School Finance: Chapter 70 Program

The Massachusetts Foundation Budget

7/5/2011

In Massachusetts, the definition of an adequate spending level for a school district is called its "foundation budget." It is a statistical measure that was developed by a group of superintendents and an economist in the early 1990's. They developed a "model school budget" which quantified "for the average school district what constitutes an adequate-but not excessive-level of funding 1." The goal of the Chapter 70 formula is to ensure that every district has sufficient resources to meet its foundation budget spending level, through an equitable combination of local property taxes and state aid.

Each district's foundation budget is updated each year to reflect inflation and changes in enrollment. Enrollment plays an important role not just because of the total number of pupils, but also because there are differences in the costs associated with various educational programs, grade levels, and student needs. Districts differ greatly in the percentages of their student population that fall into these enrollment categories. As a result, when districts' foundation budgets are presented in per pupil terms, there is considerable variation. The FY12 statewide average is $9,729 per pupil, but the range for academic districts is from $7,988 in Marion to $11,539 in Boston. Vocational districts, whose programs are more expensive, range from $13,959 to $16,975

The FY12 foundation budget continues the major changes to the calculations first implemented in FY07. The changes directly align the foundation budget categories with the chart of accounts which schools use to track how they spend their money. The rationale for the changes is discussed in detail on the DOE website at

  http://finance1.doe.mass.edu/chapter70/chapter_07_change_detail.doc

It is notable that since FY05, charter school tuition rates have relied upon foundation budgets calculated for each sending district's pupils at each charter school.

How The Foundation Budget Is Calculated

A district's foundation budget is derived by multiplying the number of pupils in fourteen enrollment categories by cost rates in eleven functional areas. Any district's FY12 calculations can be seen on the "foundation budget" link available in the Download MS EXCEL file size: 3.1 MB  FY12 Chapter 70 formula spreadsheet. Here we use the   Framingham school district's calculations as an example.

Foundation enrollment

The columns going across the page are the fourteen enrollment categories used in the foundation budget calculation. Any given year's foundation enrollment is a count of the number of pupils for whom a school district is financially responsible, on October 1st of the previous year2. It is comprised primarily of local resident school-children attending their community's local or regional school district. However, the measure also includes students for whom the district is paying tuition, at Commonwealth charter schools, other school districts, special education schools and other settings. It does not include tuitioned-in students from other districts, because their home districts are paying for those students' costs.

Based upon the pupil-specific information submitted by each school district to the Massachusetts Department of Education, a student is classified as being in one of the following categories, which appear in columns 1 through 10 of the report.

These headcounts are used to compute total foundation enrollment at the far right of the report. Note that for the purpose of computing this total, pre-school and half-day kindergarten categories count as .5 full-time equivalent pupils because they typically attend for half the school day. For example, Framingham's total foundation enrollment of 8,014 (shown in the last column on the right) counts its 16 pre-schoolers (columns 1 and 7) as 8 pupils; its 419 half-day kindergartners (column 2) count as 210 pupils; and its 193 ELL half-day kindergartners (column 8) as 97 pupils.

In columns 11 through 14 there are four cost increment categories that are intended to reflect the additional resources needed to educate special education and low-income students. These students have already been counted in columns 1 through 10, and are therefore not added to total enrollment.

• Assumed in-district special education enrollment (column 11) is set at 3.75 percent of foundation enrollment (not including pre-kindergarten and vocational pupils) and 4.75 percent of vocational enrollment. These headcounts are "assumed" rather than actual counts of pupils, an approach which is emerging as a common practice in state aid formulas around the country.4

• Assumed out-of-district special education enrollment (column 12) is set at one percent of total foundation enrollment (again not including pre-kindergarten and vocational pupils).

• Low-income status is reported on the basis of eligibility for free and reduced lunch programs. The FY12 increment for grade 1 to 8 low income students (column 13) is $3,224 per pupil. The FY12 increment for grade 9 to 12 low income students is $2,607 (column 14). Massachusetts has been ranked as having the highest such poverty factors in the nation.5

A lengthier description of how foundation enrollment is generated can be found on the DOE School Finance web site at    http://finance1.doe.mass.edu/chapter70/enrollment_desc.doc.

