Thursday, February 13, 2014

Let's take a look at Boston's budget

Okay, Bostonians: I'm breaking out of my bailiwick a bit here in hopes of giving you a hand! 

Thanks to Twitter, I've recently been hearing a great deal about the Boston Public Schools budget. There's much concern among parents about the BPS budget this year, which in many cases is cutting positions at schools.
I've started to become concerned, though, at both the lack of information and (in some cases) misinformation that is out there, so I've done some digging to see if I can pull some things out.
You can read Interim Superintendent John McDonough's update to the community from January 15 here, and his update to central office staff from February 5 here. I had to dig a bit more for this, but his PowerPoint given to Boston's School Committee is here (warning: you have to download it. If you just want to skim it and don't mind the odd way it came through, I've put it here.)
I'll first say that these are better than previous years; McDonough is the BPS finance officer, filling in as interim, and, whether he finally got to say what he wanted or what, the budget communications are clearer.
That said, there are just loads of pieces of information that aren't being put out there, and what is out there obscures some things that are useful and important.
First, there's not a ton here in terms of actual numbers about where the money comes from. For that--and I had some help on this--you can start with this chart from DESE

(yes, that's a photo. You can click to make it bigger.)
You'll see that for this fiscal year--that's FY14--Boston got $209,414,985 in Chapter 70 aid from the state; that's the top left highlighted number, as well as the same number on the right under FY14 for Chapter 70 aid. The remainder of the budget (save grants) was paid by the city of Boston.
For this coming fiscal year--FY15--Boston is projected to receive $210,991,435 in Chapter 70 aid, a slight increase over last year.

But here's the bit that isn't getting mentioned and should be: WHY is Boston getting that amount?

The BPS budget for this year (FY14) in total is $937.4 million. Now, that number is nowhere on here, because the state counts most, but not all, things in the foundation budget; mostly notably, DESE doesn't count transportation costs towards this calculation, and transportation is 9 % of the BPS budget. That's something the local community is simply expected to fund.
Most of the rest of the budget, though, is required spending, and is regulated by the Ed Reform act of 1993. The state has set a minimum amount that it costs to educate a child in Massachusetts (with breakdowns according to need); multiply that by the number of each type of student you have, and you have the foundation budget; this is also how Boston is setting their Weighed Student Funding, 'though the numbers are different.
Once that amount is calculated, the state then figures how much the local district can afford to pay of their budget. This is based 50% on local income and 50% on local property wealth.
The agreement here--and it helps to remember we only had an Ed Reform act because the state was getting sued over inequitable aid--is that needier, less wealthy communities get more state aid for education. It's one of the most progressive funding systems for education in the nation, recognizing as it does that education is a state responsibility (per Chapter V of the state constitution) and that children should be funded equitably across the state.
And here's where it gets interesting for Boston.
By the state's calculation, Boston can afford to pay for all of its public school foundation budget save for 17.5%, and that 17.5% is the "floor" that the state has set for all communities.
Essentially, by the foundation calculation, the city of Boston doesn't need much--any?--state Chapter 70 aid. 
This is why the percent of the BPS budget funded by the state, as shown here:
City budget impact over time
...with some seriously weird percentages...
...has been falling over time. Boston WAS receiving significantly more aid, but the state, rather than bumping everyone down to wherever the calculation puts them, is slowly requiring that more of the proportion of school funding come from the local community for those communities that can afford it.
For FY14, Boston was receiving 27.91% of their foundation budget as state aid; for FY15, they're projected to receive 27.04% of their foundation budget for state aid.
(and that includes the $25 minimum increase per pupil that the Governor budgeted for)
Thus, the touting of a $36 million increase in local funding for FY15 doesn't really answer the question. The cityside funding not only needs to track with actual cost increases (which it isn't, as McDonough says those are running $60 million) but also with the progressive and planned lowering of state aid.
It isn't as though it's a surprise.

SO, what to do? I'd start by pointing out to the city that much of what the city is doing is simply what the state minimally requires (Boston's tending to be about 8% over foundation, consistently; the state average is about 15%). While the numbers are always going to be big in a Boston budget, the city does have significant community wealth, which it has a responsibility to use to fund education appropriately. The FY15 budget puts 35% of the city budget into schools; last year it was 36% (in both cases save capital).
There's a local budgetary conversation to be had here, should anyone be willing to have it.

If I lost anyone anywhere above, send something along and let me know. And, yes, not my community, but I hate seeing parents not have the information they need to advocate.


Chris said...

So, in a nutshell, Boston has enough wealth that the state has decided that it can fund its own education budget.

While the city overall is wealthy, there is a huge gap between the wealthy and the poor, and a shrinking middle class (or so we are told). The wealthy don't really use the public school system - more than 3/4 of students in BPS are classified as low income - so the portion of the population that theoretically allows us to fund our schools doesn't particularly have a motivation to do so. And, of course, that same portion of the population is disproportionately powerful politically.

I'm curious if communities with more even income distributions avoid this problem and tend to fund their schools better than communities with the same total wealth but a large income gap. It seems intuitive to me, but I haven't seen any data.

Tracy Novick said...

As always, the question is what place is "like Boston" to make the comparison. What I'd be curious about (and can't find on the city website) is what the breakdown is between commercial and residential taxes. I suspect that the majority of Boston's wealth derives not from people, but from corporations.
If you want to look at who funds their schools and how much, the state posts all such charts here:

Bruce Kiernan said...

Thanks for providing a state funding perspective, it's a really useful part of the picture.

This still seems like a very relevant post, because so far the upcoming budget cycle (FY2016) is looking a lot like the current one did at this time last year.

