Report of the Foundation Budget Review Commission

June 2001

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.

Executive Summary
Executive Summary
Table 1 - Simulated Impact of Changes to Foundation Budget Upon Statutory Chapter 70 Formula Aid

Adequacy

Report of the Adequacy Sub Committee
Table 2 - Impact of Using Projected Enrollment for Foundation Budget Calculations
Table 3 - Low Income Factors in the Chapter 70 Foundation Budget

Equity and Predictability
Report of the Equity and Predictablity Sub Committee
Table 4 - Chapter 70 FY 1993 and FY 2001
Table 5-Net School Spending Compared to Foundation Budget, FY 93 and FY01
Table 6-"Fair Share" Aid Increment
Table 7-Raising the Cap on the Growth Factor-Impact Upon FY02 Statutory Chapter 70.
Figure 1 - Chapter 70 Aid As Pct of Foundation Budget, FY93
Figure 2 - Chapter 70 Aid As Pct of Foundation Budget, FY01
Figure 3 - Implicit School Tax Rate in FY93
Figure 4 - Implicit School Tax Rate Required in FY01
Figure 5 - Net School Spending as Pct of Foundation, FY93 vs FY01
Figure 6 - Net School Spending, Percentage of Foundation, FY01 vs FY93
Figure 7 - Chapter 70 Aid As Pct of Foundation Budget, FY01
Figure 8 - School Tax Rates Needed to Attain Foundation, Before And After Setting State Share of Foundation to "Fair Share"

Commission Chairs

The Honorable Robert A. Antonioni, Commission Chair

The Honorable Peter J. Larkin, Commission Chair

            Department of Education

            Mr. Roger Hatch

            Education Reform Review Commission

            Mr. Paul Reville, Director

            Speaker of the House

            Lida Harkins, designee of The Honorable Thomas M. Finneran

            Senate President

            The Honorable Thomas F. Birmingham

            House Minority Leader

            The Honorable Francis L. Marini

            Senate Minority Leader

            The Honorable Michael R. Knapik

            Governor’s Office

            Mr. Michael Sentance

            House Ways & Means Chairman

            The Honorable John Rogers

            Senate Ways & Means    

           The Honorable Frederick Berry

            Massachusetts Municipal Association

            Ms. Claire Freda

            Massachusetts Business Alliance for Education

            Mr. Ford Spalding

            Massachusetts Association of School Committees

            Ms. Nancy Stinger

            Massachusetts Association of School Superintendents

            Mr. Christopher Martes

            Massachusetts Teachers Association

            Ms. Jo Blum

           Massachusetts Federation of Teachers

           Mr. Phil Veysey

            Ms. Mary Frantz

            Massachusetts Association of Vocational Administrators

            Mr. Paul Bento, Superintendent Joseph P. Keefe Tech

            Massachusetts Association of Regional Schools

            Mr. Eugene Carlo, Superintendent Assabet Valley Regional

Consultant

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

Education Committee Staff

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

            Sylvia M. Smith, Chief of Staff, Office of Senator Robert A. Antonioni

            Kathleen Devlin, Research Analyst, Office of Representative Peter J. Larkin

ACKNOWLEDGEMENTS

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.

Thank you Lida, Mark and Roger.

Sen. Robert A. Antonioni                      Rep. Peter J. Larkin

Co-chairs

EXECUTIVE SUMMARY

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:

·        Testimony provided at said hearings

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

·        Commission discussions at its March 22, 2001 and May 29, 2001 meetings

·        Information contained in various Chapter 70 funding proposals

·        Information submitted by various constituent groups

·        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

·        Chapter 70 December 1999 Department of Education forum.

·        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:

·        Problems to be solved

·        Possible solutions

·        Recommendations

·        Quantifying costs

ADEQUACY – THE CALCULATION OF THE FOUNDATION BUDGET

Adequacy Problem to be Solved

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.

Adequacy Recommendations

The following represents the top six adequacy recommendations.

2.      Reduce elementary class sizes with a priority on grades K – 3.

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

4.      Increase low-income factor.

5.      Phase in full day kindergarten with emphasis on high risk factors.

6.      Include a technology factor in the foundation budget.

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

Equity and Predictability Problem to be Solved

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.

1) Fairness of Chapter 70 Aid

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.

3) Pupil Equity

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.

Equity and Predictability Recommendations

1.      Translate Goals Into Aid Calculations

2.      Provide relief to high effort communities

3.      Set a floor for low effort communities

4.      Utilize more current average income data

5.      Apply an income adjustment to EQV utilizing a residential factor

6.      Raise the cap on the MRGF

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.

8.      Maintain Foundation Aid

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.

9.      Dollars follow the pupil

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 Academic and Vocational School Funding Problem to be Solved

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.  

4)      Raise the Growth Factor Cap to 150 percent of the state average.

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.

TABLE 1

ADEQUACY

STATEMENT OF THE PROBLEM

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 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.

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). 

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.

POSSIBLE SOLUTIONS

SPED

·        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.

Student Teacher Ratios

·        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.

Enrollment

·        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.

Teacher Salary

·        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

SUMMARY

Specific Recommendations

The following represents the top six adequacy recommendations.

2.      Reduce elementary class sizes with a priority on grades K – 3.

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.

4.      Increase low-income factor.

5.      Phase in full day kindergarten with emphasis on high risk factors.

6.      Include a technology factor in the foundation budget.

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.

Table 2

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.

Table 3

Low Income Factors in the Chapter 70 Foundation Budget

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.

EQUITY AND PREDICTABILITY

STATEMENT OF THE PROBLEM

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 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.

1) Fairness of Chapter 70 Aid

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.   

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

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.  On Figures 3 and 4 this would appear as a straight line running horizontally across the graph.

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. 

Pupil Equity

Did “Pupil Equity” Improve Between FY93 and FY01?

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.

POSSIBLE SOLUTIONS TO ENHANCE EQUITY AND PREDICTABILITY

Can We Define Measurable Taxpayer Equity Goals?

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.

2.      Provide relief to high effort communities

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.

4.      Utilize more current average income data

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.

5.      Apply an income adjustment to EQV utilizing a residential factor

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.  

6.      Raise the cap on the MRGF

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 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.

8.      Maintain Foundation Aid

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.

9.      Dollars follow the pupil

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. 

TABLE 4

FIGURE 1

FIGURE 2

FIGURE 3

FIGURE 4

TABLE 5

FIGURE 6

FIGURE7

FIGURE 8

TABLE 6

TABLE 7

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

Section 10 of the Chapter 70 statute specifies that

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