summary of problems with Massachusetts chapter 70 formula. In particular why more focus should go to ability to pay

1. The Chapter 70 Story
www.chapter70.com

2. 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 taxationbased on a community’s ability to pay.

3. What is Chapter 70?
Chapter 70 is the funding program created to determine how much state aid school districts receive.
The goal is to ensure all students receive adequate and equitable funding.
What is the mechanism to ensure adequate and equitable funding?
There are two main components :
1. Foundation budget – this is what is deemed adequate spending on schools by the state.
2. Reimbursement formula -this is the mechanism for determining equitable local
funding. It calculates local wealth to determine what share of the foundation budget a district can
afford to pay.

4. Why is it important?
We all want to support our children with excellent teachers and programming,
create responsible adults, and ensure the next generation's success. Funding our
schools is critical to this mission.
When a city cannot fully fund its schools' budget, the state fills the gap to ensure
that children are not denied a quality education due to lack of wealth.
This is what Chapter 70 funding is supposed to do.
It ensures that all children in the state receive "adequate and
equitable" funding for a quality education.
.

5. What’s the Problem?
Since 2007 – the last time there were changes to the formula – Massachusetts' wealthiest 10% of
communities have received the largest percentage increases in school aid.
This shift in funding to wealthy districts occurred simultaneously with an increased concentration
of wealth in these same communities.
Over the past ten years, these wealthy communities have continued to invest in rich programming
and educational opportunities. Unfortunately for struggling districts, these same ten years have
been full of program cuts and reduced staffing. For many districts, the education they can afford is
no longer "adequate" or "equitable".
In fact, MCAS data has shown that the achievement gap between rich and poor has only grows
widerSee here.

6. Currently, equitable means that only some wealth is factored into state aid, creating a larger gap in resources between
wealthy and middle class or poorer communities.
Due to the designated "maximum local contribution" and "ability to pay" calculation, wealthy districts contributions are capped and
they have gained funding over their less fortunate neighbors. In 2007 approx. 32% of districts hit the maximum. In 2016 over 40% of
districts hit the maximum. The current part of the formula in in-equitable by design.Wealthy districts receive a more money than the
formula says they should get. This could easily be fixed by changing the how much property and income tax formulas
The wealth factor is ignored for the wealthiest communities and they are treated the same as middle class towns in the reimbursement
formula even though their "ability to pay" is high.
We Must Redefine Equitable.
% of Foundation Budget districts actually pay– per the state's formula:
• Weston vs. Wakefield 82.5% vs. 82.5% %
• Winchester vs.Woburn 82.5% % vs. 82.5% %
• Newton vs. Newburyport 82.5% % vs. 82.5% %
% of Foundation Budget district can afford to pay– per the state's formula:
• Weston vs. Wakefield 360% vs. 88%
• Winchester vs. Woburn 125% vs. 84%
• Newton vs. Newburyport 174% vs. 119%

7. Woburn vsWinchester
Winchester
2007 - foundation budget 27M
Chapter 70 = 3.5 M
Ability to pay 134% of foundation
What they had to pay 82.5%
2019 – foundation budget 38M
Chapter 70 = 9M
Total incremental CH70 2007 to 2019 = 38M
Woburn
2007 - foundation budget 38M
Chapter 70 = 5M
Ability to pay 88% of foundation
What they had to pay 82.5%
2019 – foundation budget 56M
Chapter 70 = 9M
Total incremental CH70 2007 to 2019 = 26M
Was the intention to increase Chapter 70 by millions a year to our wealthiest communities during an
economic expansion when most of the wealth also travelled to those communities?
Where is the leadership in the legistlature>

9. Determining Reimbursement
Cities receive a percentage of their "foundation budget"
Foundation budget is a formula used to determine the basic education costs
for a student in any district.
It is calculated by multiplying the number of students in each grade by
spending categories (teacher pay, building maintenance, etc.).
Foundation budget does not represent "adequate and equitable".
The formula needs to be updated to aid struggling communities.
There are many pieces of required spending which aren’t adequately
reflected. One example is the ever increasing costs of special education
services.
Foundation budget
Total School costs
Required School costs