It would be helpful to better understand how a community's capacity to pay is evaluated, and whether need is part of the formula. In particular, while Boston is a wealthy city in many ways, it is also home to many recent immigrants and people living in poverty. As you know, 78% of BPS students are from low-income families, and 44% speak a language other than English as their first language.

Is there anything in the formula that accounts for the exceptional need as well? Supporting those who need the most help is better viewed as a state or national obligation, not just that of the City of Boston.

To answer your question - Boston property taxes are 65% residential and 30% commercial or industrial. (The balance is personal, which may or may not be split differently.) See the Facts & Figures series:

I wonder whether that's more residential than people would expect. Also, keep in mind that commercial property tax revenues in Boston come with substantial service needs (public safety, infrastructure). And the sales and hotel tax revenues primarily go to the state, the MCCA, etc.

None of which is meant to disagree with these insightful comments: "Cityside funding not only needs to track with actual cost increases (which it isn't ...) but also with the progressive and planned lowering of state aid. It isn't as though it's a surprise."

But it seems odd that Boston would be at the "floor" for state aid alongside (presumably) other lower-need, high-wealth communities.

Bruce Kiernan said...

Part 2: Whoops, those are the figures for the property value. The levy is 38% residential and 54% commercial and industrial (due to higher tax rates on residential than commercial).

Still, the commercial property tax revenues come with significant obligations for services. And the associated income, sales and hotel taxes go to the state and other entities, not the city. Revenues alone don't tell the whole story. And they don't in any way reflect the student and family population in Boston vs. other communities.

Tracy Novick said...

Excellent questions (and I will do another round for FY16 once BPS releases their figures)!
The best source for all of what you're asking is Mass Budget's "Demystifying the Chapter 70 Formula" which is here:
I would highly recommend this for you and anyone wrestling with school budget issues in Massachusetts.

To take your questions specifically:

Regarding need: yes, the relative need (low income, ELL, special ed) IS accounted for in the foundation budget. An additional allocation is made for students with low income and ELL needs; special education is an assumed percentage of the student body, and districts receive additional funding for that.
Now, one can argue--and I and others are doing so before the Foundation Budget Review Commission--that those allocations are not up to date. But they are included, and they are consistent across the state.
Thus, yes, higher need districts have higher foundation budgets for the same number of pupils.

Who pays how much?
The calcuation of community wealth is based on two parts: income and property. So all of the income taxes for the city of Boston (as filed with Mass DoR) are added up; all of the property taxes for the city of Boston (as filed with the city) are added up. Those are weighted to make them an equal percentage to the equivalents at the state (that is: all of the income for Massachusetts in proportion to all of the property in Massachusetts). This is intended to balance out the communities that might be property rich but income (or resident) poor (think of the Cape).
This means that the relative percentages of business to resident taxation doesn't enter into the calculation at all; the state takes the way the community has wrestled that out at face value. It does mean that weathier residents as well as more highly taxed properties both increase community wealth, and thus also increase the percentage it is assumed that the community can pay.

(Note, incidentally, that non-profits in no way enter into this calcuation. Thus the relative property worth of non-profit properties do not throw off the calcuation by not being taxed.)

Bruce Kiernan said...


Thanks for the explanation and the link, it's very helpful.

Presumably part of the reason it doesn't appear to make sense overall is that 131 of the 351 cities and towns are at the 17.5% floor on state contribution. So Boston is alongside many very different towns (with more capacity to pay and less need) at the 17.5% floor. (For FY2015, the formula is based on 0.36% of property value and 1.51% of residential income.)

If there were no floor, Boston would still get 15.5% - so it doesn't benefit much from the floor. So perhaps Boston is at the right number under the formula (if the foundation budget and ability to pay calculations are right), and the issue is that the other towns are getting too much aid due to the political expedient of the floor.

And that is the result if you set aside the floor and calculate the ability of towns to pay versus the foundation budget. If the floor did not exist, 103 towns would show an ability to pay of 85 to 237% - with Lincoln, Dover and Cambridge (!) at the top. * (Towns above that seem like outliers.) So the overall floor (and perhaps the formula for ability to pay) is part of the inequity at work here.

Further, I'm not at all convinced that increasing the foundation budget accounts for the variations in need in an equitable way under the formula, if the state is still only paying 17.5% of the incremental budget. Boston has to carry the remaining 82.5%. The core issue is the assumption that low-income and LEP/ELL students are the sole obligation of the city or town they happen to live in. Economic and social forces concentrate the poor and recent immigrants in a small proportion of the 351 cities and towns.

That is, the formula applies the ability to pay of Boston (and other communities) to cover what is really a state-wide obligation. An equitable formula would see that it is the state's obligation to fund a much larger share of those additional allocations (low income, LEP/ELL). There should be floor on those components of the allocation that is much higher than 17.5%

So while you say "the city is doing is simply what the state minimally requires," Boston is using the resources of its residents to carry 82.5% of the cost of a large share of the state's high-needs students. The formula says Boston should pay to carry these societal costs, and that's another place where the formula is inequitable.

The net result is that uses up the resources that would otherwise go to the students in Boston Public Schools (with the same result in other communities). In the real world, Boston actually can't afford to pay all of those extra costs and still fund an adequate budget. (As the data show on p 20 of the PDF below show, many other districts fund well over the foundation budget.) Even assuming Boston contributes more (by carrying out reform, spending cuts and a tax increase), the burden of funding high-need students will still really be carried by Boston Public Schools *students*, until the formula is changed.

... continued ...

Bruce Kiernan said...

The math correction followup - Boston's ability to pay / foundation budget = 91.4%, a little different from the first time I calculated it. But the conclusions are the same.