No, DESE didn't make the numbers up: a bit of a Q&A on FY25

While it's not uncommon this time of year for me to get questions about the state budget, never have I found myself standing in front of quite so many groups, answering so many phone calls, typing so many emails that involve some version of "no, DESE doesn't make these numbers up."

To that end, a bit of a Q&A on FY25. 

As many who have been through any kind of training on this know, state law lays out a very specific funding system for schools in Massachusetts. It's written down in Massachusetts General Law chapter 70, which starts with its intent in section 1:

It is the intention of the general court, subject to appropriation, to assure fair and adequate minimum per student funding for public schools in the commonwealth by defining a foundation budget and a standard of local funding effort applicable to every city and town in the commonwealth.

Thus the state says it is going to define:

1. a foundation budget
   
2. a standard of local funding effort that applies to every city and town

It's doing this contingent on the budget it draws up ("subject to appropriation") to ensure what it terms a "fair and adequate minimum" funding per public school student.

The foundation budget gets defined in section 3. The definitions in section 2 outline the pats of the standard local funding effort.

"Dem's the rules," you might say. DESE does not make up the numbers; in fact, the state doesn't make up the numbers. The law tells the state where to find the numbers, which are the same numbers we've been running from for (for the foundation budget) the past three years or (for the municipal contribution) longer than that. And those numbers? They're almost entirely generated locally. 

Here's a few things that I think are important this year in this conversation:

Inflation, inflation, inflation: what inflation rate?
You've no doubt seen headlines on inflation a lot this year (often with some framing about the reflection on the presidential administration). That inflation is not what we're talking about when we talk about the inflation in the foundation budget. 

The foundation budget (for all categories save the benefits section) uses the (federally measured) implicit price deflator for state and local governments, looking at relative change from the fall of last year compared to the same time at the year before (this is about as obscure as we get in MA school finance). Price deflators are a measurement of inflation; this one is specific to local governments and state governments.
Why? It's designed to tie this to some measure of real cost increases (yes, of the prior year) of entities like school districts. 
And this year, it's 1.35%

Why does this matter to school districts?
The 1.35% is not, anywhere, the increases districts are actually seeing this year. It is, however, legitimately the foundation budget inflation rate (for all sections except benefits).
Since the Massachusetts foundation budget is a pupil-driven formula, the major drivers of the foundation budget are two: the inflation rate (just a percentage increase year over year) and changes in enrollment. You can have more or fewer kids overall; you can have more kids in different grades; you can have more or fewer kids with particular needs recognized by the foundation budget. And, you have the inflation increase. 

But I thought we still had the Student Opportunity Act?
We do. This coming fiscal year--FY25, which starts in July--will be the fourth of a six year implementation, and, as you've no doubt seen in headlines, the Governor's proposed budget fully calculates that implementation (it's all foundation budget side) and fully funds the state's share.

However, even the increases of the low income increment--which is the biggest money in the formula--are countered by the very low inflation rate. 

Does the state have to use the calculated inflation rate?
As it happens, the state not only doesn't have to use the calculated inflation rate: it hasn't the last two years. That is because the Student Opportunity Act caps the inflation rate at 4.5%; it cannot be higher than that.

The past two years, it would have been higher than that if it were not capped.

That doesn't seem fair.
This isn't a question, but I don't disagree.

Does this mean everyone is getting less money from the state?
No, in fact no district is getting less money in Chapter 70 aid, because, under the Student Opportunity Act, every district is guaranteed the same state aid it got the year before plus a minimum per pupil increase of $30 per pupil.

How do they decide how much every district gets?
While I'm not going to walk through the whole municipal contribution calculation here, that's also based on two things: 

1. the local municipality's full and fair cash value of all taxable property; and
2. the local municipality's residents' income

...which (through a standard formula that apply the same to everyone!) create measure of the community's ability to contribute towards the local district's foundation budget.
No district is required to contribute more than 82.5% of their foundation budget, which is another way of saying: everybody gets state aid.

Then how much is our chapter 70 aid?

It's the difference between that standard calculation of the local community's ability to contribute and the foundation budget. The state fills the gap.
Plus, hold harmless if that would be less than the prior year. 
Plus, a $30/pupil increase if it isn't already at least that.

But we have as many kids in need as the district next door and they're getting more chapter 70 aid!
This is also not a question, but I see some of this every year. It is crucial that communities not only understand their foundation budgets; they have to understand their municipal contributions, too. 

One cannot simply compare foundation budgets and chapter 70 aid without going through a municipal contribution comparison, as well. 
There are districts that look a great deal alike that are in communities with very different abilities to contribute towards those similar foundation budgets. The relative wealth of those communities--through, remember, a standard measure!--is what determines how much of their foundation budget those districts are getting in state aid (except for everyone over 82.5%)

So what should we be doing now?

I know that we're being a little silly about the budget fish, but I'm not kidding: 

The Legislature could add a factor to the foundation budget if it wished to. And doing so that way, rather than adding to the minimum per pupil increase, could both benefit all districts, and wouldn't dig the districts in hold harmless further in. 

As always, I am glad to take questions on this.