Thursday, March 23, 2017

Why is your district getting an increase in state aid? It probably isn't your foundation budget.

I write this well aware that isn't going to be popular. Nonetheless, more information and clarity is always, in my view, better.

Last February, I wrote a post on how the foundation budget operates and how the state's failure to reconsider it is failing districts.
The foundation budget, though, isn't why most districts get yearly increases in state aid.

Note: as always, all of the following are coming from the fantastic information available on DESE's Chapter 70 page. Bookmark it; download the spreadsheets! I'm pulling here from the FY18 one, which is based on House 1, the budget Governor Baker submitted in January. And also as always, if I totally lose you, let me know.

Less than a third of districts see increases in state aid the way that Worcester does:
  • the foundation budget goes up (due to increased enrollment or increases in categories of need or inflation) 
  • the increase is beyond the increase in the municipal assessment (in Worcester's case, they're aiming for the city to fund 28% of foundation) 
  • so the increase largely falls on the state. 
Thus for FY18, Worcester's foundation budget goes up by $9.3M, the city's assessment is only going up by $227,515, so the rest is coming in state aid.

But that combination isn't true most places.

First, lots of districts have flat or declining enrollment. Statewide, K-12 enrollment only increased by 1200 kids last year, which isn't much in a system handling nearly a million students. Skimming up the enrollment change column in the comparison of FY17 to FY18 sheet, it's mostly places like Springfield, New Bedford, Lowell, and Worcester that are seeing the big numbers (in hundreds) of student increases. Since the foundation budget is, as they say, "student driven," in that it's a by-student count, no student increases = no budget increases.
There can, of course, also be shifts in enrollment: a district could see a jump in the number of ELL students, or an increase in a vocational program. That would also increase the foundation budget, as students would shift to a higher cost category. Some of that is happening (statewide, ELL numbers continue to be up, for example), but not enough to make much of a difference in districts.

We also have a close to flat inflation rate.   An inflation rate of 1.1% isn't going to put much of a jump into a foundation budget.
And if the foundation budget doesn't grow, or doesn't grow enough to get to where the state picks up the difference, then the increase only falls on the city.

Or there isn't an increase at all.

Let's take an example.

Douglas is in southern Worcester county, right on the Connecticut/Rhode Island line. The town has its own school system (it isn't regionalized) and has 1328 students; its FY18 foundation budget is just under $13M. Through the municipal wealth formula, it's expected that Douglas can fund a bit over half of its foundation budget (52%).
But Douglas lost 77 students from last year. That means that:
  • In FY17, the foundation budget for Douglas was $13,394,370
  • In FY18, the foundation budget for Douglas is $12,885,345  
...a loss of $509,025.
Likewise, the calculation of the Chapter 70 aid fell, from $8,644,415 in FY17 to $6,121,390 for FY18.
On the summary sheet (tab 6), that looks like this:

Note that line 5 is phrased as "increase" over previous year; if it were finding the change, it would be a negative number.

And here is where we leave the realm of the foundation budget.

"Hold harmless" means your district will never get less Chapter 70 aid than you got the year before. The state, thus, will send Douglas the $8,664,415 that it got last year, rather than the $6,121,390 that it is, by the municipal wealth formula, supposed to get this year.
(It's worth noting, by the way, that it being such a difference implies that this has been happening for years; there's a lot of hold harmless and minimum increase years in that $8M!)
Note that this doesn't let the town off the hook: they still have to hit their minimum spending level, which for FY18 is $6,763,955. It does mean that what was the foundation budget isn't going to be what is spent in Douglas next year (even before we go any farther).
"Hold harmless" is not part of the foundation budget. It's what happens when the people who decide how we spend money are elected; it's hard for them to go back to Douglas, for example, and let them know they're getting less state aid than last year.
And realistically, of course, while Douglas lost 77 students from last year, their costs haven't gone down. Most districts with either losses of students or flat enrollment are still seeing costs go up by 3% or more a year.

Which brings us to the next step: the minimum per pupil increase. 
I posted on this last April after the House budget came out, as it is something that gives most advantage to the districts that need it least. It is, however, what gets most districts their increases in state aid.
The Governor's budget includes a minimum per pupil increase of $20 per student. That means if you're Worcester, and your state aid is going up by $9.3M over last year and you have about 26,000 students, you're already getting at least $20 more per pupil, so this doesn't include you. But if you're Douglas, and you're only getting what you got last year, you'll get a bump:

You're going to hear a lot about this over the next few months, again, as it's how most districts get an increase. The Legislature usually wants to increase it more (to $50/pupil or more), to ensure that their districts get an increase.
Note, though, that it isn't based on need (of district or community); it's not in any way a progressive funding system. At this point, $450M of the state's school aid is in hold harmless and minimum per pupil aid to districts, due to accumulation over time: districts that get minimum aid increases year after year see those build on one another, such that there's a real separation between the Chapter 70 aid coming out of the foundation budget and the state aid actually being received by the district. In the example of Douglas, there's a significant difference in a $13M budget between $6M in state aid and $8M.

This leads to some interesting consequences.

I tend to avoid Boston examples, because Boston is such an outlier, both in terms of size and in terms of being a high need district in a low need city: Boston is a minimum aid community, getting 17% of their foundation budget in aid because by the municipal wealth formula, they can afford to pay for the whole foundation budget locally.

The box in yellow is what the city could afford to spend; the box in green is the foundation budget.
Note of course that the foundation budget doesn't include transportation, which for Boston tops $100M a year.

I raise Boston only because hold harmless and minimum per pupil increases have real state impact when the numbers get this large:

By the FY18 calculation, Boston gets $142M in state aid; after hold harmless and minimum per pupil increases, Boston gets $217M. That's a difference of $74M.
Again, that's not to pick on Boston--the numbers are big because the system is big. It's simply the calculation writ large.

That also isn't the only consequence. A number of the poorest of the Gateway Cities--Revere, Everett, Brockton, Lynn, just for example--lost out on the change between low income and economically disadvantaged counts. The students that aren't being picked up by the ED count aren't being made up by the increase in the per pupil rate. Their foundation budgets aren't going up, or if they are, they aren't going up by enough to increase state aid. Thus most of those districts are hold harmless/minimum aid districts for FY18. 

And that's why you'll hear a lot about that in coming weeks.
And none of it is in the foundation budget. 

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