of effort amount, the preliminary local contribution will not be less than the fiscal year nineteen hundred and ninety-three local contribution, except that said contribution may be reduced proportionately to any decrease in the total municipal budget; and provided further, that for any municipality in which net school spending is greater than the foundation budget, in no case will the sum of the preliminary local contribution and the base aid and the minimum aid result in a reduction of net school spending to an amount less than the foundation budget amount. The preliminary local contribution is defined separately for each municipality's share of each district to which it belongs.

The standard of effort gap is the positive difference in any fiscal year between the standard of effort in the fiscal year and the preliminary local contribution in that fiscal year. The standard of effort gap for a municipality will be allotted among the districts to which that municipality belongs.

Adjusted equalized valuation divided by FY01 foundation enrollment divided by the state average adjusted equalized valuation per pupil. This line item is used in the overburden aid calculation.

Overburden aid provides relief where the EQV/pupil the district is less than the state average and has a high standard of effort gap. This is state aid to assist a poorer community in their local contribution payment. For municipalities with an adjusted property valuation per pupil of equal to or less than ninety-five percent of the statewide average, the gross overburden amount will be one hundred percent of the standard of effort gap. For municipalities with an adjusted property valuation per pupil greater than ninety-five percent of the state average but less than one hundred and twenty percent of the state average, the gross overburden amount will be the standard of effort gap multiplied by the positive difference between one and ninety-five one hundredths and the ratio of the municipality's adjusted property valuation per pupil to the amount of the state average adjusted property valuation per pupil. For municipalities with an adjusted property valuation per pupil equal to or greater than one hundred and twenty percent of the state average, the gross overburden amount will be zero. For any municipality in which the average per capita income is below the state average per capita income, the gross overburden amount will be one hundred percent of the standard of effort gap. The smaller the overburden percentage, the more aid.

FY01 standard of effort gap times the FY01 Overburden %. This line item is used in the overburden aid calculation.

The minimum contribution is the local share. It addresses the preliminary (base) contribution plus a percentage to close the standard of effort gap less any state aid for a high standard of effort gap.

The foundation gap is the difference between total spending and the foundation budget. Total spending includes the local contribution and state aid.

For over/over communities, if the excess of the standard of effort is greater than the excess over foundation, equity aid is received. If the FY01 spending gap is greater than zero, then the FY equity gap is the FY01 local contribution less the FY gross standard of effort. If the FY01 spending gap is zero, another calculation is made. If the calculation is negative, the equity gap is considered to be zero.

SUMMARY

The following line items compose total local contribution, state aid, and net school requirements.

FY01 minimum contribution less FY01 equity aid and FY01 excess debt service. In addition, no district spending above the Foundation can reduce to below that level. For towns affected by the spending cap for regional vocational districts (S 126, FY00 state budget) the reductions are reflected in this column.

The combined amount of FY00 base aid, FY00 foundation aid, and FY00 choice aid, plus any FY00 minimum aid at $150 per pupil. Excludes foundation reserve "pothole" funds. Chapter 151 provides that no municipality or district will receive less that $150/pupil.

Excess of the standard of effort over the excess over foundation. The FY01equity gap is multiplied by 100.00%.

Overburden aid provides relief to communities that have a high-adjusted EQV/student and a high standard of effort gap. To compute overburden aid, multiply the gross overburden by the overburden aid factor of 100.00%. Overburden aid is state aid to help certain districts meet their local contribution.

The increase, if any, between a district's final FY00 tuition and its estimated FY01 tuition out as of February 99. For below foundation districts only.

Additional aid guaranteeing that (1) each district receives at least a $150/pupil increase over its FY00 Ch70 net of labor market area transition aid and (2) each district reaches its FY01 foundation budget regardless of its excess debt status or other formulaic calculations.

The sum of FY00 base, minimum, foundation, equity, overburden, choice and supplemental aid.

Required spending in FY01, the sum of the net minimum contribution and Chapter 70 aid.

Teaching Salary	1410.38
Custodial Salary	92.79
Salary Benefits	176.37
Other Benefits	18.78
Professional Development	42.31
Maintenance	122.48
Extraordinary Maintenance	81.65

Commission Members

BACKGROUND AND OBJECTIVES

ADEQUACY – THE CALCULATION OF THE FOUNDATION BUDGET

EQUITY AND PREDICTABILITY – THE CALCULATION OF LOCAL AND STATE CONTRIBUTIONS

2) Fairness of Local Required Effort

1. Translate Goals Into Aid Calculations

3. Set a floor for low effort communities

REGIONAL ACADEMIC AND VOCATIONAL SCHOOL FUNDING

Membership

Regional Academic and Vocational School Funding Recommendations

Low Income

Technology

Early Childhood

Bilingual

Specific Recommendations

Impact of Using Projected Enrollment for Foundation Budget Calculations

Defining the “Enrollment Problem”

Long and Short-Term Trends in Enrollment

Projection Methodology

Results

An Alternative Approach: Three-Year Historical Averages

Defining “Low Income”

Distribution of Low Income

Impact of Low Income Enrollment In The Foundation Budget

DID “EQUITY” IMPROVE BETWEEN FY93 AND FY01?

Measuring Equity

Taxpayer Equity

2) Fairness of Local Required Effort

Measuring Pupil Equity

Results

Defining a Fair Share of Aid

The basic tenet of this approach is that the state share of foundation budget should be inverse to the wealth of the community. Wealth is defined as a community’s residentially-income-adjusted equalized year 2000 property valuation, divided by its FY01 foundation enrollment (RAEQV per pupil).

Defining a Fair Level of Local Effort

SUMMARY

Specific Recommendations

1. Translate Goals Into Aid Calculations

Many districts meet their contributions using smaller portions of their income and tax base. However, a number of districts expend large amounts of contributions relative to their wealth. The formula should provide relief to high effort communities.

3. Set a floor for low effort communities

REGIONAL ACADEMIC AND VOCATIONAL SCHOOL FUNDING

STATEMENT OF THE PROBLEM

1) Disparities in Assessments

2) Allocating A Community’s Contributions Among Districts To Which It Belongs

3) Allocating A Community’s Aid Among Districts To Which It Belongs

POSSIBLE SOLUTIONS

A description of a possible solution to each of the three “regional allocation” problems follows.

1. Reducing Disparities in Assessments: The “Zero-Sum Shift”

Summary

2. Allocating A Community’s Contributions Among Districts To Which It Belongs

3. Allocating Contributions: the Foundation Link

Summary

Allocating A Community’s Aid Among Districts To Which It Belongs

FY01 GROSS STANDARD OF EFFORT (COLUMN 13)

SUMMARY

APPENDIX D

Commission Chairs

Commission Members

League of Women Voters of Massachusetts