EDUCATION FINANCING IN MASSACHUSETTS AND THE 50 STATES, FISCAL YEAR 2006

The budgetary response to the state’s fiscal crisis dominated discussions of education funding in Massachusetts in the current year. In order to put the current education finance discussion in perspective, however, it is important to looks at historical trends for primary and secondary (K-12) public education within the state and to compare education spending in Massachusetts with other states and with the nation as a whole.

This brief examines changes in Massachusetts education spending from 1993 to 2006. In that time, Massachusetts’ support of public education is compared to other states in terms of federal, state and local spending. Finally, the brief looks at how the costs of education in Massachusetts are shared between the federal, state and local funds.

The analysis in this brief relies on U.S. Census Bureau data for Fiscal Years 1993 to 2006 – the most recent year for which such data are available. We rely on three key measures to make comparisons between Massachusetts and the rest of the country both for the Fiscal Year 2006 (FY 2006) and over time. These measures include:

1. Spending on K-12 public education as a share of total state personal income.¹

2. Cost-adjusted spending per pupil.²

3. The share of overall primary and secondary education revenue derived from state sources as opposed to local or federal sources.

Education Financing Trends over Time

To put changes in spending on K-12 education into context, it is first helpful to understand how education financing in Massachusetts has changed over time. Over the course of the 1990s – due largely to the enactment of the landmark Education Reform Act in 1993 – Massachusetts substantially increased the amount of state revenue dedicated to primary and secondary education. That progress all but came to a halt between FY 2003 and FY 2005 when, during a recession, the Commonwealth adopted nearly $3 billion in budget cuts, including substantial cuts to education.³ In FY 2006, the state began to restore some of the cuts made in K-12 education. In FY 2007, Massachusetts adopted a five-year plan to increase the state’s share of education spending and to address perceived inequities in required local contributions. In FY 2010, as the state has struggled to address a $5 billion budget gap, state aid to districts was cut by 2 percent and a number of the components of the FY 2007 reforms have been suspended in an effort to limit state education spending.⁴

As the following summary of the Census Bureau’s data from FY 1993 to FY 2006 indicates, the share of total primary and secondary education revenue furnished by the state grew dramatically in the 1990s, but then fell as a result of budget cuts between FY 2002 and FY 2004. Data from FY 2005 and FY 2006 reflects the state’s efforts to restore some of the funding cuts in the prior three years. Likewise, aggregate and cost-adjusted per pupil spending on primary and secondary education grew in the 1990s and then fell with budget cuts in the early part of the new decade. The most recent Census data show aggregate and cost-adjusted per pupil spending continues to rise, but still remains below the FY 2002 level that was achieved before budget cutting began.

• Since FY 2004, when the Commonwealth’s share of the total amount of revenue dedicated to public primary and secondary education in Massachusetts declined to 39.8 percent, from a high of 42.1 percent in FY 2002, the state share of education spending has risen. As shown in Figure 1, In FY 2005 the state share rose to 42.2 percent as the state began to replace cuts made between FY 2002 and FY 2004. In FY 2006, the amount of education spending for state sources rose again to just under 44 percent. Between FY 1993 and FY 2006, the share of primary and secondary education revenue flowing from state coffers grew from less than 33 percent to 44 percent, a dramatic increase of more than one-third.

• While the share of all revenue for primary and secondary education in the state paid for by cities and towns rose from 52.5 percent in FY 2002 to 53.6 percent in FY 2004, the share declined in the following two years. By FY 2006, the contributions by cities and towns fell to 50.7 percent of the total revenue for elementary and secondary education.

Comparing Massachusetts to the Rest of the Country

It is also important to understand how Massachusetts’ financial commitment to K-12 public education compares with other states and the how those costs are shared between the federal, state and local governments.

To consider total education spending in Massachusetts, we examine elementary and secondary spending as a share of total personal income earned in each state as well as per-pupil spending adjusted for cost differences between states.

