The Massachusetts State Budget: State Aid to Education

Ken O’Brien

As The O’Zone pointed out yesterday, state aid is a vital component of the town’s budget.

Aid for general government constitutes between 12% and 13% of total non-education expenses.

But this is trivial when compared to the portion of Southbridge’s education budget underwritten by state aid. During the fiscal year at least 71% of the town’s education budget is provided by state funding.

With future prospects for the state’s financial future dimming an understanding of the role of education funding in the state budget becomes increasingly important.

The FY 2013 budget increases funding for a number of education programs over current FY 2012 levels. In many cases these increases are in line with inflation, and in a few cases these increases go beyond merely reflecting annual cost growth to help offset a portion of cuts made over recent years. Even with these modest increases, however, total state spending on education for FY 2013 represents an inflation-adjusted cut of around 6.4 percent from pre-fiscal crisis levels (FY 2009 General Appropriations Act, "GAA").

Much of the one-year increase for education programs comes in the form of revenue support for local school districts. Chapter 70 education aid is increased by $180.3 million and reimbursements through the Special Education Circuit Breaker are increased $28.8 million. Early education programs are the hardest hit category of education spending in the FY 2013 budget, with the three main child care subsidy accounts getting cut by a total of $8.1 million.

EARLY EDUCATION & CARE

Early Education and Care programs and services receive a cut of $7.2 million compared to FY 2012. This cut is much bigger when accounting for the increase in costs due to inflation. The FY 2013 budget appropriation of $499.6 million represents a cut of 20.7 percent when compared to FY 2009 GAA inflation-adjusted funding levels.

In FY 2012, more than 85 percent of early education and care funding went to three child care programs: Supportive Child Care for children in Department of Children and Families (DCF) care, Income Eligible Child Care for other children of low-income working families, and TANF Related Child Care for children of families served by or transitioning from Transitional Aid to Families with Dependent Children (TAFDC). Taken together, the FY 2013 budget appropriation for the three child care subsidies is $8.1 million lower than the current FY 2012 budget and $89.1 million lower than FY 2009 GAA inflation-adjusted funding levels.

Entry for new income eligible child care families has been closed for most of FY 2012 and the FY 2013 budget will continue to exclude new families for FY 2013. EEC is projecting a small surplus in this account for FY 2012 which would be used for siblings of children already receiving a subsidy. In April 2012 the number of families on the waitlist for income eligible child care exceeded 36,000 with an 11.8 percent increase from March to April alone. Although the state is projecting a reduction in caseload for TANF-related child care, EEC projects that the $125.5 million appropriation will be insufficient in FY 2013. DCF no longer counts the number of children waiting for supportive child care, but in FY 2010 the waitlist averaged around 1,000 children.

Reach Out and Read received $750,000, the largest percentage cut (6.3 percent) of the early education and care programs compared to FY 2012. Reach Out and Read promotes early literacy and school readiness by partnering with doctors to give out free books and encourage families to read together. This small percentage cut is dwarfed when comparing FY 2013 appropriations to FY 2009 GAA inflation-adjusted funding levels:

• Access Management, cut 78.1 percent, funds child care resources and referral agencies (CCR&R) which help families with a subsidy attain child care.
• Early Childhood Mental Health Consultations, cut 75.8 percent, promote the healthy social and emotional development of all children at the classroom level.
• Universal Pre-Kindergarten, cut 42.2 percent, funds grants to improve the quality of and expand access to preschool programs and services to children from the age of two years nine months until they are kindergarten eligible.
• Head Start, cut 25.1 percent, promotes school readiness of children ages birth to five from low-income families by enhancing their cognitive, social, and emotional development.

K-12: CHAPTER 70 AID

The FY 2013 budget funds Chapter 70 Education Aid at $4.2 billion, $180.3 million over current FY 2012 funding. The vast majority of this increase, about $145 million of it, roughly funds the formula outlined in state law, using updated enrollment, inflation, and municipal revenue growth factor measures, helping school districts keep up with the rising cost of providing baseline services.¹ The FY 2013 budget also partially phases in one of the reforms planned as part of the FY 2007 budget—reducing by 15 percent the gap for districts whose preliminary contribution is above their target.²

Two further provisions combine to distribute an additional $35.0 million through the Chapter 70 formula by:

1. Distributing additional money to communities whose Chapter 70 aid allocation is below their "target aid percentage.³" The FY 2013 budget distributes this money only to those districts whose Combined Effort Yield (a uniform measure of local property wealth and incomes available to fund K-12 education) as a percent of their foundation budgets is less than or equal to 107.5.Guaranteeing each school district a minimum $40 per pupil increase over their FY 2012 aid allocation.
2. Guaranteeing each school district a minimum $40 per pupil increase over their FY 2012 aid allocation.
   
   

Combined, these two provisions have a somewhat regressive distributional effect (see graph below), although exempting the wealthiest districts from the target aid provision helps make it less regressive than it otherwise would have been. Additionally, the provision relating to target aid does have the virtue of further advancing a subset of policy reforms planned through the 2007 budget. The $40 per pupil minimum provision, by contrast, distributes additional aid without considering local need or capacity.

K-12: NON-CHAPTER 70 AID

In the FY 2013 budget several K-12 education grant programs see small increases over current FY 2012 levels. Two programs, in particular—the Special Education Circuit Breaker and Homeless Student Transportation—receive significant new funding and make up the lion's share of the $58.9 million increase over FY 2012.

