Sunday, March 04, 2007

What happened since 1993

Last post I gave a brief background of how Ed Reform financing has had to wrestle with Massachusett's Prop 2.5, with the suprising unintended consequence that some locales with a stingy history have had windfalls of state aide t0 assure their childen have equal education funding.

To make this clear, I support the idea of progressive financing for schools, but not the idea that town with a history of underfunding its schools because of tax aversion should receive more state support for their schools that a town with similar wealth but with greater support for education.

At the time ed reform began, in 1993, the legislature had to come up with a mechanism to assure that towns increase their funding of schools in line with their Prop-2.5 limited tax base. What they came up with was a factor called "Municipal Revenue Growth Factor", and the formula was quite simple - a town's required spending for education had to rise by its MRGF, and the state would generally continue to support it either at the level of the previous year or bring it up to the calculated "foundation budget" level.

After 13 years, this led to even wilder disparities between seemingly similar locales. Some cities, such as Cambridge, with skyrocketing housing prices and a declining public school population, were forced to pay well above "foundation" spending, as much as double the foundation level - upwards of $20,000 per student per year in some cases; while some other locales of quite average ability to pay were subsidized far beyond their need and never forced to pay a cent above the foundation level.

Last year, after discussing the problem for a number of years, the governor and legislature chose to phase in a correction to the problem. Over a five year period, they would allow towns that had been forced to pay beyond their calculated means to reduce their schools spending and receive additional state assistance to fill in the gap - assuring that spending would remain at or above the foundation level.

I'll save the special case of regional schools for another post, along with the current political dilemmas of this reform.


Anonymous Anonymous said...

You've misunderstood how the foundation budget works and the role of the Municipal Revenue Growth Factor. The foundation budget is a zero-based budget developed using the ages and characteristics of the district's students. Once that calculation is made, there is a budget -- the foundation budget -- for that district. There is an implied "school" tax -- an averaged property tax rate of the costs of schools in the state -- that is then used to calculate the community's contribution. If the contribution is sufficient to pay for the schools, then no state aid is required. If the local contribution falls short, there is a "foundation gap". This amount if filled by state aid.

By calculating costs this way, every community has to make some contribution and is held to a uniform standard of contributions. However, the contribution was not meant to penalize any community that had done well by its schools. So, a community like Worcester or Somerville that had tried to fund its schools well, would not be penalized by their notable efforts. Their contribution, in the early years, was not required to be extended further by this standard.

At the same time, the educational community wanted to make sure that the "minimum was not the maximum" in school spending. This was one way that the MRGF came into play.

Another role for the MGRF was to provide the means for estimating a community's fair contribution toward achieving the district's foundation budget. If, for example, a community was under its foundation budget, but ALSO under its municipal contribution, then it needed to ramp up its spending. With Prop 2.5, this might be difficult. But with the MGRF, then a community had to dedicate at least those revenues that it could for school spending.

By this means, school expenditures should have remained fairly constant and consistent from both municipal and state sources.

Over time, the state share was adjusted to address other concerns. In order to incent housing, more state educational aid was added for those communities that chose to add housing (and the concomitant school costs). This has led to differences in state education aid that are both rational and, at a glance, seemingly unfair.

March 15, 2007  
Blogger MassParent said...

Thanks for your comments, which are obviously well informed.

I have to differ with you about rational differences in required spending, and in particular how these differences contrast with calculated target local share, and how "disparity reduction" of recent years has actually created disparities between towns.

The current distribution of preliminary required contributions has ninety towns whose required spending exceeds 120% of target local share. Cambridge tops the list, at 196%, but you'll also find locales such as Monroe, Heath, Egremont, and Hawley with contributions that exceed 140% of their target. The excesses, across the state, cannot be justified by virtue of progressively, fairness, or an implied school tax. They’re simply capricious differences in what the state’s regulations require of different towns.

When you put those small, relatively impoverished towns into a regional school district where other towns are assessed at or below their target, it means residents in the overpaying towns have to subsidize either the neighboring towns, or the state, or both, relative to what the state's target share says is a fair distribution.

Cambridge's 96% over-assessment at least doesn't force subsidizing other towns or the state, since the money gets spent on local kids, and the city would probably support a lot of that spending whether or not it is required to make it. Cambridge has a legitimate gripe that it's foundation aid is only 13% of foundation, and it will not see the promised 17.5% minimum aid until the required minimum falls by 93% - meaning four years from now, if the legislature's promise is kept.

But the distribution of aid and burden among small, relatively comparable towns can’t be justified, and that is particularly true where "disparity reduction" has shifted one-third of some local school budgets to regional schools in recent years, because the underlying contribtion data was not corrected to target share first.

The formulas currently indicate the imbalances will be corrected when (if) target local share phase-in is complete; the governor's proposed budget slows that down; taking a step away from the governor's own promise to help fix imbalances in local property taxes.

I personally support high ed spending - but think the state's role should be limited to assuring that towns make the minimum contributions to achieve a proper foundation budget – particularly for towns that participate in regional schools. I’m fine with a formula that seeks to balance required payments and aid against ability to pay and school burdens. But the current allocations don’t achieve that, and having introduced target local share, which establishes a hard figure based on current income and property values for the maximum a town should be forced to pay, I think it is inappropriate to continue for even one more year to force spending beyond many locale’s means, at regional schools where the state should be particularly concerned about equity and fairness of assessments.

As a fairly simple remedy, I think the state should cap required contributions that exceed target local share at something like 110% of target. This would cut away about half of the "above target" spending in the state, but at a very low cost in additional chapter 70 aid allocation. This would help locales like Pittsfield, Chicopee, Greenfield, and Lee, which receive far less aid than their target share says they should; as well as resolving most of the differences in regional school spending that infuriates towns which are over-assessed.

March 15, 2007  

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