Not adding up

After CommonWealth went to press, the state budget was finalized. The Senate proposal for a Foundation Budget Review Commission, described in the final paragraphs of the story, was not agreed to by the House.

Illustration by Richard Mia.

orange, a small town of 7,800 along the Millers River in Franklin County, is exactly the sort of place state leaders had in mind almost 20 years ago when they agreed on a sweeping new education reform and financing plan for Massachusetts schools. The town was bustling up through the 1960s with its manufacturing plants churning out everything from raincoats to tapioca. But those days are long gone. Today, the average household struggles to get by on $42,800, putting Orange among the poorest 3 percent of all Massachusetts communities.

The 1993 Education Reform Act was built on the promise of a quality education for all Massachusetts students, whether they grew up in poor towns like Orange, or the wealthiest Boston suburbs. If education is supposed to be the great equalizer, giving all children the opportunity to reach their full potential, the reform law was the state’s most ambitious effort to live up to that vision.

New accountability measures were put in place aimed at boosting student achievement, while a far-reaching new school funding formula was designed to ensure that even the poorest districts would have the resources for their students to receive an adequate education and meet the state’s new performance standards.

Billions of state dollars flowed to schools in the state’s lower-income districts, including Orange’s three elementary schools, and the regional middle and high schools the community shared with neighboring towns. Class sizes and teacher-student ratios were kept at reasonable levels. Art and music enriched the school curricula.

About 10 years ago, however, the funding formula started unraveling, and things have only gotten worse.

The reform law established a required minimum level of spending for each district, a “foundation budget” with annual adjustments that assumed a steady rate of inflation over time. Beginning in the early 2000s, however, health care and special education costs began to take off at rates far beyond the inflation adjustment, leaving less money for other classroom expenses. Wealthier districts have been able to compensate by appropriating more money for their schools, going well beyond the required foundation budget. Poorer districts that are only able to fund schools at the minimum foundation budget level, on the other hand, are witnessing a steady decline of staffing levels and program quality.

The education funding system that brought such hope to lower-income districts now has towns like Orange backed into a corner and on the ropes.

Over the past decade, as teachers retired, their positions remained vacant or were filled with aides. Rain dripped into classrooms through leaky roofs, as maintenance got deferred. Textbooks weren’t replaced. Computers bought in the 1990s were never updated.

Last year, Orange did not even meet the minimum school spending requirement established in the funding formula, triggering state fines that town officials say only aggravated problems. Twenty-two elementary school personnel were laid-off last summer, wiping out all art and music programs.

Meanwhile, state budget shortfalls over the last decade have led to a 40 percent decrease in local aid to communities for all non-school services. With local aid revenue down, health care costs soaring, and Orange struggling to keep up with its mandated school spending level, critical town services are suffering.

The austerity measures the town has resorted to seem positively Dickensian. Understaffing is creating holes in police patrol coverage. The town’s streetlights are now off. And heating oil became a luxury last winter in one department, leaving employees to work in frigid buildings. A donated woodstove was brought in to take the chill off at the town cemetery department building.

“That we’re having to argue over whether to fund the schools or keep a third shift of police is egregious,” said School Committee member Joan Cohen-Mitchell after a meeting this spring to discuss the town’s dire budget condition. “This is an awful situation.”

Kathy Reinig, a member of the town’s Board of Select­men, says Orange’s back is against the wall. “We want to fund our schools above the required level, we want to provide services everyone needs—but we can’t,” she says.

Of the town’s $16.7 million annual budget, the state formula requires that $4.5 million go to school spending. “That we’re having to argue over whether to fund the schools or keep a third shift of police is egregious.”Ultimately, in communities like Orange, the school spending bar is both too high and too low. The state-mandated school spending level is too much for Orange to shoulder while facing cuts in state aid for all other town services. At the same time, the foundation budget provides far too little to adequately meet all the demands of running schools today. It’s a double-whammy that is hitting more and more lower-income school districts in Massa­­chu­­setts, and undermining the “grand bargain” of adequate funding in exchange for greater accountability that the education reform law set forth nearly two decades ago.

The Massachusetts Business Alliance for Education, the nonprofit group that was formed to spearhead the education reform effort in the early 1990s, issued a report two years ago that sounded that alarm. Without a way to ensure more resources for poorer districts, the report said, “we cannot in good faith continue to hold teachers and principals accountable for reaching the reform law’s performance goals.”