The SPED Circuit Breaker is funded at $28.8 million above current levels, enabling the state to reimburse school districts at close to the full 75 percent statutory reimbursement rate (of costs above four times the state foundation budget per pupil) for the first time since FY 2008. This increase in circuit breaker funding was coupled with outside section language that froze the annual inflationary increase made for tuition payments to private SPED schools, but the Governor vetoed this rate freeze. Since his veto was not overridden by the legislature, the rate freeze did not make it into the final budget.

Because school districts are legally mandated to provide services that meet the needs of their special education students, a higher reimbursement rate through the circuit breaker is not likely to change dramatically the nature of services provided to these students; rather these reimbursements help free up money to fund other school services, and in that sense, circuit breaker funding serves as a form of general education aid, similar to Chapter 70 aid.

Homeless Student Transportation is a new program for FY 2013 and is funded at $11.3 million. Federal law provides that homeless students living in temporary housing outside of a city or town where the family lived prior to becoming homeless may choose to remain enrolled in the school district of origin. The federal law requires that transportation be provided so that students can continue attending the school district of origin, and this new line item will help reimburse host and sending school districts for these transportation-related costs.

The FY 2013 budget funds four other new education programs. Specifically, the budget provides:

• $3.0 million for Programs for English Language Learners in Gateway Cities, for summer English learning camps for students who are not yet fluent in English.
• $500,000 for Gateway Cities Career Academies, for high school support centers to help students explore career opportunities.
• $505,000 for Data Sharing, for a cross-departmental data sharing pilot program for assigning a student identifier to children participating in early intervention programs with the goal of tracking their progress and determining cost savings associated with early intervention.
• $250,000 for Financial Literacy Program, for competitive grants to fund high school financial literacy programs.

K-12: SCHOOL BUILDING

The FY 2013 budget projects a contribution to the School Modernization and Reconstruction Trust (SMART) of $689.4 million. Each year the Commonwealth is required to contribute to this trust an amount equal to one out of every 6.25 cents brought in through the state sales tax. The FY 2013 contribution is projected to be higher than the FY 2012 contribution due to modest projected increases in total sales tax receipts.

HIGHER EDUCATION

While total funding for public higher education in the FY 2013 budget is somewhat higher than FY 2012, FY 2013 funding still represents an inflation-adjusted cut of around 13 percent from pre-fiscal crisis levels (FY 2009 GAA). Cuts are even deeper when looked at over a longer time horizon, with FY 2013 funding proposals representing around a 30 percent cut from FY 2001.

As demonstrated in the graph below, one consequence of declining state support over the past decade has been dramatic growth in the cost of tuition and fees for students attending each of the state's three types of higher education campuses.

The vast majority of the increase for FY 2013—$49.1 million of it—funds collective bargaining accounts that cover labor costs at each of the campuses. While this spending shows up in separate reserve accounts, we  build these dollars into campus totals below in order to reflect more accurately the level of state budget resources being used to run these campuses ($5.7 million for line item 1599-4419 goes towards a bargaining unit covering both state universities and community colleges and cannot be broken out across these two types of campuses).⁴ Except for these collective bargaining increases, higher education campuses are all close to level-funded from current FY 2012 levels. The table below summarizes funding totals for each of these campus types.

Also noteworthy in the FY 2013 budget is the adoption of several reforms to how the state's fifteen community colleges are governed, calling on them to focus more specifically on job training and seeking greater standardization of the system statewide. Key reforms include:

• Empowering the Governor to appoint the chairperson of individual community college boards.
• Directing the Commissioner of Higher Education to develop a new community college funding formula that integrates workforce development goals and student performance metrics.
• Expanding the Board of Higher Education's role in selecting and evaluating community college presidents.

The FY 2013 budget provides new or increased funding for a few programs in order to help advance these reforms, including:

• $7.5 million for the Performance Management Set Aside program, an increase of $5.0 million over current FY 2012 levels. This increase is coupled with a $5.0 million earmark for community college standardization initiatives, including the creation of standard course offerings and numbering across all fifteen community college campuses.
• $2.3 million for a new Rapid Response Grants program, enabling community colleges to set up workforce training programs within three months of a request by local businesses.
• $400,000 for a new Office of Coordination, to coordinate all public higher education workforce training efforts. This office will be housed within the Board of Higher Education.

Additionally, the FY 2013 budget provides $3.3 million for a new High Demand Scholarship Program, targeted for Massachusetts residents attending state universities or community colleges working towards majors in in high-demand professions.

Please see the table below for more information on higher education line items. This table includes tuition retention adjustments for each of the campus line items, but separates out collective bargaining accounts.

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NOTES:

¹For more information on how the Chapter 70 formula works, see Demystifying the Chapter 70 Formula.

²For more information on the 2007 reform plan, please see the November 2006 MassBudget paper Public School Funding in Massachusetts: Where We Are, What Has Changed, and Options Ahead, available here: http://www.massbudget.org/file_storage/documents/Public_School_Funding-Where_We_Are_What_Has_Changed_-_FINAL.pdf

³This approach is similar to "down payment aid" discussed on page 6 of the above MassBudget report.

⁴Additionally, starting in FY 2012, all campuses of public higher education began retaining tuition payments from out-of-state students, rather than remitting that revenue back to the state, so we adjust upwards the campus allocations by these projected amounts so that one can compare reasonably the levels or resources available at an individual campus to previous years when this tuition was remitted to the state.

Data and commentary from Massachusetts Budget and Policy Center