Published in the July 23, 2015 edition


NORTH READING — School officials have long criticized the way the state allocates money to local school districts and have stressed the state needs to overhaul the unfair formula used to determine so-called Chapter 70 funding.

Fortunately for school officials, it appears the state appears to be on the cusp of revamping the Chapter 70 funding formula allocated to school districts across the state as part of the state budget.

As part of the state budget for fiscal year 2015, the Foundation Budget Review Commission was established. The commission was tasked with determining ways to better calculate cities and towns’ foundation education budgets and how much the state should contribute to them.

The Foundation Budget Review Commission released a preliminary report recently and has asked the State Legislature to continue working up to Nov. 1.

As part of its preliminary findings, commission members wrote:

“The Education Reform Act of 1993 established the foundation budget to ensure adequate funding for all students in Massachusetts. Since them, some of the assumptions contained in the formula for calculating the foundation budget have become outdated. In particular, the actual costs of health insurance and special education have far surpassed the assumptions built into the formula for calculating the foundation budget. As a result, those costs have significantly reduced the resources available to support other key investments.”

After evaluating health insurance costs, commission members determined that statewide, district spending on “employee benefits and fixed charges” exceeds the foundation budget allotment by more than 140 percent.

“This,” commission members write, “is primarily due to the dramatic growth in health insurance costs nationwide and the fact that such costs have increased at a significantly higher rate than the rate of inflation used to adjust the foundation budget. In addition, the ‘employee benefits and fixed charges’ component of the foundation budget does not include retiree health insurance,” even though communities like North Reading incur such costs.

The commission recommends that the employee health insurance rate be adjusted in the “employee benefits and fixed charges” component of the formula to reflect the average Group Insurance Commission rate.

The commission also recommends adding a new category for “retired employee health insurance” to the foundation budget and to establish a separate health care cost inflation adjustor for the employee health insurance portion of the “employee benefits and fixed charges” component of the formula, based on the change in the GIC rates.

Another issue the commission examined closely is special education costs. The commission found that foundation enrollment “accounts for the additional costs of providing special education services through an assumed rate of district enrollment, rather than an actual count of students. The district’s foundation enrollment is multiplied by 3.75 percent to add additional special education resources to the foundation budget. This translates to an assumption that 15 percent of students receive in-district special education services 25 percent of the time. In actuality around 16 percent of students receive some level of in-district special services statewide, which suggests that the foundation budget understates the number of in-district special education students.

“Out-of-district special education enrollment is assumed at 1 percent of foundation enrollment, which mirrors the rate of out-of-district special education placements statewide. However, districts spend far more on special education tuition for out-of-district placements than what is allocated through the foundation budget. In fiscal year 2013, actual costs were 59 percent higher than the foundation rate of $25,454,” members write.

The commission made the following recommendations on special education funding:

• Increase the assumed in-district special education enrollment rate from 3.75 percent to 4 percent (for non-vocational students) and from 4.75 percent to 5 percent for vocational students.

• Increase the out-of-district special education cost rate to capture the total costs that districts bear before circuit breaker reimbursement is triggered.

“One example of how this might be done is to increase the out-of-district special education cost rate by an equal amount to the following: [4 times the statewide foundation budget per-pupil amount] minus [statewide foundation budget per-pupil amount] plus [out-of-district special education cost rate].” This would be a one-time adjustment, with the resulting rate increased by inflation each year thereafter.

School officials react

Superintendent of Schools Jon Bernard said the Foundation Budget Review Commission’s report is a positive step forward in overhauling the education funding across the state.

“We have been concerned about the Chapter 70 funding formula for our community because the state uses a one size fits all approach,” Bernard told the Transcript in a phone interview. “We don’t have a large business tax base in North Reading unlike other communities. Health insurance and special education are two substantial considerations which factor into our budget development process and our ability to offer programs.”

Finance Director Michael Connelly said the Budget Review Commission’s preliminary recommendations are on target but he questioned if the recommendations could be implemented because the state would need to allocate an additional $4.4 million to cover needed education costs in the foundation budget.

“The recommendations for special education costs and adjusting the health insurance rate make sense but it comes with a substantial cost that might not be feasible for the state,” said Connelly.

School Committee Vice Chairman Mel Webster, a staunch critic of the state’s Chapter 70 funding formula, said the commission’s preliminary recommendations are “long overdue.”

“(The report) confirms the fact that the state has fallen far behind in terms of adequately funding public schools,” said Webster. “The $500 million gap between the funding the state has provided and the amount required to properly fund public education is distressing and it will be extremely difficult for the state to come up with the required dollars. However, it is clear that something must be done and it must be done quickly.”

Webster said he’s pleased the Budget Review Commission recognized the fact the state has “far underestimated how much school districts are paying for employees’ health insurance and that it needs to account for these costs moving forward.”

“I am also pleased that the commission makes it clear that special education costs are far higher than anticipated,” Webster added. “While recognizing the issue is great, the state must now figure out how to come up with the funds to cover these costs.”

Next steps

The Foundation Budget Review Commission intends to review the following issues in the coming months: in-district special education cost rate; low-income increment; English Language Learners increment; mental health/wraparound services; extended learning time; technology; full day preschool; K-3 pupil to teacher ratios and operations and maintenance.

Webster said he is looking forward to seeing the commission’s final report later this fall.

“The commission’s report is an important first step but, in reality, it is only a tiny step,” said Webster. “What matters is the state figuring out a formula that will adequately fund public schools in the commonwealth’s cities and towns.”’

Bernard agreed.

“I hope the Budget Review Commission will achieve its goals,” said Bernard.