Chapter 70 overview

How Schools are Funded in Massachusetts

School costs are the largest single budget item for cities and towns in Massachusetts.
These costs are funded from two primary methods; local property taxes and reimbursements from the state.  

The purpose of state reimbursements is to balance the playing field of wealth. Wealthier towns should fund a greater percentage of costs themselves through local property taxes and poorer communities receive a greater percentage of funding from the state. 

There is a formula called “Chapter 70” which calculates what the relative share between local and state funding should be.

These links provide a more detailed explanation of how Chapter 70 does and should work.

http://finance1.doe.mass.edu/chapter70/chapter_10_explain.html

http://www.massbudget.org/report_window.php?loc=Facts_10_22_10.html

http://finance1.doe.mass.edu/chapter70/chapter_cal.html


The Cherry Sheet is the official notification of state aid and assessments to cities, towns, and regional school districts.
http://www.mass.gov/dor/docs/dls/cherry/cherrysheetmanual.pdf

PURPOSE: The Education Reform Act of 1993, as amended by recent budget language, continues to have a substantial impact on municipal finance and, in particular, on the level of local aid received by municipalities and regional school districts, hereafter referred to collectively as districts. Education Reform was undertaken in an effort to ensure both adequate funding of the Commonwealth's public schools and to bring equity to local taxation effort based on a community’s ability to pay.

The distribution formula has a few components and is intended to create a minimum spending level to provide an adequate education for all students. The manual also states that it is the intention for towns and districts to exceed this minimum though a combination of state and local resources..

The main components include:

1. Foundation Budget: reflects district enrollment, pupil characteristics, inflation and geographical differences in wages. This is the minimum spending level.
   
   http://finance1.doe.mass.edu/chapter70/chapter_cal.pdf
2. Ability to Pay:  how much of this targeted spending  amount should come from local sources and how much should be funded by the state.
1.  Aggregate wealth model was instituted in the FY07 budget and is the formula for ability to pay.
• uses updated property values and personal income data to address issues of inter-municipal equity
  
• property values are derived from DOR equalized property valuations
  
• personal income data comes from state tax returns
3. Target Local Share: this is the amount each city or town should fund from local sources.
1. The documentation goes on to discuss how towns and districts being above or below that threshold would have corrections implemented over a series of at least 5 years.
• The details are on page 7 of the Cherry Sheet manual.
•  There is so much conditional language in the documentation it leads me to the hypothesis that not much of this adjustment has actually happened.
• I will look at a few case studies to see if I can document (if any) corrections are actually taking place
4.  New State Aid- This step determines how much a town/district will receive.
1. The same 2007 formula also created a methodology to determine how much money would be received from the state.  100 percent of foundation budget - each district’s local contribution target %= state aid.
2. They also established a minimum % from the state even if a city's ability to pay is greater than their need. A wealthy town which has enough local resources will still receive money from the state.
    

Summary: there is a foundation budget that sets the minimum spend level and a percentage of cost paid by town based on the aggregate wealth model. 

1. State Aid $ = Foundation Budget$- Target Local Share $. It looks like it is calculated as a percentage and then dollars are applied.
   
   
2. Final Town District $= Any spending above the Foundation Budget + (Foundation Budget – Stage Aid). 
1. Most districts will spend beyond the foundation budget and this amount is to be covered by the city and town. If I was running a city or town I would audit the foundation budget inputs to guarantee the  numbers are as high as possible to ensure as much is included in the Chapter 70 formula.