SHIRLEY -- The main purpose of the March 11 Finance Committee meeting was to discuss the commonwealth's formula for fiscal 2014 Ch. 70 funding.

Present were 37th Middlesex District Rep. Jen Benson and Massachusetts Department of Elementary and Secondary Education (DESE) School Finance Programs Administrator Roger Hatch.

"When we received our proposed assessment for the School Department, there were a couple of pieces of the pie for that assessment that are pieces for required local contribution (RLC) set by the state, and the net school spending (NSS) above RLC," stated Finance Committee Vice Chairman Mike Swanton.

Swanton went on to explain that the town is in the process of elevating the amount above the RLC in an effort, per the regional agreement, to equalize Shirley's per pupil expenditure with that of Ayer's.

"Ayer was paying a higher percentage of that RLC relative to the mix of Ayer and Shirley students," he stated. "A part of the agreement was that Shirley would start to move so we would have the correct ration of our student population over five years -- so a roughly $100,000 increment each year over five years.

"This year saw a significant ($260,000) increase in that NSS>RLC," he added. What the Finance Committee would like to know, he said, was how the state calculated that amount, and how it is likely to impact the school district's and two towns' budgets in the future.

Ch. 70: 3 basic steps

Hatch referred those in attendance to a handout that explains how the RLC fits into Ch.


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70, which is the commonwealth's primary program for distributing its portion of K-12 public education aid.

"There are big differences within the commonwealth in terms of the ability to pay, so we want to be sure that the formula recognizes those differences," he said.

The first basic step in the Ch. 70 formulation is the state's calculation of an "adequate" spending level for a district. That foundation budget depends upon the mix of students, grades and programs, he said.

The second step is the target local share (TLS), which is based upon a community's "aggregate" property valuation and residents' income. Annual increments are calculated to get a community's total RLC closer to its target. The RLC is basically a measure of how much local tax revenue a town can reasonably raise and dedicate to the operation of its schools.

The third step is the amount of aid the state offers to make up the difference between a district's RLC and its foundation budget.

On the foundation budget side, in any given year, a confluence of various factors such as inflation, enrollment and wage adjustments can have a big effect on a community, Hatch explained.

On the local contribution side, property value, income and the municipal revenue growth factor (MRGF) can affect a community. The MRGF is an estimate of the percentage change in revenue growth for each town.

Those six factors work together to determine a district's Ch. 70 aid, Hatch said.

Determining the foundation budget

Statewide, the current ratio of state to local contribution levels is 41 to 59 percent. Using that ratio, a property percentage and income percentage are calculated that, when combined, yield the total state share, with half coming from property and half from income.

For each town's TLS, the property and income percentages are applied to the town's equalized property valuation and aggregate income.

Hatch referred the Finance Committee to a spreadsheet of the Ayer Shirley fiscal 2014 Ch. 70 foundation budget for grades preschool through 12, plus English language learners (ELL), who figure in at a higher rate in the formula.

There are also four categories for special education and low-income students that are incremental.

"Instead of using a head count for special education, we use an assumed 3.75 percent of foundation for in-district and one more percent for out-of-district placements. The governor raised the rate at the department's recommendation because we have looked at actual spending," he said.

Generally, NSS is 20 percent more than the foundation budget, he added. 

The inflation rate used for adjusting the foundation budget in fiscal 2014 will be a low 1.55 percent, less than half of that of the previous year. Ayer Shirley's fiscal 2014 foundation budget per pupil is $10,112, slightly below the state average.

The new formula applied to Shirley's goal

Prior to 2007, the target requirements were mostly going up due to the MRGF, which caused even districts losing students to have to pay more, Hatch said.

As a result of a Supreme Judicial Court case in 2005, the board of education was required to determine a new foundation budget.

"One change we had to make was restoring wealth as part of the formula, and a methodology that people could understand. We made a conscious effort to make this methodology simpler, and so people would understand it and trust it," said Hatch.

"The target (foundation budget) statewide is 59 percent. We want exactly half to come from property and half from income."

The local effort from property wealth and income, however, is not a 50-50 split. They are based on a property percentage and an income percentage based on 2010 income. Those two figures result in a combined effort yield of $4,825,554.

The foundation budget for fiscal 2014 is $8,748,075, and the maximum local contribution (82.5 percent) is $7,217,162.

The target local contribution (TLC) is equal to the combined effort yield, since it is the lesser of the two figures. The TLS is 55.15 percent of the foundation budget, and the target aid share is 44.84 percent.

Fiscal 2014 increments toward the goal

With the fiscal 2013 RLC of $4,374,968, the MRGF (determined by the Department of Revenue) 3.66 percent, and the preliminary contribution of $4,535,092, the shortfall from the TLS is 3.32 percent.

Because that falls in the range of 2.5 to 7.5 percent, the added increment toward the target now mandated by the state is 2 percent, or $87,499, bringing the total shortfall from the target to $202,963. The total Shirley fiscal 2014 RLC is $4,622,591, or 52.84 percent of the foundation budget.

Hatch explained that the governor's proposal to be more aggressive in bringing the one-third of communities below their target up to speed is in part due to the lower interest rates. "In past years, inflation has been so that it was prohibitive to do this," he said.

Hatch said the state accomplished in the eighth year what it had hoped to do in just five in bringing communities more in line with their targets. "From now on, mostly the growth factor will change," he said.

Possible solutions

While Swanton asked for advice on how the town might get the governor to scale back what he called a "two percent penalty increase," Benson explained that with two-thirds of the state's school districts at or above the target contribution, more of the legislators' constituent communities are benefitting from the initial proposal than are not.

That is because the minimum RLC for fiscal 2014 for any municipality with a preliminary contribution greater than its fiscal 2013 target contribution, will have the preliminary local contribution reduced by 100 percent of the gap between the preliminary and target local contribution.

"If it isn't in the initial proposal you can file an amendment to change it, but the problem is to get the other two-thirds to give up the relief for their town. It becomes a political hot potato," said Benson.

Her suggestion: to alter the district's regional agreement.

Swanton's counter suggestion was for the state to temporarily eliminate the fiscal 2014 additional increment toward the target of two percent, or $87,499. The district had predicted an annual increase of about 2 percent total, or $100,000, he said, but had not anticipated what he termed a "$160,000 surprise."

Benson agreed to look into filing an amendment that would slow the rapid equalization in the governor's budget, potentially saving the town $87,000.

Another piece to pursue, she said, would be to look at regional transportation and the circuit breaker. But going after the underlying formula, she said, is probably "hands-off."

She also suggested applying for a municipal grant line for which regional school districts may now be eligible.

In addition, Hatch suggested that the state "pothole" reserve funds might now be available to communities for fiscal 2015.