Thursday, March 15, 2007

Background on the concept of Target Local Share

A paper can be found here describing a reform currently underway in Massachusetts' education funding formulas for allocating state aid and spending burden.

The basic goal of this reform is to assure that required spending and aid allocations are based on communities' ability to pay. I agree and believe this is an overdue reform.

I quote below the timetable and methodology this paper advocates for the reform.

Above-effort cities and towns should be given some relief on an annual basis. This is the group that should be most aggrieved, and whose relief should be easiest to accomplish. These communities should no longer be required to raise their annual contributions by the MRGF. Furthermore, their requirements should be lowered by a certain percentage of the amount that they currently exceed their effort goal. This proposal uses 25 percent, resulting in a drop of $91 million in FY06. Phasing in this relief over four years would accomplish big improvements in disparity at relatively little cost in additional state aid. In the second year of implementation, 50 percent of the excess would be eliminated, and in the third year 75 percent. In the fourth year and thereafter, no city or town would be required to make more than its effort goal.

The actual methodolgy implemented by the legislature starting last year calls for a five-year phase-in period, but also continues to grow annual contributions by their MRGF prior to reducing effort - and this has meant the first two years of reform are considerably below the gradual target that this paper set.

As for where I disagree with this paper:

It is important to have a quantifiable goal for taxpayer equity, but it is neither reasonable nor necessary to make a radical change from the existing system. As long as there is a goal, it can serve as a target, which can be approached gradually over time.

This paper was written during the second year for phase-in of a different reform with the Orwellian name of "disparity reduction". Since that time, "disparity reduction" has forced many locales to make radical redistributions of their local contributions - that is, of the property tax revenues towns raise - and this shift has often resulted in shifts of 20% or more of budgets from one school district to another, typically from a local elementary school to a regional upper school.

Because disparity reduction has been performed on unequalized contributions, existing errors have often been propagated and amplified. If target local share had been implemented prior to or in conjunction with disparity reduction, I think the outcome would have been reasonable, but the status quo is unacceptable.

I agree with the concept that the burden of regional schools should reflect ability to pay (many people do not, and believe the contract under which regional schools were formed should govern assessments). But I vehemently, rabidly protest having an unfair formula wrench away local school funds to subsidize other communities of comparable ability to pay, or to allow the state to withhold aid that is calculated as due.

Thus I disagree with the commissioner of education's expression that gradually phasing in taxpaper equity is reasonable, particularly given that "disparity reduction" has not been gradual and has often moved away from, rather than towards, taxpaper equity.

The governor's proposed budget for this year scales back the 2nd year goal for target local share reform from the the 40% target established by the legislature to 30%. Recall, that 40% target was below this paper's proposed 50% target for the second year. At 30%, regional assessments for many towns continue to move away from, rather than towards, equity for FY08.

If this reform is going to be slowed down because the state cannot afford to pay the full freight, I think it is time for the state to explore regulatory changes that would release some of the extremes but which would have relatively small cost of actual aid dollars. One such reform option is to limit the maximum required contribution for all towns to something like 110% of their target share. A limit at that level would:

- Lop off about 55% of the excess effort - about $270 Million
- Cost about the same as the governor's scaled back 30% proposal.
- Benefit about 154 communities which currently have mandated spending above 110% of target share.

The reason it would cost so little in aid dollars is that aid allocation is non-linear, and most of these corrections don't push communities beyond the threshold where additional aid would kick in. For the few locales where aid does kick in, it is aid that the formulas acknowledge is due, and these locales are among the furthest from target aid levels in the state. Aid would also kick in for some regional schools where spending is currently at or just above foundation; but the amount of aid required to correct for the locales which are currently being punished by the formulas is relatively small potatoes. The aggrieved locales are typically small or medium-sized towns, and only about one out of every three or four towns in each regional has a very large difference from target. Meaning, again, a large bang for the buck in restoring equity at very little cost to the state - and all of the cost is something the state acknowledges it ought to be bearing sooner if not later.

I think a cap is appropriate even if it is as part of the legislature's 40% plan. A cap at 120% of foundation would add only $10 million of additional current year cost, and would quell much of the riot over excessive regional allocations. And $10 Million is the sort of aid that would otherwise likely be allocated as "foundation reserve" funds that ought to be going to the same locales. A 120% cap is enough to get most errant regional allocations to make meaningful movement in the correct direction, something not apparent in the preliminary governor's spreadsheet.


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