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Under state school aid, rich communities make out better


An open letter to the Legislature from civic leaders of the Gill-Montague Regional School District
Saturday, October 13, 2018

In its search for ways to increase education funding, particularly for poorer and rural districts, the Legislature should consider making changes to fix a glaring inequity in the current system, namely the provision that forces poorer towns to pay into the system at a higher rate so that wealthier towns may pay at a lower one.

Elementary and secondary public education in Massachusetts is funded under legislation referred to as Chapter 70. That law establishes “foundation budgets” for each town that represent the minimum expenditures considered necessary to provide an adequate education for our children. The law further provides that, on a state-wide basis, the towns shall provide “local contributions” equaling 59 percent of those foundation budgets, and the state shall provide the rest.

The Chapter 70 formula is complicated, but in broad outline it calculates local contributions for every town by applying one percentage number (similar to a tax rate) to the town’s property wealth and another percentage number to its income wealth. These percentages are calibrated so that, statewide, the total property wealth and income wealth contributions are equal, and together they add up to the 59 percent requirement. Since the same percentages are applied to the two wealth figures of every town in the state, there is an equitable distribution of local burden for public education costs based on the wealth of the towns of the commonwealth. (In this letter, we call the amount so calculated the “initially calculated local contribution.”) So far so good.

However, Chapter 70 has a further provision that limits (or “caps”) each town’s actual local contribution to 82.5 percent of the town’s foundation budget. This means that whatever the earlier calculation shows, no town’s local contribution can be greater than the cap, and any excess is simply ignored. As one would expect, it is generally the towns with larger property and income wealth whose initially calculated local contributions exceed the 82.5 percent cap. The result in FY19 is that 148 towns (out of 351) contribute at lower percentage rates than towns with lower wealth figures that do not reach the 82.5 percent cap. Since the total of local contributions in the state must equal 59 percent of the state-wide foundation budget, the reduced contributions from towns affected by the cap must be offset by increased contributions from towns that are not affected. Thus, the original percentage figures have to be raised, but the raise only affects those towns which do not meet the 82.5 percent cap. This results in a clear subsidy of the affluent by the less affluent.

As an example, consider the towns of Greenfield and Weston. In FY2019, each is educating roughly 2,000 students and has a foundation budget of a little over $20 million. Greenfield’s initially calculated local contribution (based on its wealth assessment), before application of the cap, is just over $10 million. Weston’s initially calculated local contribution (also based on its wealth assessment) is more than $83 million. In the end, Weston’s actual local contribution is less than $18 million due principally to operation of the 82.5 percent cap, which means it is contributing barely 21 percent of its initially calculated local contribution. Because Greenfield has a much lower wealth assessment and thus is not affected by the cap, its actual local contribution is 100 percent of its initially calculated contribution. Poorer towns pay the full rate; wealthier towns do not.

It should be noted that if there were no cap on local contributions, many of the more affluent towns would be required to contribute above and beyond their own foundation budgets, and they would thus help fund the public education costs of other towns. This is not possible under the current law because there is no mechanism for collecting and distributing the portion of a town’s local contribution that exceeds its foundation budget. However, the magnitude of the inequity built into the current law is indicated by the fact that, for FY19, the difference between the initially calculated local contributions of towns benefiting from the 82.5 pecent cap, and the smaller amount they actually are being required to pay due largely to the cap, totals for all such towns about $1.778 billion. Given that the statewide local contribution target is about $6.2 billion, this is truly a huge amount of local contribution to be shifted away from those towns. And to repeat, this is money that must still be found, and it is currently raised principally from those towns not affected by the cap. If there were no cap and wealthy towns in fact paid all of their initially calculated local contribution into the system, as less affluent communities do now, a burden of many hundreds of millions of dollars would be lifted from those less affluent towns.

The unfairness and inequity in the current system are obvious. We should reject a system that collects funds for public purposes on a basis that requires economically disadvantaged communities to pay disproportionately more than their wealthiest counterparts. As citizens, we can and do debate the uses to which our public funds are put, and we certainly don’t always agree. But once the decisions have been made, all of us owe it to our fellow citizens to step up and pay our fair share. When it is discovered that this, in fact, is not happening to a very large degree, our legislators and the governor should work diligently to rectify the situation as quickly as possible.

This letter was endorsed by the Gill and Montague selectboards, finance committees, and the GMRSD School Committee.