LOCAL AIDWhat’s in House 1:Reductions with Reform

March 4, 2003

Local Aid Components

FY03 FY04 FY05

Chapter 70, SBAB, SPED, transportation, class size, other education aid

Chapter 70, SBAB, SPED, transportation, class size, other education aid

Chapter 70, SBAB, SPED, transportation, class size, other education aid

Lottery Lottery Lottery

PILOT (5% funded) PILOT (80% funded) PILOT (100% funded)

Additional Assistance Transitional Mitigation Transitional Mitigation (multi-year phase-out),Housing Incentives

Quinn, libraries, other Quinn, libraries, other Quinn, libraries, other

BOLD = Section 3

Local Aid Components

FY03 Spending (after 9c)

FY04 House 1 Change

Chapter 70 3,259 3,332 73 Lottery 705 419 (286) Additional Assistance 405 - (405) Transitional Mitigation - 293 293 PILOT * 10 173 163 Class Size Reduction 18 - (18) Total Section 3 4,397 4,217 (180) Other education aid 661 631 (30) Other aid 248 226 (22) TOTAL all Local Aid 5,306 5,074 (232)

All Local Aid FY03 vs. FY04 (millions)

* PILOT not Section 3 in FY03; included for comparison only

Education Aid

FY03 Spending (after 9c)

FY04 House 1 Variance

Chapter 70 3,259 3,332 73 Class Size Reduction 18 - (18) Other education ** 661 631 (30) TOTAL 3,938 3,963 25

** Other detailMajor I ncreases:School Building Assistance 383 408 25 Special Education 71 115 45 Low Scoring Student Support 50 53 3 Low English Proficiency Grants - 9 9 Major Decreases:School Transportation 94 21 (73) Kindergarten/Other Grants 36 - (36) All other 28 25 (3)

661 631 (30)

Other Programs

All other local aid programs account for $226M, 4.5% of FY04 total local aid

Other Local Aid (millions)FY03

Spending (after 9c)

FY04 House 1 Variance

Major Increases:Police Career Incentive Payment 42 45 3 Major Decreases:Smoking Prevention/School Health 23 5 (18) All Other 183 176 (7)

248 226 (22)

Local Aid Principles

Education is first priority• 100% of foundation for all school districts• Assist districts without sufficient tax base• New incentives, increased SPED funding

Formula-driven fairness • PILOT (Payment In Lieu Of Taxes)• Updates with current data• Cut paperwork (no grant applications)

Smooth transition

Local Aid Principles

Why not across the board? Hits hardest those who depend

most on state aid Violates foundation budget

commitment to education Perpetuates past inequities

Understanding Chapter 70

Average cost per student (the foundation)

Sharing the costa) City or townb) State

Average per student cost

Base cost per student up 3.3%:FY03=$5,325 FY04 H1=$5,500

Adjusted for• 50% increase for low-income• 33% increase for English immersion• 33% credit for additional charter students

(before tuition deduction), 3-year phase-out• 70% increase for vocational school students• 8.25% SPED factor (before additional SPED

reimbursements) Average foundation

FY03 $7,184 versus FY04 $7,391

Sharing the cost: local

Since 1993, based on prior year local contribution, adjusted for growth in municipal revenues (MRGF).

MRGF is still the starting point H1 factors in adjustments for FY04

state aid reductions.

Sharing the cost: local

NEW H1 compares local school spending to the property tax base, adjusted for local median income

New adjustment prescribes a minimum effort on education: $6.00 of tax rate• If local spending exceeds $6.00, then local

contribution lowered • If local spending less than $6.00, then

local contribution raised

Sharing the cost: examples

FY04 Change in municipal revenues (MRGF)

Change in local contribution due to MRGF

Tax rate/ $1000

Change due to Tax rate

FY04 H1 Total change in Local Contribution

Abington -0.83% (78,651) 8.74 (579,191) (657,842)

Agawam 2.90% 542,845 10.45 (1,640,089) (1,097,244)

Barnstable 2.31% 998,529 5.41 1,189,005 2,187,534

Fall River -11.98% (1,748,203) 5.40 368,525 (1,379,678)

Sharing the cost: state

Foundation cost per studentless local contribution = state share

State pays minimum 12% of the foundation

No locality responsible for more than 88%

Logic of Chapter 70 reform

Equalized required contributions provides more aid to communities funding more than average share

Eliminates unfairness caused by old 1993 as base year data

Establishes flexible, common standard of effort not based on historic distributions

Establishes single factor ($6.00 tax rate) to calculate share of education spending

To learn more about Chapter 70 changes, and to see the calculations used to determine Chapter 70 aid for your city or town, go to http://finance1.doe.mass.edu/chapter70/chapter_04p.html

Regional district reform

FY03: regional district aid had little connection to enrollment or foundation

FY04 REFORM: Foundation budget fully-funded at local

level for all students, including regionals Municipality transfers foundation budget

amount per student to regional school district, based on enrollment

Education aid summary

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

FY03 FY04

$ M

ILL

ION

S

SBA

SPED Reimbursements

Low Scoring Student Support

Transportation

Early Literacy

Full-Day Kindergarten

Class Size Reduction

Other

Regional Distributions

C70

Major reductions

Lottery reduced by 34% from FY03 Additional assistance eliminated

PILOT (Payment In Lieu Of Taxes)

FY03: Based on value of state land only; $10m, not fully funded

FY04: Based on value of all state property (excluding Higher Education, authorities, and hospitals), $173m, 80% funded

• Tax value = square-footage x property tax rate FY05: 100% funded

Housing Incentives

To be fully implemented in FY05 Based on number of occupancy certificates

issued in FY04• Includes all types of housing units• Includes rehabs and new starts

$50M allocated; approximately $3,000/permit based on FY02 construction rate

Transitional Mitigation

Established to offset impact of reform Will be phased out while PILOT and Housing

Incentive program are fully phased in Distribution designed to ensure:

• No town cut over 10.5% of Section 3 state aid• No town increase in state aid, except to reach

foundation funding for education

Examples of changesFall River

FY03 Spending (after 9c)

FY04 House 1 Variance

Chapter 70* 95,129 98,532 3,403 Lottery 20,692 13,696 (6,996) Additional Assistance 2,443 - (2,443) Transitional Mitigation - 4,579 4,579 PILOT 42 1,146 1,104 Class Size Reduction 703 - (703) Total, Section 3 119,009 117,953 (1,056)

Section 3 comparison (thousands)

*FY03 Chapter 70 figure includes estimate for Fall River’s share of regional Chapter 70 distribution.

Fall River’s local contribution requirement for education will also be lowered by $1.4 million as a result of FY04 House 1 changes, helping to offset reductions in non-education state aid.