summary of the consequences on changes to the "ability to pay formula" between 2007 and 2016 and subsequent chapter 70 reimbursements to Massachusetts cities and towns.

1. The Chapter 70 story
www.chapter70.com

2. PURPOSE: The Education Reform Act of 1993, as amended by recent
budget language, continues to have a substantial impact on municipal finance and, in particular, on the
level of local aid received by municipalities and regional school districts, hereafter referred to
collectively as districts. Education Reform was undertaken in an effort to ensure both adequate
funding of the Commonwealth's public schools and to bring
equity to local taxation effort based on a community’s ability to pay.

3. What is Chapter 70?
Chapter 70 is the funding program created to determine how much state aid school districts receive.
The goal is to ensure all students receive adequate and equitable funding.
Not that aspirational – but ok. What is the mechanism to ensure Adequate and Equitable?
There are two main components :
1. Foundation budget – this is what is deemed adequate by the state.
2. Reimbursement formula -the mechanism to for equitable local funding calculates
local wealth to determine what share of foundation budget a district can afford to pay.

4. Why is it important?
We all want to support our children with excellent teachers and programming,
create responsible adults, and ensure the next generation's success. Funding our
schools is critical to this mission.
When a city cannot fully fund its schools' budget, the state fills the gap to ensure
that children are not denied a quality education due to lack of wealth.
This is what Chapter 70 funding is supposed to do.
It ensures that all children in the state receive "adequate and
equitable" funding for a quality education.
.

5. That sounds great.What’s the problem?
Since 2007 – the last time there were changes to the formula – Massachusetts' wealthiest 10% of
communities have received the largest percentage increases in aid.
This shift in funding to wealthy districts occurred simultaneously with an increased concentration
of wealth in these same communities.
Over the past ten years, these wealthy school systems have invested in rich programming and
educational opportunities. Unfortunately for struggling districts, these same ten years have been
full of program cuts and reduced staffing. For many districts, the education they can afford is no
longer "adequate" or "equitable".
In fact, MCAS data has shown that the achievement gap between rich and poor has only grows
widerSee here.

6. Does equitable mean that only some wealth should be factored into state aid?
There is a designated "maximum local contribution" and an "ability to pay" calculation. In 2007
approx. 32% of districts hit the maximum. In 2016 over 40% of districts hit the maximum.
Therefore, the wealth factor is ignored for our wealthiest towns and they are treated the
same as middle class towns in the reimbursement even though their "ability to pay" is high.
Ability to pay – per formula
• Weston vs. Wakefield 360% vs. 88%
• Winchester vs.Woburn 125% vs. 84%
• Newton vs. Newburyport 174% vs. 119%
What is equitable?
Over 10 years these wealthiest
communities have received 10’s of
millions of dollars in additional state aid
while other districts have had to cut
programming and raise taxes locally to
pay for reduced offerings.

7. How is reimbursement determined?
Cities receive a percentage of their "foundation budget"
What is foundation budget?
Foundation budget is a formula used to determine the basic education
costs for a student in the district.
It is calculated by multiplying the number of students in each grade by
spending categories (teacher pay, building maintenance, etc.).
So foundation budget represents "adequate and equitable"?
No – the formula needs to be updated.
There are many pieces of required spending which aren’t adequately
reflected. One example is the ever increasing costs of special
education services.
Foundation budget
Total School costs
Required School costs

8. Special education costs aren’t in the foundation budget?
Not fully.The state set a fixed percentage for how many students
receive in-district and out-of-district special education in any one
district. They also set estimated tuition.
A district that has more students requiring these services will pay the
required costs from local property taxes.
Doesn’t the circuit breaker fix that?
No.The circuit breaker only kicks in once a certain spend level is
reached and then only pays a percentage of the unmet costs. It is also
not consistently funded. Circuit breaker is a flawed attempt to patch a
broken system.
Foundation budget
Total School costs
Required School costs

9. So districts aren’t reimbursed on actual required cost?
No!
They are reimbursed on foundation budget.
That must be difficult to plan for.
Yes! For many middle class districts, removing programming
has been the solution to rising costs as funding responsibilities
have shifted to local property taxes.
Foundation budget
Total School costs
Required School costs

10. Is reimbursement based on community wealth?
No!
Huh?That doesn’t sounds fair.
The rules changed in 2007 to ensure that wealthy communities
receive a minimum amount of the foundation budget.
That sounds fair. Why is this a problem?
After the state made the changes, our wealthiest communities have
inadvertently or intentionally received the largest percentage
increases in school funding.
But those are just percentage increases. It can’t make that much
of a difference. It does. For example, Wellesley and Needham
received 50 million new dollars over 10 years.
Foundation budget
Total School costs
Required School costs

