Overall, state aid to schools is inadequate and, although the current distribution formula works out well for Belmont and Boston, it is unfair to many communities, including Watertown. I hope we can pass the “millionaire’s tax” this November and use the proceeds to increase school aid under a simpler, more rational formula.
The state distributes approximately $5 billion annually in unrestricted aid for local schools, known as “Chapter 70” aid, covering on average roughly 1/3 of total local school costs. Aside from MassHealth, unrestricted local school aid is the single largest item in the state budget — roughly 20% of state tax revenue.
The starting point for allocation of aid is the so-called “foundation budget”. The foundation budget is an estimate of the minimum costs of running schools in a particular community, based on the number and particular needs of the students in the community.
The state computes the share of a community’s foundation budget that it will support based on a formula that is adjusted each year. The formula has grown more and more complicated as a result of repeated compromises.
Watertown, Belmont and Boston are all among the more affluent communities in the state measured by either income or property values. Under the 2006 revision of the aid formula, they should all be getting the minimum aid allocation of 17.5% of their foundation budget. This guaranteed minimum was a victory for more affluent communities, many of which were getting even less than that under the old formula.
Boston is well above that level, at 26% of its foundation budget. Its aid is based on a formula term that grandfathers historic aid and on another term that provides minimum increases. From a community wealth perspective, it would appear that Boston is getting a generous award.
However, among the three school districts, Boston has by far the neediest students — 58% of its students are economically disadvantaged, as compared to 24% in Watertown and 8% in Belmont. It has the lowest percentage of students achieving “advanced” or “proficient” MCAS scores — only 27%, as compared to 48% in Watertown and and 81% in Belmont. The annual high school dropout rate is 5.5% in Boston as compared to 2% in Watertown and 0.1% in Belmont.
One of the key findings of the Foundation Budget Review Commission was that it takes more effort than we thought to close the achievement gap. We need to offer longer school days, wraparound services, and other resource intensive strategies to raise achievement among students from less advantaged homes.
A foundation budget computation that better reflected the needs of disadvantaged students would raise Boston’s foundation budget much more than it would raise other communities’ foundation budgets. It would reveal Boston’s high grandfathered aid level to be more consistent with Belmont and Watertown aid levels and with the statewide minimum aid standard.
The direct comparison between Belmont and Watertown highlights the unpredictable consequences of the overly complex distribution formula. Watertown is less wealthy than Belmont on an income basis and on a property value basis. And even though it has a strong commercial base to carry some of the cost of services, it has a higher ratio of residential property taxes paid to income than Belmont. By every measure its students have greater educational needs than Belmont students. Yet, compared to Belmont, it receives less aid, less aid per student and less aid as a percentage of foundation budget under the Governor’s proposal. See this post for the basic aid amounts and see this spreadsheet for the comparison details.
Watertown has chosen to accept a relatively high volume of development which yields fiscal benefits and some congestion downsides. The development creates “new growth” in Watertown’s assessed value, which in turn gives Watertown a relatively high “municipal revenue growth factor”. The MRGF in the state aid formula drives up the required local contribution, so driving down the aid. See the complete formula spreadsheet on DESE’s Chapter 70 page. Belmont has chosen less new growth, but, instead has passed overrides. Overrides are excluded from the MRGF calculation, so Belmont has received better state aid increases. A simpler formula which just looked at actual wealth would be fairer.
We need to fix the foundation budget which will raise aid to all communities. At the same time we need to simplify the distribution formula. If the voters raise the income tax on very high earners at the ballot this fall, we’ll have the resources needed to increase and simplify school aid.