Photo: Alessandra Hartkopf for Strategies for Children
Photo: Alessandra Hartkopf for Strategies for Children

What formula should Massachusetts use to fund its schools?

A new report from the Foundation Budget Review Commission says that the current formula is outdated and fails to reflect “the actual costs of health insurance and special education.”

“In addition, the added amounts intended to provide services to ELL [English Language Learner] and low-income students are less than needed to fully provide the level of intervention and support needed” to ensure these students achieve academic and social-emotional success.

And while the commission did not have time to take an in-depth look at early education, the report does point to the importance of these programs.

State law established the commission last year and charged it with periodically reviewing the school funding formula. As we’ve blogged, “To set state funding for K-12 public schools, Massachusetts relies on the Chapter 70 Program. Created by the Education Reform Act of 1993, and first implemented in fiscal year 1994, Chapter 70 uses a formula that ‘has two goals: adequacy and fairness,’ according to a 2013 report from the Massachusetts Department of Elementary and Secondary Education (DOE).”

Now, updating this school funding formula is crucial.

“The foundation budget formula was established 22 years ago and has not been substantively updated since then,” MassLive reports.

As a result, foundation budget funding lags far behind the reality of today’s costs.

The Worcester Telegram and Gazette reports: “The Foundation Budget Review Commission, in its final report released Monday, estimates that the state underfunded Chapter 70 education assistance by 25 percent, or $1.13 billion less than needed to adequately operate public schools, based on this year’s $4.51 billion allotment.”

The budget review commission is chaired by Senator Sonia Chang-Diaz (D-Boston) and Representative Alice H. Peisch (D-Wellesley). Commission members include policymakers and advocates, among them Chris Martes, president and CEO of Strategies for Children and an advisory member of the commission.

“Until now there has been a vague agreement that there is a problem, but not about the scope of it, or about what to do about it,” Chang-Diaz said at a news conference, according to the Boston Globe. “Today, that is different. Today that changes.”

The State House News Service paraphrases Peisch as saying that school districts lack the leeway “to modify their fixed costs for special education or health insurance to spend on other priorities.”

“As a result, money is being taken away from other areas that the foundation budget provides for in order to fund these components,” Peisch said. But with “sufficient funding for these areas, millions of dollars across the commonwealth will be freed up to spend on the kinds of things that we know students need.”

Identifying Real Costs 

“Paul Reville, Massachusetts secretary of education under former governor Deval Patrick and a member of the commission, said some of the spending assumptions included in the formula in 1993 have been proven incorrect,” MassLive reports.

“‘While many of them were roughly accurate, some of them were wildly inaccurate, and school districts have been paying the price for the Legislature’s underestimate of certain categories of funding, like health benefits and special education,’ Reville said.”

Health insurance costs have, in fact, skyrocketed. As the commission report explains: “Actual spending on employee health insurance far exceeds the current foundation budget allotment for such costs… Statewide, district spending on ‘Employee Benefits & Fixed Charges’ exceeds the foundation budget allotment by more than 140%. This is primarily due to the dramatic growth in health insurance costs nationwide…” In addition, these costs have increased much faster than “the rate of inflation used to adjust the foundation budget.”

Similarly, the foundation budget for special education funding is too low. The report says: “A district’s foundation enrollment is multiplied by 3.75%… This translates to an assumption that 15% of students receive in-district special education services 25% of the time. In actuality, around 16% of students receive some level of in-district special education services statewide, which suggests that the foundation budget understates the number of in-district special education students.”

Committee Recommendations

The report makes a range of recommendations for improving the process of school funding. These include:

– increasing the health insurance rate used to calculate school funding

– increasing “the assumed in-district special education enrollment rate from 3.75% to 4.00% (for non-vocational students) and 4.75% to 5.00% (for vocational students)”

– updating the rates used to calculate funding for schools serving ELL students

– updating the process for funding schools serving low income students

– setting up a “data collection and reporting system” to track funding for ELL and low-income students, and

– convening “a Stakeholder Data Advisory Committee to promote effective resource allocation decisions at the local level”

The State House News reports that if the commission’s insurance and special education adjustments were adopted in full, the amount of Chapter 70 aid issued statewide would need to increase by nearly $432 million, bringing the total up to $4.9 billion. If these adjustments were adopted partially, with the intent of phasing in changes over four years, the increase would be nearly $96 million.

Early Education

“High-quality preschool is an effective practice identified by most school districts as one which increases the school readiness of students, especially high need students,” the report says, pointing out that these programs are “worthy of further consideration and action by the Legislature as it updates the structure and financing of public education for the 21st Century.”

“While the Commission did not have sufficient time or resources to undertake specific recommendations on early education, it was a practice that was frequently highlighted in both national literature and in feedback from model districts within the Commonwealth—both for closing achievement gaps for disadvantaged students and in reducing special education costs for districts and the state.”

The report also points to the use of “federal funds from the Preschool Expansion Grant (PEG) program, and some supplemental state funds, to examine and explore ways in which early education can be provided and expanded through the existing and robust mixed delivery system of public and private providers. As it considers whether the Chapter 70 funding formula can be adapted appropriately as a funding vehicle for the ongoing provision of pre-school, the Commission encourages the Legislature to incorporate the implementation wisdom gained through the PEG pilot programs and the Commonwealth’s other early education program, quality, and access initiatives as it rolls out any effort to provide these services more widely.”

Taking Action

“We are convinced that providing a high-quality education to every student within the Commonwealth regardless of wealth, income, educational background, or zip code is not only a matter of constitutional obligation but of generational responsibility,” the commission’s report says.

And Strategies CEO Chris Martes adds, “If we’re going to have a 21st century education system, we have to make a 21st century investment in our children.”

Now it’s up to the Legislature to act. And while economic times are tight now, legislators can still use the commission’s report as a thoughtful guide as they find innovative ways to increase funding and ensure that Massachusetts remains a leader in education.