Fixing a Local Aid Glitch

Fixing a Local Aid Fixing a Local Aid GlitchGlitch

Discretionary DecisionsDiscretionary Decisions in the Implementation in the Implementation

of 2006 Education Aid Reformsof 2006 Education Aid Reforms

February 27, 2012 2Sen. Will Brownsberger

Pre-2006Pre-2006 2006 Reform2006 ReformFoundation BudgetFoundation Budget Foundation BudgetFoundation Budget

Less: Required Local Less: Required Local Contribution based on Contribution based on historical growth modelhistorical growth model

Less: Required Local Less: Required Local Contribution based on Contribution based on Aggregate Wealth modelAggregate Wealth model

Equals: Education AidEquals: Education Aid Equals: Education Aid Equals: Education Aid (grandfathering and (grandfathering and transition)transition)

Formula tweaked Formula tweaked annually since 2002annually since 2002

Formula tweaked Formula tweaked annually – bigger tweaks annually – bigger tweaks since 2010since 2010


Results still unfair in Results still unfair in FY13FY13WalthamWaltham WellesleyWellesley

Combined Effort Combined Effort Capacity as % Capacity as % Foundation Foundation BudgetBudget

102.6%102.6% 176.7%176.7%

H2 Aid as % of H2 Aid as % of Foundation Foundation Budget (no chg. Budget (no chg. from FY12)from FY12)

12.9%12.9% 15.9%15.9%

Aid Increase – Aid Increase – FY06 to FY13FY06 to FY13

18.5%18.5% 127.2%127.2%

Note, other similar examples can be found – e.g., Belmont vs. Watertown.


The Transition GapThe Transition GapTarget and FY06 Required Contributions

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120


Target and FY13 H2 Required Local Contributions

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Target vs. FY13 H2 Foundation Aid

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Target vs. FY12 Aid (as % of FY13 Foundation)

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Target vs. FY13 H2 Aid (grandfathered)

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Dropping Down Payment Dropping Down Payment Aid in the Financial CrunchAid in the Financial Crunch

FY07 FY08 FY09FY1

0 FY11 FY12 FY13

Aid Categories F D G M F D G M F D G M F F M F F

Down Payment % 20% 30% 33% n/a n/a n/a n/a

Effort Reduction % 20% 25% 33% 15% 30% 20% 15%

Low RLC Increase None 1-2% 1-2%

Floor 1-2% 1-2% 1-2%

Min. Increase PP $50 $50 $50 n/a $25 n/a n/a

Base Reduction +SF+ Job

$ - Job $

Cap on RLC % of FB 150% n/a n/a n/a n/a n/a 100%

FB Inflation 5.9% 4.7% 5.2% 3.0% -2.2% 1.8% 3.7%


Waltham has fared poorly because (a) it was Waltham has fared poorly because (a) it was among the most disadvantaged under the old among the most disadvantaged under the old formula and (b) in the crunch, we chose Effort formula and (b) in the crunch, we chose Effort

Reduction over Down Payment.Reduction over Down Payment.

WalthamWaltham WellesleyWellesley BrooklineBrookline

13 Cap/FB13 Cap/FB 102.6%102.6% 176.7%176.7% 160.7%160.7%

06 RLC/FB06 RLC/FB 173.7%173.7% 108.8%108.8% 154.0%154.0%

13 Target13 Target 82.5%82.5% 82.5%82.5% 82.5%82.5%

13 RLC/FB13 RLC/FB 91.1%91.1% 85.5%85.5% 85.8%85.8%

13 FA/13FB13 FA/13FB 8.9%8.9% 14.5%14.5% 14.2%14.2%

12 Act/13FB12 Act/13FB 12.9%12.9% 15.9%15.9% 11.0%11.0%

12 to 13 Chg12 to 13 Chg 0%0% 0%0% 29.9%29.9%


Options to get Waltham to 13.25% Options to get Waltham to 13.25% of FBof FB

Add Add to to H2H2

CommentComment

Increase Effort Reduction from 15% Increase Effort Reduction from 15% to 58.1%to 58.1%

$40.9$40.9mm

Windfall if Windfall if above target above target with FY12 Aid with FY12 Aid < F. Budget< F. Budget

Add Down Payment Aid at 8% of Add Down Payment Aid at 8% of GapGap

$4.0m$4.0m Helps many Helps many who are not far who are not far under target under target aidaid