10. Special education costs are not fully in the foundation budget
The state set a fixed percentage for how many students receive in-
district and out-of-district special education in any one district. They
also set estimated tuition.
A district that has more students requiring these services will pay the
required costs from local property taxes.
Circuit breaker is not a fix.
The circuit breaker only kicks in once a certain spend level is reached
and then only pays a percentage of the unmet costs. Circuit breaker is
also not consistently funded. It is a flawed attempt to patch a broken
system.
Foundation budget
Total School costs
Required School costs

11. Districts are not reimbursed on actual required cost
Districts are reimbursed on foundation budget which
makes planning local budgets a challenge.
For many middle class districts, removing
programming has been the solution to rising costs as
funding responsibilities have shifted to local property
taxes.
Foundation budget
Total School costs
Required School costs

12. Is reimbursement based on community wealth?
No!
That doesn’t sounds fair.
The rules changed in 2007 to ensure that wealthy communities receive
a minimum amount of the foundation budget.
Why is this a problem?
After the state made the changes, our wealthiest communities have
inadvertently or intentionally received the largest percentage increases
in school funding.
Does it make that much of a difference?
Yes, it does. For example, Wellesley and Needham received 50
million in new dollars over 10 years.
Foundation budget
Total School costs
Required School costs

13. What is the wealth formula?
The formula uses a city's income and property wealth to
determine how much of foundation budget can be paid for locally.
Property*.38 Income*1.49+ =
Ability to Pay
(combined effort yield)
It is expressed a %
Can I see some examples?
local effort DOR total local effort combined target
total from property income from income effort local
District EQV 2014 wealth 2012 wealth yield share
AMESBURY 1,849,252,600 7,041,622 520,578,000 7,772,249 14,813,871 61% 61.00
NEEDHAM 8,293,426,000 31,579,878 2,801,114,000 41,820,737 73,400,615 140% 82.50
NEWBURYPORT 3,515,476,700 13,386,304 918,141,000 13,707,880 27,094,184 117% 82.50
WELLESLEY 10,212,968,600 38,889,151 4,775,204,000 71,293,975 110,183,127 227% 82.50
What the formula says
What the community
actually is expected to pay
of foundation budget
Wellesley can afford 227% of their foundation budget. But since the formula
change, they only need to fund 82.5% to receive catch-up funds.
What district
can afford

14. The formula treats wealthy communities like Wellesley, Weston and
Winchester the same as middle class cities like Woburn, Danvers and
Amesbury.
Wellesley, which has four times the wealth of Amesbury, is only expected to have 33% more
wealth than Amesbury when the formula is applied.
What does that mean in dollars?
Between 2007 and 2016Wellesley has received an additional 29 million dollars in state aid for schools
above their 2007 levels.
Amesbury has received a total of 45 thousand dollars in 10 years.
Who needs the money more?
Wellesley’s income has grown by over 113% in that 10 year period.Amesbury’s has grown by about
40%.
Does school population account for this change?
No. If we look atWellesley's aid and enrollment in 2007 compared to 2016, the difference would equal
almost $9000 dollars annually for each additional student.

15. Winners under the New Rules
These 10 districts, with an average
ability to pay of 152% of foundation
budget, received a total of 219 million
in additional state aid over 10 years.
All of these districts are treated as
though their ability to pay is 82.5%
On average these 10 get 90% more in
aid annually than they did in 2007.

16. Some Losers under the New Rules
These 10 districts with an average
ability to pay of 70% of foundation
budget only saw an average increase
at 1.46%.
These communities will tell you, this
distribution is far from equitable or
adequate.