Retired Supreme Judicial Court Justice John Greaney, who ruled in two key cases concerning the state’s obligation to provide adequate funding for schools, puts it more bluntly. If we don’t fix the broken state of school funding, he says today, “kids growing up in Holyoke or Orange or Springfield don’t stand a chance…they’re going to get a thoroughly inadequate education.”

Formula breakdown  

Orange wasn’t supposed to be in this bind, struggling to provide even a barebones education to its students without art or music, while wealthy communities fund everything from state-of-the-art science labs to school orchestras.

Indeed, it was just those kinds of yawning gaps in educational resources that inspired a series of court battles culminating in a landmark Supreme Judicial Court case, McDuffy v. Secretary of Education, which inspired passage of the 1993 reform law. Just three days before Gov. William Weld signed the education reform law, the SJC ruled in favor of student plaintiffs in poorer districts in the McDuffy case, finding that the state has an obligation under the Massachusetts Constitution to fund public schools so that all children receive an adequate education.

The McDuffy ruling turned on the court’s interpretation of a single word in a single paragraph in the constitution, drafted by John Adams in 1779. The “rights and liberties” of citizens are dependent on the diffusion of “wisdom and knowledge, as well as virtue,” he wrote. “It shall be the duty of Legislatures and Magistrates in all future periods of this commonwealth to cherish the interests of literature and the sciences….”

The SJC pondered the use of the term “cherish,” delving into texts of the 18th century, Shakespeare, and even the Bible to determine whether Adams intended the state’s educational duty to be obligatory or aspirational. The court concluded that, in Adams’s day, the term meant “nourish” or “support,” imposing “an enforce­able duty” on the state to provide and fund an adequate education for all. Educa­tion was the heart stone of demo­cracy, to be nurtured as such “for all future periods.” But the SJC left to “Legisla­tures and Magis­trates” the task of solving glaring in­equities in school funding and programs.

The 1993 law was that solution. Rigorous curriculum standards and standardized MCAS tests measuring student achievement were the centerpiece of the accountability measures, while a new school financing formula was intended to ensure schools had the resources needed to meet these higher standards. A minimum, or foundation, budget was calculated for each district based on the costs of all facets of school operations, including personnel, professional development, curriculum resources, operations, and maintenance.

The formula determined how much cities and towns could be expected to contribute to school spending, based on a combination of local property values and average resident income. State education aid made up the difference between that figure and the foundation budget in each district.

For the current budget year, the state pays 83 percent of the foundation budget for the schools in Orange, with the town responsible for 17 percent. Fall River has a similar breakdown, with the state assuming 82 percent of the foundation budget costs for the blue-collar South Coast city, while local government is responsible for 18 percent.

The breakdown is almost exactly reversed at the other end of the wealth spectrum. The tony Boston suburb of Wellesley pays 84 percent of its foundation budget from local revenue, with the state chipping in 16 percent. In Weston, the wealthiest community in the Com­mon­wealth, the town-state split is 89-11.

Juggling Fall River’s commitment to schools and public safety is a struggle, says William Flanagan, the mayor and school board chair. Photo by Angela Rownlings/Boston Herald.

The formula called for additional funds for low-in­come students, English language learners, and special education students, based on the increased needs of those students. Because districts like Orange and Fall River educate many more students from these higher-need populations, they have higher foundation budgets. The mandated annual per pupil spending is $11,123 in Fall River and $9,877 in Orange, compared with $9,074 in Weston and $9,063 in Wellesley.

The formula adjusts the budget based on a set rate of inflation each year—and that is where the problems have come in. The state ramped school aid up in the first seven years after the reform law’s passage in order to bring every district up to the minimum foundation spending level by 2000. Just as all communities finally met that budget benchmark, however, health care and special education costs began to soar far faster than the inflation adjustment in the aid formula.

The 2010 Massachusetts Business Alliance for Educa­tion report, written by economist Edward Moscovitch, who devised the original funding formula, assessed the adequacy of the foundation budget by comparing current spending levels with the level that districts would have been at if the formula had been adjusted for disproportionately rising costs, primarily in health care.

