Saturday, October 23, 2010

Facts At a Glance: Demystifying the Chapter 70 Formula -- How the Massachusetts Education Funding System Works from Mass Budget and Policy Center

Facts At a Glance:
Demystifying the Chapter 70 Formula -- How the Massachusetts Education Funding System Works
Friday, October 22, 2010


This Facts At A Glance is designed to demystify the Chapter 70 formula for distributing education aid to local and regional school districts, so that people can become better engaged in school finance discussions in Massachusetts. While understanding the formula may seem daunting, its basic structure is actually quite simple, as demonstrated by the four steps outlined below. (For further information on the formula’s more technical details and on changes made since 1993, please see a listing of additional resources at the end of this paper.)


Chapter 70 education aid is the Commonwealth’s primary program for distributing its portion of K-12 public education funding to the state’s 328 local and regional school districts.1 The Chapter 70 formula aims to ensure that each school district has sufficient resources to provide an adequate education for all of its students, taking into account the ability of each local government to contribute. In short, the formula is designed to have an equalizing effect, with less wealthy districts receiving more state aid than wealthier ones.2


Chapter 70 aid allocations to school districts are determined through four basic steps:3


The Massachusetts State Constitution requires that total K-12 spending in each district never falls below the amount needed to provide an adequate education to its students. Lawmakers developed the “foundation budget” as a way to calculate this funding level. A district’s foundation budget is determined by multiplying the number of students at each grade level and demographic group (e.g., low-income and limited English proficiency students) by a set of education spending categories (e.g., teacher compensation, professional development, building maintenance), and then adding together those total dollar amounts.4

This total “foundation budget” is designed to represent the total cost of providing an adequate education for all students, and it is often expressed as a per-pupil foundation budget by dividing the total foundation budget by the number of students (as we do in the graph below).


Once the total foundation budget is established, the state calculates each city and town’s ability to contribute local revenue towards the operation of its schools. Local ability to contribute varies widely based upon the incomes and property values of different cities and towns. The state expects that each municipality can contribute the same share of local resources to the foundation budget by setting uniform contribution rates. In FY 2011, for example, local contributions were determined by adding 0.3 percent of each town’s total property values to 1.4 perecnt of the income earned by residents of the town.

The required local contribution is basically a measure of how much local tax revenue a city or town can reasonably raise and dedicate to the operation of its schools.


Chapter 70 education aid is then determined by filling the gap between a district’s required local contribution and its foundation budget. Calculating state aid from the difference between steps 1 and 2 ensures that every district can fund the total baseline education determined appropriate by the foundation budget.


The required local contribution is only a minimum amount that cities and towns must contribute to their school districts, and many wealthier communities opt to contribute significantly more. For this reason, the Chapter 70 formula provides a baseline school budget, but it does not ensure equitable total funding across the state. Please see the graph below for an example.

Funding for Two Sample Districts

In the example above, Lynn has a higher foundation budget than Newton but a lower total budget. Lynn’s foundation budget is higher mostly because it has a higher proportion of low-income and limited English proficient students, two categories of students that have higher associated costs when determining a foundation budget. Newton, however, is able to supplement its smaller Chapter 70 state aid with significantly more local revenue.

Notice that for both Lynn and Newton total funding is at least as high as their respective foundation budgets. The major difference, however, is that Lynn’s total funding level is essentially equal to its foundation budget (only $23 higher per student), whereas Newton’s is 60 percent greater ($5,400 higher per student). So even though Newton receives roughly $7,300 less per student in Chapter 70 state aid, it has greater local resources at its disposal, enabling it to provide enough supplemental local funding to produce a total per-pupil budget that is roughly $3,200 higher than Lynn’s.

1 The vast majority of education funding in Massachusetts comes from state and local government sources, with the federal government typically contributing only around 5 percent of school budgets. For more information on sources of education funding over time and to see how Massachusetts compares to other states, please see MassBudget’s Public School Funding in Massachusetts: Where We Are, What Has Changed, and How We Compare to Other States.

2Specific decisions about spending Chapter 70 aid money are left to districts themselves, and this form of state aid is separate from another form of state aid, “unrestricted general local aid,” which supports other local services like fire protection and road maintenance. The state does distribute additional money for other specific education programs, such as a pilot program for schools operating a longer school day, but Chapter 70 aid represents by far the largest portion of state K-12 education funding.

3 Technically speaking, Step 4 occurs after the full Chapter 70 formula has been run, rather than as a part of the formula itself. We include additional local contributions, Step 4, as a part of this Facts At A Glance since they are an important part of the overall education funding system in Massachusetts.

4 There is also a wage adjustment factor that increases the costs of salaries in parts of the state where wages are higher than average.