Associating a cost with each enrollment category and function

Each pupil generates a specific cost in each functional category. The costs are higher at the upper grades. They are also higher in the limited English and vocational programs. Special education and low-income increments add substantial costs as well.

A summary of the  assumptions underlying foundation ratesdescribes how all eleven categories are derived. The largest dollar amount is represented by the class size and salary assumptions for teachers. The statutory class sizes of 22 for elementary, 25 for junior high/middle, and 17 for high school remain in effect. The FY94 teacher salary of $38,000 has been factored up by inflation so that in FY12 it stands at $61,682.

The Wage Adjustment Factor

The "wage adjustment factor" gives a district credit for having higher school costs if it is located in a geographic area where average wages are higher than in other areas of the state. In theory it is more expensive for them to attract teachers and other staff to come to work there, because the cost of living is higher. Massachusetts is one of the few states in the country to use such a factor.

The wage factor is calculated using the latest available average wage data supplied by the state's Department of Employment. The factor reflects a town's own average, but is much more heavily weighted to the average of the "labor market area" the town is located in. There are 23 labor market areas used. There are real differences in these averages, which represent the combined total for all industries both private and public.

A district's wage factor is a percentage that is applied to the eight salary-related functional categories in the foundation budget6. The labor market area for a district is compared to the state average and weighted at 80 percent. The town's own factor is weighted at twenty percent. The distance above or below the state average is then divided by three to determine the wage adjustment factor.

Prior to FY2000 districts in lower-wage areas saw significant reductions in their foundation budgets, by as much as ten percent. Since then, annual budget language has cushioned districts from these reductions, to the point where beginning in FY04, only those with above-average wages have been affected by the wage adjustment factor. Those below the average are set to 100 percent. In FY12, 115 municipalities in just three labor market areas are affected:

A district's wage factor appears at the bottom left of its foundation budget report. Framingham's wage factor is 105.9 percent.

FY12 Foundation Budget: Massachusetts State Totals

After applying the wage factor, the statewide total for all school districts in FY12 is $9,119,340,580. Teaching makes up 45 percent. The six instructional categories (instructional leadership, teachers, other teaching services, professional development, instructional materials/technology, and guidance/psychological) account for a combined 70 percent.

FY12 Foundation Budget: District Results

When presented in per pupil terms there is considerable variation among districts in their foundation budgets. After separating out vocational districts as a separate category, urbanized centers are higher than other types of districts by more than $1,200 per pupil.

A  listing by districtshows each district's per pupil amount, with some of the key factors that can contribute to higher foundation budgets.

Contacts

1Edward Moscovitch, "Model School Budget". Cape Ann Economics, Rockport, Massachusetts, 1992, p1.

2For example, FY11 foundation enrollment is based upon Oct 1, 2009 headcount. The one-year lag is necessary because the next year's enrollment is not known until after the state budget authorizing the Chapter 70 aid amounts has passed.

3 If a town is a member of a regional vocational district, its resident pupils at that district are not counted in local district enrollment. The vocational district reports those pupils and Chapter 70 aid goes directly to the vocational district. Post-graduate and post-secondary pupils in programs run by vocational districts may be counted if they pay less than the state-approved tuition rate.

4Thomas Parrish, Jenifer Harr, Jennifer Anthony, Amy Merickel, and Phil Esra, "State Special Education Finance Systems, 1999-2000", Center For Special Education Finance, Palo Alto, California, 2003, p13. As of FY2000, 12 states used a "census-based approach" similar to Massachusetts. See  http://www.csef-air.org/publications/csef/state/statpart1.pdf

5Kevin Carey, "The Funding Gap 2004" The Education Trust, Special Report: Washington, DC. 2005, p.13.

6The wage factor is not applied to instructional equipment, employee benefits, or special education tuition.