17. "The state has very limited dollars.We have many
competing interests," said state Rep. Alice Peisch, D-
Wellesley, chairwoman of the Joint Committee on
Education. "We need to do a better job of educating the
population about the fact that taxes are not necessarily
a bad thing and that at the end of the day we all benefit
from the common good that is produced when we have
a well-educated population.” May 7, 2016
Full article here.
What Do our Legislators Say?

18. 2007 to 2016 Sample Changes
What formula would say if actually used
All considered to be able to afford 82.5%
Even though Wellesley's wealth is 2x that of
Newburyport, they’re treated the same,
Alice Peisch's districts got 50 million dollars in
additional aid over 10 years. Amesbury, with an
ability to pay of 63%, received only 45 thousand.

19. Summary of Changes over 10 years

20. ThereAre Solutions
But first the legislature would need to look at what problem they are trying to solve.
If we change the method for determining minimum payment, we can return equity to the
funding formula so all districts can provide an adequate education all students.
What do you mean?
Currently if a districts' wealth is above 82.5% ability to pay, they are still only expected to
pay 82.5%. The state needs to decide how many districts can be above that amount per the
formula and adjust the .38 and 1.49 until that target district = 82.5.
Property*.38 Income*1.49+ =
Ability to Pay
(combined effort yield) How would this work?

21. An AlternateWay to DetermineWealth
What would that do?
It would:
• Ensure that the ability to pay is actually utilized and the differences in wealth are recognized.
• Reduce the number of districts caught in the "maximum local contribution" regardless of wealth.
• Stop treating middle class and wealthy suburbs the same – this is what equitable means.
• Unfortunately, we probably can’t roll back the massive amounts of catch-up payments provided to our
wealthiest districts for the money the "missed" under the old rules.
Wait, what? We provided catch up payments to our wealthiest districts ? -Yes.
Property*.38 Income*1.49+ =
Ability to Pay
(combined effort yield)
Adjust these so that only 10% of districts are above the maximum contribution.

22. "Catch Up" Funds
local january preliminary difference
contribution (preliminary) contribution from
Lea District FY06 mrgf07 FY07 goal
317 WELLESLEY 31,514,317 4.93% 33,067,973 4,086,809
In 2007, in addition to deciding that our wealthiest districts should be exempt from the wealth formula,
the legislature also decided to build in another formula to help those wealthy districts "catch up" on funds
they didn't get prior to the changes.
What does this mean?
Each district was assigned a goal –
Was the goal based on a districts actual wealth or the 82.5% number?
It was designed on the 82.5% number which means the legislature built in a subsidy for our wealthiest
communities.
Not only did the legislature decide to treat wealthy districts like middle class districts they decided
to give them a bonus.
yes

23. Lea District CEY %
target local
share
difference from
goal
49 FY 07 CAMBRIDGE 210% 82.50 81,927,634
46 FY 07 BROOKLINE 177% 82.50 26,105,297
207 FY 07 NEWTON 165% 82.50 24,715,481
314 FY 07 WATERTOWN 153% 82.50 11,249,103
20 FY 07 BARNSTABLE 120% 82.50 10,210,991
96 FY 07 FALMOUTH 134% 82.50 9,105,135
67 FY 07 CONCORD 167% 82.50 8,203,934
330 FY 07 WESTON 262% 82.50 7,065,999
197 FY 07 NANTUCKET 562% 82.50 6,511,153
55 FY 07 CHATHAM 454% 82.50 4,230,036
26 FY 07 BELMONT 130% 82.50 4,207,494
317 FY 07 WELLESLEY 183% 82.50 4,086,809
344 FY 07 WINCHESTER 134% 82.50 3,166,440
242 FY 07 PROVINCETOWN 572% 82.50 3,140,685
78 FY 07 DOVER 201% 82.50 2,965,956
75 FY 07 DENNIS 179% 82.50 2,476,573
126 FY 07 HARWICH 149% 82.50 2,464,930
296 FY 07 TISBURY 209% 82.50 2,117,678
85 FY 07 EASTHAM 198% 82.50 1,941,621
157 FY 07 LINCOLN 198% 82.50 1,919,201
224 FY 07 ORLEANS 312% 82.50 1,762,075
166 FY 07 MANCHESTER 222% 82.50 1,611,100
334 FY 07 WEST TISBURY 212% 82.50 1,451,620
269 FY 07 SHERBORN 130% 82.50 1,440,157
89 FY 07 EDGARTOWN 364% 82.50 1,420,934
318 FY 07 WELLFLEET 288% 82.50 1,413,589
41 FY 07 BREWSTER 122% 82.50 1,376,585
Difference from Goal
Communities with more than 120% of wealth
• In 2007 it was decided that
• Wellesley needed 4 million more annually
• Winchester needed 3 million more annually
• Concord needed 8 million more annually
• Newton needed 24 million annually
Etc..

