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The $168 million question

For each school district, the Chapter 70 formula generates:

  • A foundation budget (the minimum level of education expenditures necessary to provide an adequate education to every student, excluding transportation and certain other expenditures), which is unique to each district and which generally increases annually with inflation and enrollment changes.
  • A minimum required local contribution (education spending from property taxes and other local revenues), which is a function of local property wealth, income, and the rate of growth of local revenues (i.e., its local ability to pay).
  • Chapter 70 aid, which fills the gap between each district's foundation budget and its minimum required local contribution (and, in normal times, provides additional funds to fast-growing and high-taxing districts as well as a guaranteed annual increase to all districts).
  • Minimum required net school spending, which is the sum of each district's minimum required local contribution and its Chapter 70 aid.

In principle, each district's minimum required net school spending should equal or exceed its foundation budget.

  • In the House 1 version of the FY10 state budget, total Chapter 70 aid was level funded at $3.9 billion, and each district's Chapter 70 aid was set equal to the district's FY09 aid.
  • For most districts, the FY09 - FY10 growth in the foundation budget outpaced the increase in the minimum required local contribution.
  • In the majority of cases, this required additional Chapter 70 aid to keep these districts' minimum required net school spending at their foundation budgets.
  • With Chapter 70 aid held constant for each district, however, for 153 of the state's 328 operating districts, minimum required net school spending was less than the foundation budget.
  • The statewide total of these "net school spending gaps" was approximately $168 million.
  • Had the gaps not been filled, the Commonwealth may have been in violation of the state constitution, which has been interpreted to require that all districts spend at or above foundation levels.
  • House 1 relied in part on anticipated funds from the American Recovery and Reinvestment Act (ARRA) to fill the gaps.

Among other funds (primarily ESEA Title I and IDEA grants) the governor received $994 million in "state fiscal stabilization" dollars from the ARRA to be used in fiscal years 2009, 2010, and 2011.

  • $813 million of this total must be used for PreK-12 and higher education.
  • The remaining $181 million is available for "public safety and other governmental services," including education.
  • The governor has used $168 million of the $813 million to fill the FY10 House 1 net school spending gaps noted above.
  • Districts that did not have a FY10 House 1 net school spending gap did not receive funds from the $168 million allocation.
  • In spite of a provision in the ARRA to "allow funding for phasing in State equity and adequacy adjustments" to the state funding formula in FY10 and FY11 -- applicable, it can be argued, to the Chapter 70 formula -- the governor to this point has not provided additional funds for this purpose in FY10.
  • As the legislature considers the FY10 budget, the House and Senate may make changes to the House 1 Chapter 70 aid distribution which could affect the distribution of state fiscal stabilization funds.

Examples

Given that House 1 level funds Chapter 70 aid for each district, whether a district's FY10 net school spending gap is positive (it received a portion of the $168 million) or negative (it did not receive part of the $168 million) depends on three factors:

  • The FY09 - FY10 change in its foundation budget
  • The FY09 - FY10 change in its minimum required local contribution
  • Its FY09 minimum required net school spending compared to its FY09 foundation budget

To see how this works, let's consider a well-off district (Wellesley) and a not-so-well-off district (Boston).

Wellesley

 
FY09
FY10
Change
Enrollment  
4,796
4,920
124
Foundation budget  
41,021,668
44,090,467
3,068,799
Minimum required contribution  
34,503,446
35,885,727
1,382,281
Chapter 70 aid  
6,518,222
6,518,222
0
Required net school spending  
41,021,668
42,403,949
1,382,281
Net school spending gap  
0
1,686,518
(If > 0, req'd NSS < FB)        
 

From FY09 to FY10, Wellesley's foundation budget increased by $3,068,799 (due to inflation and enrollment growth), while its minimum required local contribution rose by $1,382,281. (The growth in its foundation budget was $1,686,518 more than the increase in its required contribution.)

Therefore, with FY10 Chapter 70 aid ($6,518,222) held constant at the FY09 level, the district's required net school spending was $1,686,518 less than its foundation budget. (Hence, the district DID receive state fiscal stabilization funds to eliminate the net school spending gap.)

Boston

 
FY09
FY10
Change
Enrollment  
60,951
60,778
-173
Foundation budget  
674,654,547
708,816,825
34,162,278
Minimum required contribution  
485,336,817
503,439,880
18,103,063
Chapter 70 aid  
221,422,839
221,422,839
0
Required net school spending  
706,759,656
724,862,719
18,103,063
Net school spending gap  
-32,105,109
-16,045,894
(If > 0, req'd NSS < FB)  

From FY09 to FY10, Boston's foundation budget increased by $34,162,278 (due to inflation, in spite of an enrollment decline), while its minimum required local contribution rose by $18,103,063. (The growth in its foundation budget was $16,059,215 more than the increase in its required contribution.)

However, in FY09, the district's minimum required net school spending was $32,105,109 more than its foundation budget.

Therefore, with FY10 Chapter 70 aid ($221,422,839) held constant at the FY09 level, the district's required net school spending was $16,045,894 ($32,105,109 minus $16,059,215) more than its foundation budget. (Thus, the district did NOT receive state fiscal stabilization funds.)

Conclusion

At first glance, it appears that a number of the 175 operating districts that did not receive state fiscal stabilization funds have been shortchanged. With respect to the overriding goal of keeping each district's minimum required net school spending at its foundation budget, however, 153 operating districts were shortchanged by the House 1 FY10 Chapter 70 distribution.

From this perspective, the distribution of state fiscal stabilization funds "makes whole" these 153 districts. Taking a broader view, districts that would have benefited from implementing in FY10 the ARRA provision regarding funding for equity and adequacy adjustments to the Chapter 70 formula (see above) have been shortchanged.