11. What is the wealth formula?
The formula uses a city's income and property wealth to
determine how much of foundation budget can be paid for locally.
Property*.38 Income*1.49+ =
Ability to Pay
(combined effort yield)
It is expressed a %
Can I see some examples?
local effort DOR total local effort combined target
total from property income from income effort local
District EQV 2014 wealth 2012 wealth yield share
AMESBURY 1,849,252,600 7,041,622 520,578,000 7,772,249 14,813,871 61% 61.00
NEEDHAM 8,293,426,000 31,579,878 2,801,114,000 41,820,737 73,400,615 140% 82.50
NEWBURYPORT 3,515,476,700 13,386,304 918,141,000 13,707,880 27,094,184 117% 82.50
WELLESLEY 10,212,968,600 38,889,151 4,775,204,000 71,293,975 110,183,127 227% 82.50
What the formula says
What the community
actually is expected to pay
of foundation budget
Wellesley can afford 227% of their foundation budget. But since the formula
change, they only need to fund 82.5% - and received catch-up funds.
What district
can afford

12. So the formula treats wealthy communities like Wellesley, Weston and
Winchester the same as middle class cities like Woburn, Danvers and
Saugus? - Yes.
Wellesley which has four times the wealth of Amesbury is only expected to have 33% more
wealth than Amesbury when the formula is applied.
What does that mean in dollars?
Between 2007 and 2016Wellesley has received an additional 29 million dollars in state aid for schools
above their 2007 levels.
Amesbury has received a total of 45 thousand dollars in 10 years.
Who needed the money more?
Wellesley’s income has grown by over 113% in that 10 year period.Amesbury’s has grown by about
40%.
Does school population account for this change?
No. If we look atWellesley's aid and enrollment in 2007 compared to 2016 the difference would equal
almost $9000 annually dollars for each additional student.

13. Who are some winners under the new rules?
These 10 districts, with an average
ability to pay of 152% of foundation
budget, received a total of 219 million
in additional state aid over 10 years.
All of these districts are treated as
though their ability to pay is 82.5%
On average these 10 get 90% more in
aid annually than they did in 2007.

14. Who are some losers under the new rules?
These 10 districts with an average
ability to pay of 70% of foundation
budget only saw an average increase
at 1.46%.
These communities will tell you, this
distribution is far from equitable or
adequate.

15. "The state has very limited dollars.We have many
competing interests," said state Rep. Alice Peisch, D-
Wellesley, chairwoman of the Joint Committee on
Education. "We need to do a better job of educating the
population about the fact that taxes are not necessarily
a bad thing and that at the end of the day we all benefit
from the common good that is produced when we have
a well-educated population.” May 7, 2016
Full article here.
What are our legislators saying about this?

16. 2007 to 2016 sample changes
What formula would say if actually used
All considered to be able to afford 82.5%
Even though Wellesley's wealth is 2x that of
Newburyport, they’re treated the same,
Alice Peisch's districts got 50 million dollars in
additional aid over 10 years. Amesbury, with an
ability to pay of 63%, received only 45 thousand.

17. Summary of Changes over 10 years

18. Are there are solutions? – Yes!
But first the legislature would need to look at what problem they are trying to solve.
If we change the method for determining minimum payment, we can return equity to the
funding formula so all districts can provide an adequate education all students.
What do you mean?
Currently if a districts' wealth is above 82.5% ability to pay, they are still only expected to
pay 82.5%. The state needs to decide how many districts can be above that amount per the
formula and adjust the .38 and 1.49 until that target district = 82.5.
Property*.38 Income*1.49+ =
Ability to Pay
(combined effort yield) How would this work?

19. Alternate way to determine wealth factors
What would that do?
It would:
• Ensure that the ability to pay is actually utilized and the differences in wealth are recognized.
• Reduce the number of districts caught in the "maximum local contribution" regardless of wealth.
• Stop treating middle class and wealthy suburbs the same – this is what equitable means.
• Unfortunately, we probably can’t roll back the massive amounts of catch-up payments provided to our
wealthiest districts for the money the "missed" under the old rules.
Wait, what? We provided catch up payments to our wealthiest districts ? -Yes.
Property*.38 Income*1.49+ =
Ability to Pay
(combined effort yield)
Adjust these so that only 10% of districts are above the maximum contribution.

20. What are these catch up funds?
local january preliminary difference
contribution (preliminary) contribution from
Lea District FY06 mrgf07 FY07 goal
317 WELLESLEY 31,514,317 4.93% 33,067,973 4,086,809
In 2007, in addition to deciding that our wealthiest districts should be exempt from the wealth formula,
the legislature also decided to build in another formula to help those wealthy districts "catch up" on funds
they didn't get prior to the changes.
What do you mean?
Each district was assigned a goal –
Was the goal based on a districts actual wealth or this 82.5% number?
It was designed on the 82.5% number which means the legislature built in a subsidy for our wealthiest
communities.
So not only did the legislature decide to treat wealthy districts like middle class districts they
decided to give them a bonus?
yes