24. What the ActualWealth Distribution Looks Like
In 2007 7% of
communities
could afford
180% of
foundation
In 2016 9% of communities could
afford 180% of foundation
Green indicates # of communities exempt from wealth formula
2007 2016

25. The Distribution Used to Reimburse in 2007 and 2016
In 2007 32% of
communities
were above the
82.5% limit
In 2016 43% of
communities
were above the
82.5% limit
All 114 treated
the same
All 153 treated
the same
Treated virtually the
same
70 to 80% of foundation70 to 80% of foundation
One of the 1st things you do when looking at numbers is to understand the distribution (how much goes into
each category). A normal distribution is represented as an arc or bell curve.
These distributions have a negative skew – not a normal distribution.This is typically a sign of a problem.

26. 2007 Distribution Actual vsWhatWas Used
2007
The actual wealth data has a skew to the right – but the state decided to make reimbursement
skew to the left (skew goes towards which way long tail)
This means that the legislature decided to favor wealthy districts in the formula over middle class
and working class districts for over 10 years.

27. We should try to have the distribution of reimbursement match reality.
If the state believes that districts likeWellesley or Needham only need to pay 82.5% of
foundation costs, then the same formula should be applied to middle class communities.
This would be more equitable.
How did our legislators fail to provide oversight when Wellesley’s ability to pay
for foundation budget increased from 180% to over 200% of foundation budget,
and continued gain more than double the annual Chapter 70 aid, while
struggling districts like Amesbury received 0% increases?

28. This Needs to change!
Why isn't anyone fixing this?
Over the past 2 years Beacon Hill has set up the Foundation Budget Review Commission to
investigate problems with the funding formula. Many citizens and experts testified and
several pointed out the inequity in distribution and wealth.
What did they find?
The good news is that they think that there needs to be a change. Unfortunately, their
proposed solutions continue to exacerbate the lack of equity.
What will they do?
Nothing.
Who is on the commission?
Rep.Alice Peisch continues to head the commission although her district is one of the
primary beneficiaries of the inequities.
Senator Chang-Diaz attempted to point to the inequities and was removed from the
committee.

29. Why Equity is Important
Massachusetts needs to lead in the knowledge economy of the 21st century,
yet we are creating a barbell economy of just the wealthy and the poor.
Reworking the mechanism for state aid in education funding can help stem
the movement of education opportunity only being available to a select
group of wealthy districts.

30. Shouldn't equitable mean striving to provide funding so that
students in Amesbury, Saugus, and Danvers have the same
opportunities as students fromWellesley, Winchester, and
Weston?
Massachusetts cannot be competitive in the global economy
without all its students receiving a quality education.

31. TakeAction
Call your state Representative and state Senator. Ask them why the chair of the Joint
Commission of Education from Wellesley has seen her district receive 110% more in annual
aid while your district funding hasn’t increased at the same level.
Ask them if they believe $29 million in additional aid over 10 years to Wellesley
represents adequate and equitable funding.
Call your mayor ask them to speak with other mayors to see if we should sue the state to
ensure equitable funding.