Education Support as a Share of Terms of Personal Income

• Relative to its capacity to finance public primary and secondary education (as expressed by state personal income), Massachusetts’ total spending (from federal, state, and local sources) on primary and secondary education was considerably less than the majority of states. In FY 2006, total spending on public K-12 education in Massachusetts amounted to 4.6 percent of personal income, earning the Commonwealth a rank of 35th among all states Nationally, total spending on public primary and secondary education constituted 5 percent of personal income in FY 2006, roughly 10 percent more than in Massachusetts. See Appendices A & B for more information on state rankings.

• If one were to exclude federal education aid to the states from total spending – and, thus, to examine state and local spending on public primary and secondary education in isolation – Massachusetts’ relative standing relative to the national average does improve. Figure 2 shows, that in FY 2006, state and local spending on public primary and secondary education in Massachusetts equaled 4.3 percent of total personal income, putting Massachusetts in 25th place nationally. The country as a whole devoted 4.5 percent of total personal income to state and local support of public education.

Education Support in Terms of Per Pupil Spending⁵

• When operating and capital costs are combined and adjusted for differences between states, total spending per pupil in Massachusetts was $12,774 in FY 2006, leaving the Commonwealth 10th in the country and above the overall U.S. mark of $10,885 per pupil. See Appendix D for state by state per-pupil spending information.

Looking at Education Support on Instruction and Capital Costs

• Approximately 63 percent of current education spending in Massachusetts in FY 2006 was used for instruction. Just four states – led by New York with 69 percent – dedicated a larger share of current spending to teaching in that year. Almost all remaining current spending in Massachusetts – roughly one-third – went to support services. By comparison, the 50 states, when averaged together, devoted 60.2 percent of current spending to instruction and 34.6 percent to support services.

• Measured as a share of total income, Massachusetts was 43rd in the country in spending for capital outlays for education, allocating 0.31 percent of personal income to such outlays in FY 2006. The national average for capital spending – 0.55 percent of personal income – was 77 percent greater than Massachusetts. See Appendix D for comparisons of state support for capital spending.

Sharing the cost of education

The Census Bureau’s data offer some insight into the way in which responsibility for financing public primary and secondary education was shared in Massachusetts in FY 2006 relative to other states. Of note:

• Local governments provided the largest share of revenue for public elementary and secondary education in Massachusetts for FY 2006 – 50.7 percent, as show in Figure 3. State government provided 44 percent of such revenue, while the federal government supplied just 5.3 percent.

• Massachusetts continues to rely more than most states on local governments to generate revenue for public primary and secondary education. Among local governments, those in Massachusetts produced the 12th largest share of total public elementary and secondary education revenue in FY 2006. Local governments across the United States provided 44.4 percent of revenue for public primary and secondary education; by comparison, Massachusetts cities and towns provided 50.7 percent of primary and secondary education revenue. Appendix E provides additional information on the different levels of federal, state and local support in the states.

• Massachusetts also receives less federal aid than the vast majority of states – the federal share of total education revenue in Massachusetts in FY 2006 was 48th in the country. This is due to the manner in which Federal education aid is distributed. Funds available under Title I, the “largest federal program supporting elementary and secondary education” are targeted “primarily to high-poverty districts and schools, where the needs are greatest.”⁵

¹Data on state personal income is compiled by the U.S. Commerce Department, Bureau of Economic Analysis and can be obtained at http://www.bea.gov/regional/index.htm#state.

²Data on primary and secondary education spending and on student enrollment were taken from U.S. Census Bureau, Governments Division, Public Education Finances, downloaded from http://www.census.gov/govs/www/school.html. The Comparable Wage Index was used to adjust for cost differences between states. Comparable Wage Index data can be found online at http://nces.ed.gov/pubsearch/pubsinfo.asp?pubid=2007397

³As the state faces its current recession, the cuts and policies adopted in between FY 2003 and FY 2005 are particularly relevant as they show how the state has approached reducing school finance funding in the past.

⁴For more information on education funding in the FY 2010 budget, see the MassBudget Preliminary Analysis of the FY 2010 Conference Committee budget, available online at http://www.massbudget.org/documentsearch/findDocument?doc_id=622

⁵This report controls for differences in costs between states using the Comparable Wage Index, developed by research supported by the National Center for Education Statistics. Information on the merits of using the Comparable Wage Index to adjust for cost differences between states can be found online at http://nces.ed.gov/pubs2006/2006865.pdf