Implement Aid Floor as 13.25% of Implement Aid Floor as 13.25% of Foundation BudgetFoundation Budget

$3.6m$3.6m Helps only if Helps only if well under well under target, but also target, but also only if wealthyonly if wealthy

Implement aid floor as max. 4.25 Implement aid floor as max. 4.25 point gap under target (same as point gap under target (same as 13.25% of F. Budget if at 17.5% 13.25% of F. Budget if at 17.5% target, but includes all below target, but includes all below target)target)

$10.8$10.8mm

Helps those Helps those most under most under target at all target at all wealth levelswealth levels

(13.25% gets Waltham $203,549 increase or 2.9% on $7,068,165 FY12 Aid.)


Options to Offset $10.8m Options to Offset $10.8m in Costin Cost

Eliminate Effort Eliminate Effort Reduction % Reduction % factor (in favor factor (in favor of working the of working the gap down gap down directly)directly)

$5.8m (if $5.8m (if gap gap capped at capped at 4.25%; 4.25%; savings savings greater if greater if no cap).no cap).

In combination with In combination with gap implementation, gap implementation, targets effort targets effort reduction funds to reduction funds to communities most communities most disfavored by disfavored by previous previous implementation implementation decisionsdecisions

Limit Required Limit Required Local Local Contribution Contribution Gap below Gap below Target to 10 Target to 10 points points maximum (i.e., maximum (i.e., raise lowest raise lowest RLCs)RLCs)

$5.1m $5.1m (savings (savings do not do not interact interact with cap)with cap)

Accelerates slow Accelerates slow moving catch up in moving catch up in RLC towards target RLC towards target from below – affects from below – affects 13 communities13 communities


Target vs. FY13 H2 Aid (grandfathered)

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Target vs. FY13 Aid at H2 Total with Max under RLC of 10, Max under of 4.25 (Grandfathered)

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Target vs. Fully Converged Foundation Aid (grandfathered) -- $43.9 Million above H2 Cost

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Target vs. Fully Converged Foundation Aid >= H2 -- $110.6 million above H2 Cost

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Summary of AnalysisSummary of Analysis

Elimination of Down Payment Aid while Elimination of Down Payment Aid while continuing effort reduction disproportionately continuing effort reduction disproportionately disadvantaged those communities that (a) have disadvantaged those communities that (a) have above-target RLC and (b) were most above-target RLC and (b) were most disadvantaged by pre-reform aid model disadvantaged by pre-reform aid model (Waltham, others), especially those (c) at the (Waltham, others), especially those (c) at the maximum target RLC of 82.5%.maximum target RLC of 82.5%.

Fairest solution is to place a floor on the gap Fairest solution is to place a floor on the gap between target contribution and required local between target contribution and required local contribution, so increasing aid for those contribution, so increasing aid for those furthest below target aid level at all wealth furthest below target aid level at all wealth levels.levels.


Funding Options SummaryFunding Options SummaryChange over Change over incremental cost of incremental cost of H2 (which is H2 (which is $145.3m above $145.3m above FY12)FY12)

Effort Effort Reduc-Reduc-

tiontion

Max Max RLC RLC

Points < Points < TargetTarget

Max Max RLC RLC

Points > Points > TargetTarget

GrandfatheGrandfather vs. H2r vs. H2

$0 – H2 $0 – H2 configurationconfiguration

15%15% No MaxNo Max No MaxNo Max YesYes

Add $10.8m – Add Add $10.8m – Add max points over max points over target ruletarget rule

15%15% No MaxNo Max 4.254.25 YesYes

$0 – Add max, $0 – Add max, offsetsoffsets

00 1010 4.254.25 NoNo

Save Net Save Net $32m$32m – – Use low max, deep Use low max, deep offsetsoffsets

00 00 2.52.5 NoNo

Add $43.9m – go Add $43.9m – go fully to target RLCfully to target RLC

100% 100% (irrel.)(irrel.)

00 00 NoNo

Add $110.6m – go Add $110.6m – go fully to target but fully to target but require >= H2require >= H2

100% 100% (irrel.)(irrel.)

00 00 YesYes

Note: All options shown provide standard grandfathering of FY12 aid. A 2% initial base cut would cover the $43.9 million cost of going fully to target RLCs.

Fixing a Local Aid Glitch

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