FEDERAL STIMULUS AND CHAPTER 70

On March 19, Governor Patrick announced plans to use federal stimulus funds, appropriated in the American Recovery and Reinvestment Act (ARRA), to provide the $168 million necessary to ensure that required school spending met the Foundation Budget in the 153 districts for which that was not the case in the Governor’s proposal. The House Ways and Means budget proposal, released on April 15, authorizes the Governor to use $184 million to ensure that required school spending in all districts meet the Foundation Budget.

What types of districts receive money and why?⁹

While much attention has been focused on districts that would receive money and do not seem to need it, a large share of federal stimulus funds went to communities that have clear need. These are districts that the state formula allocates additional resources to because these districts do not have the local resources to provide the minimum spending required to ensure an adequate education for projected enrollment in FY 2010. For example, $13.2 million was allocated to Springfield, $3.1 million to New Bedford, and $5.6 million to Brockton. In total, $89.7 million of the ARRA funds were distributed to these types of communities.

2. Districts that have been contributing more of their local resources than the formula requires¹¹

In 2007, reforms to the state education funding formula reduced local contributions and increased state aid for those communities that were spending more of their own resources than other towns with the same capacity. Because the Governor’s distribution continues to phase in this reform, some communities receive aid increases when other very similar communities do not – but this is because these communities receiving the new ARRA funds have historically received less aid, proportionately, than comparison communities. For example, Framingham contributes much more than the target set by the formula. Therefore, Framingham is allowed to reduce its contribution towards the target and gets $3.5 million in new aid. Altogether, $50.1 million of the ARRA funds went to these types of communities. It is important to note that some of these communities are also experiencing rapid enrollment growth, and would have been eligible for ARRA funds even if the effort reduction provision had been suspended.

3. Districts where enrollments are growing rapidly

In many of the cases described above, the formula factors combined with enrollment growth determine how much aid particular communities receive. Increases in a district’s Foundation Budget are the result of both inflation and enrollment changes. Thus any element of the formula that relates to the Foundation Budget is sensitive to changes in enrollment. Altogether, $17 million of the ARRA funds went to communities whose gap between the combination of state aid and required contribution and the Foundation Budget was due to growing enrollments.

4. Districts with high incomes and high property values

The maximum target contribution (or ceiling) of 82.5 percent of district’s Foundation Budget means that many wealthy communities are considered high-effort and have had their minimum required contributions reduced over the past three years. Most of the districts that received ARRA money, and appear to have limited need, are receiving money because of this provision. It is a provision of the law which was specifically designed to increase funding for those who have the least need as measured by the needs-based formula. This includes $1.4 million for Belmont, $1.2 million for Wellesley and $1.2 million for North Andover. Altogether, $14 million of the total amount distributed was due to this provision.

What types of districts are not receiving any of the $168 million?

1. Many districts with declining enrollments

Districts with declining enrollment are less likely to receive aid because the Foundation Budget formula is based on the number of students in a district. Many of the lower income districts that are not receiving additional aid have declining enrollments and the formula therefore treats them as not less need.

2. Districts with high local capacity that have been contributing relatively less of their resources

The current education formula seeks to require every community to contribute the same proportion of local resources towards their schools. Therefore, those communities whose local spending is a smaller share of local incomes and property values than average are expected to increase local spending rather than receive new state aid.

⁹Analysis of ARRA distribution and the options ahead for school finance in FY 2010 are based on the Governor’s House 1 proposal due to the availability of the underlying data for the Governor’s plan on the Department of Elementary and Secondary Education’s website. The categories described are not mutually exclusive. For communities that could belong to more than one group, this analysis assigns that district to the category it best fits. Districts that are contributing at too high a level, and are experiencing rapid enrollment growth, were assigned to group #2.

¹⁰For the purpose of this analysis, communities were included in this category if their Target Share is greater than 50 percent.

¹¹ Districts are considered to be contributing more of their local resources than required by the formula if their state aid level falls below their Target Share.

¹²ARRA calls for the education portion of the State Fiscal Stabilization Fund to be distributed using existing formulas. In Massachusetts, however, this language probably leaves significant flexibility as the reforms to the formula adopted in FY2007 were never put into the general laws and have been altered since their adoption. In addition, the Legislature could adjust state chapter 70 funding to offset elements of the distribution of the ARRA funding that would not be consistent with a revised distribution plan.