21. Lea District CEY %
target local
share
difference from
goal
49 FY 07 CAMBRIDGE 210% 82.50 81,927,634
46 FY 07 BROOKLINE 177% 82.50 26,105,297
207 FY 07 NEWTON 165% 82.50 24,715,481
314 FY 07 WATERTOWN 153% 82.50 11,249,103
20 FY 07 BARNSTABLE 120% 82.50 10,210,991
96 FY 07 FALMOUTH 134% 82.50 9,105,135
67 FY 07 CONCORD 167% 82.50 8,203,934
330 FY 07 WESTON 262% 82.50 7,065,999
197 FY 07 NANTUCKET 562% 82.50 6,511,153
55 FY 07 CHATHAM 454% 82.50 4,230,036
26 FY 07 BELMONT 130% 82.50 4,207,494
317 FY 07 WELLESLEY 183% 82.50 4,086,809
344 FY 07 WINCHESTER 134% 82.50 3,166,440
242 FY 07 PROVINCETOWN 572% 82.50 3,140,685
78 FY 07 DOVER 201% 82.50 2,965,956
75 FY 07 DENNIS 179% 82.50 2,476,573
126 FY 07 HARWICH 149% 82.50 2,464,930
296 FY 07 TISBURY 209% 82.50 2,117,678
85 FY 07 EASTHAM 198% 82.50 1,941,621
157 FY 07 LINCOLN 198% 82.50 1,919,201
224 FY 07 ORLEANS 312% 82.50 1,762,075
166 FY 07 MANCHESTER 222% 82.50 1,611,100
334 FY 07 WEST TISBURY 212% 82.50 1,451,620
269 FY 07 SHERBORN 130% 82.50 1,440,157
89 FY 07 EDGARTOWN 364% 82.50 1,420,934
318 FY 07 WELLFLEET 288% 82.50 1,413,589
41 FY 07 BREWSTER 122% 82.50 1,376,585
Difference from Goal
Communities with more than 120% of wealth
• In 2007 it was decided that
• Wellesley needed 4 million more annually
• Winchester needed 3 million more annually
• Concord needed 8 million more annually
• Newton needed 24 million annually
Etc..

22. What does the actual wealth distribution really look like?
In 2007 7% of
communities
could afford
180% of
foundation
In 2016 9% of communities could
afford 180% of foundation
Green indicates # of communities exempt from wealth formula
2007 2016

23. The distribution used to reimburse in 2007 and 2016
In 2007 32% of
communities
we’re above the
82.5% limit
In 2016 43% of
communities
we’re above the
82.5% limit
All 114 treated
the same
All 153 treated
the same
Treated virtually the
same
70 to 80% of foundation70 to 80% of foundation
One of the 1st things you do when looking at numbers is to understand the distribution (how much goes into
each category). A normal distribution is represented as an arc or bell curve.
These distributions have a negative skew – not a normal distribution - typically signs of a problem

24. 2007 distribution actual vs what was used
2007
The actual wealth data has a skew to the right – but the state decided to make reimbursement
skew to the left (skew goes towards which way long tail)
? - it means that legislature decided to favor wealthy district in the formula over the last 10
years over middle class and working class districts

25. What would that mean?
– We should try to have distribution of reimbursement match reality .
If the state believes that districts like Wellesley or Needham only needs to pay
82.5% of foundation costs, then the same formula should be applied to middle class
communities.This would be more equitable.
But was the intention for Wellesley’s ability to pay for foundation budget
to increase from 180% to over 200% of foundation budget and get more
than double the annual Chapter 70 aid, while districts like Amesbury
received 0% increases?

26. This needs to change!
Why isn't anyone fixing this?
Over the past 2 years Beacon Hill has set up the Foundation Budget Review
Commission to investigate problems with the funding formula. Many citizens and
experts testified and several pointed out the inequity in distribution and wealth.
What did they find?
The good news is that they think that there needs to be a change. Unfortunately,
their proposed solutions continue to exacerbate the lack of equity.
What will they do?
Nothing.
Who is on the commission?

27. Why Equity is important
Massachusetts needs to lead in the knowledge economy of the 21st century
and we need plan to avoid creating a barbell economy of just the wealthy
and the poor. Education funding can help alleviate that flight to a few
districts.

28. Shouldn't equitable mean striving to provide funding so that
students in Amesbury, Saugus, and Danvers have the same
opportunities as students fromWellesley, Winchester, and
Weston?
Massachusetts cannot be competitive in the global economy
without all its students receiving a quality education.

29. What can I do?
Call your state Representative and state Senator. Ask them why the chair of the Joint
Commission of Education from Wellesley has seen her district receive 110% more in annual
aid while your district funding hasn’t increased at the same level.
Ask them if they believe $29 million in additional aid over 10 years to Wellesley
represents adequate and equitable funding.
Call your mayor ask them to speak with other mayors to see if we should sue the state to
ensure equitable funding.