Mass DOE Sandwich Chapter 70 FY08

 Sandwich Chapter 70 Simulation FY08

 FY07 Cherry Sheets

SENATE CHAPTER 70 PLAN

CHANGES TO LOCAL AND STATE CONTRIBUTION FORMULA

~ HOW IT WORKS ~

A target contribution as a percentage of the foundation budget* is set for each municipality based on its ability to pay. Its ability to pay is measured by a combination of property values and income that, on a statewide basis, gives equal weight to each. On the state aid side, the formula’s goal is to have the state contribute, at minimum, the difference between the foundation budget and the required local contribution. This is not always the case during the first years of implementation, but this balance between local and state contribution will be achieved over the course of five years.

LOCAL CONTRIBUTION

Each municipality’s target calculations assume the goal of having total local contributions cover 60% of the statewide foundation budget. (In FY06, the statewide local contribution was 62.8% of the statewide foundation budget). This does not mean that the goal is to have every municipality contribute 60% of its own foundation budget. The goal is to have all of the municipalities’ contributions combine to equal 60% of the total statewide foundation budget.

To determine a municipality’s required local contribution, first a “target local contribution” and a “preliminary contribution” are calculated separately.

If the “target local contribution” is greater than the “preliminary contribution,” then the “preliminary contribution” is used as the municipality’s required local contribution.

The “preliminary contribution” is calculated by multiplying a municipality’s prior year contribution by its municipal revenue growth factor (“MRGF”).

If the “target local contribution” is less than the “preliminary contribution,” then the required local contribution for FY07 is calculated by reducing the “preliminary contribution” by 20% of the difference between the “preliminary contribution” and the “target local contribution.”

To determine “target local contribution”:

The plan defines the “maximum local contribution” (“MLC”) as 80% of foundation budget. If a municipality’s “combined effort yield” is greater than 80% of its foundation budget, the MLC is then used as its “target local contribution.” If not, the “combined effort yield” stands as its “target local contribution.”

The “combined effort yield” measures a municipality’s ability to pay, weighing its property and income wealth equally.

Statewide property wealth amounts to approximately five times as much as statewide personal income. Consequently, in order to equalize the effect of property wealth and income levels and in order to yield the desired statewide total contribution, different statewide factors are multiplied by both a municipality’s equalized property value (“EQV”), that is, its total property wealth, and its aggregate income. These factors are 0.3548% and 1.7103%, respectively.

Thus, the “combined effort yield” is: (municipality’s EQV *.3548%) plus (its aggregate income ´ 1.7103%).

Example: Dracut

To find Dracut’s “target local contribution”:

Multiply its 2004 EQV by 0.3548% and its 2003 aggregate personal income by 1.7103%. The two results added
together produce the “combined effort yield.”

• 2004 EQV: $2,638,346,500 ´ 0. 3548% = $9,361,455
• 2003 Personal Income: $698,402,000 ´ 1.7103% = $11,944,637
• “Combined Effort Yield”: $9,361,455 + $11,944,637 = $21,306,092

Dracut’s FY07 Foundation Budget: $35,555,894

“Maximum local contribution” = 80% of $35,555,894 = $28,444,715

Because the “combined effort yield” ($21,306,092) is
lower than the “maximum local contribution” ($28,444,715), the formula provides that the “combined effort yield” ($21,306,092) be used as Dracut’s “target local |contribution.”

To find Dracut’s “preliminary local contribution”:

Multiply its prior year local contribution ($17,766,553) by its MRGF, which is 4.99%. (This is how local contribution is calculated under the current formula.)

$17,766,553 ´ (1+.0499) = $18,653,104 (this is Dracut’s “FY07 preliminary local contribution”)

Next, compare Dracut’s FY07 “preliminary local contribution” ($18,653,104) to its “target local contribution” ($21,306,092).

Because Dracut’s “target local contribution” is more than its “preliminary local contribution,” its “preliminary local contribution” is used as its “required local contribution” for FY07.

$18,653,104 = Dracut’s FY07 required local contribution

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STATE AID

There are four types of state aid: “foundation aid,” “growth aid,” “down payment aid” and “minimum aid.” A school district receives whichever type of aid, calculated as described below, results in the largest allotment.

1. Foundation Aid

Foundation aid is calculated by subtracting a district’s FY07 required local contribution from its FY07 foundation budget. The resulting gap is called “foundation aid.”

Using Dracut as an example:

$35,555,894 (FY07 foundation budget)

- $18,653,104 (FY07 required local contribution)

$16,902,790 à Dracut’s foundation aid

 

2. Growth Aid

To calculate “growth aid”:

A municipality’s prior year Chapter 70 aid + (“Target Aid Share” ´ dollar amount change in foundation budget from prior year)

The “target aid share” is 100% minus the “target local share.”

The “target local share” is the “target local contribution” as a percentage of the foundation budget.

For Dracut, this is: $21,306,092 (target local contribution) divided by $35,555,894 (foundation budget), so target local share = 59.92%

Therefore, Dracut’s “target aid share” is:

100%

- 59.92% (target local share)

40.08% (target state aid share)

In Dracut’s case, state aid already exceeds the state aid target share of foundation. Consequently, “growth aid” does not apply to Dracut.

­3. Down Payment Aid

“Down payment aid” is calculated by taking the positive difference between the district’s FY06 aid and 100% of its target state aid. “Down payment aid” equals FY06 state aid plus 20% of this difference.

In the case of Dracut, because it is already receiving above its target state aid share, “down payment aid” does not apply.

4. Minimum aid

Minimum aid ensures that every district receives at least $50 per pupil more than it did last year. If none of the other types of aid results in at least a $50 per pupil increase over FY06, then “minimum aid” kicks in.

Because of its “foundation aid,” Dracut receives more than $50 per pupil, so “minimum aid” does not apply.

5. Conclusion

Because “foundation aid” provides the largest allotment of state aid (among the four categories of state aid), Dracut will receive “foundation aid” in the amount of $14,954,310 for FY07. This is an increase of 5.0% over its FY06 state aid.

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* A foundation budget is calculated for each school district. The foundation budget is the sum of the 11 categories of education expense (e.g., classroom and specialist teachers, instructional materials, etc.). The total represents an amount of money that the state considers sufficient to adequately educate the school district population, although most districts’ overall expenditures amount to more than their foundation budget.