According to the report, school spending in the state’s poorest districts in 1993 was 21 percent below the foundation level. By 2000, even with proper adjustment for inflation, spending in such districts was nearly at the targeted foundation level. But by 2010, spending in poorer districts was 16 percent below the foundation level if adjusted for actual cost increases. In other words, poorer districts were barely better off in 2010 than they were at the start of the education reform effort in 1993.

“The gains made by the neediest districts in the years before 2000 have all but been nullified by losses in the years since,” says the report.

The 2010 report by the business-backed nonprofit was followed last year by a study from the liberal-leaning Massa­chusetts Budget and Policy Center that drew much the same conclusion—the foundation budget no longer keeps pace with the cost of delivering an adequate education to Massachusetts schoolchildren.

The Mass. Budget report concluded that the foundation formula underestimates actual health insurance costs by $1.1 billion, and actual special education costs by $1 billion.

Problems with the foundation budget formula are disproportionately felt by poorer districts because wealthier communities are able to fund schools well above the required foundation budget level using their richer local tax base. While most poorer districts spend at the foundation level, in 2010 the wealthiest 20 percent of districts spent, on average, 39 percent above foundation level, according to the Mass. Budget report.

Despite the drain of health insurance and special ed on school budgets, the report found wealthy schools are still able to fund regular education teachers slightly above the foundation target. In the poorest districts, on the other hand, where local government lacks the capacity to make up for the growing share of the education funding pie eaten up by health care costs and special education, spending on regular education teachers was 32 percent below the foundation target.

Back to court

Questions about the adequacy of the foundation budget are not new. In 2003, the Supreme Judicial Court assigned then-Superior Court Judge Margot Botsford to hear testimony and gather evidence in a case called Hancock vs. Driscoll. The suit contended that student plaintiffs in 19 lower-income districts were not receiving an adequate education, despite the increase of billions of dollars in state school aid since the 1993 ed reform law.    

Botsford’s 342-page report to the SJC supported the plaintiffs’ claim. She found staffing levels, laboratory equipment, curricular materials, and resources were so inadequate that teachers were unable to implement the state’s K-12 curriculum framework, and education quality was far below that of wealthier comparison districts.

With the exception of health care costs, which had not yet started to take off, Bots­ford identified many of the same problems with the foundation budget highlighted in the recent Mass. Budget and Policy Center and Mass. Business Alliance for Education reports.

While state officials argued that leadership and management shortcomings were to blame in underperforming districts, Botsford determined funding to be the “very important and independent” cause of lower quality education. She also found that underfunding of the state education department meant it lacked capacity to help school districts and leaders to meet performance standards.

The decision by former SJC Chief Justice Margaret Marshall said the state was making progress toward addressing inequities between poor and affluent districts. Photo by Frank Curran.

But in a 5-2 decision, the SJC rejected the argument of the Hancock plaintiffs. Chief Justice Margaret Marshall acknowledged some of issues raised by the plaintiffs, but wrote that the state was “moving systematically toward addressing those deficiencies.” Greaney, one of two dissenting votes (the other was Roderick Ireland, now the court’s chief justice), says Marshall “cherry picked” pieces of Botsford’s report to support her opinion the state was making headway in righting what she admitted were “sharp disparities” between poorer and affluent districts.

Problems with the foundation budget have only grown since that time. With the court threat now behind them, state leaders pushed aside any thought of a major overhaul of the foundation funding formula. What’s more, lawmakers made an adjustment in 2007 that actually increased state aid to wealthy districts.

Responding to concerns about un­equal funding of communities with similar property and income wealth, the changes sought to eliminate some disparities in funding levels for similar districts that had been grandfathered in at the time the ed reform law was adopted in 1993. But in response to complaints from wealthy districts that they ought to get some guaranteed minimum level of state aid, the Leg­islature also adopted a new target that even the wealthiest districts receive at least 17.5 percent of their foundation budgets from state aid.

State Rep. Alice Peisch, the House chairwoman of the Legislature’s Education Committee, says, referring to the chapter of the state law covering education aid, the idea was to create a “Chapter 70 carrot” so that every community received enough aid to motivate legislators to go to bat each year for state education funding.

Peisch emphasized that the floor was “a goal, not a promise,” and that communities are being slowly brought up to that level. “I personally have concerns about 17.5 percent as a target for every single community,” says Peisch, whose hometown of Wellesley is one of those that benefits from the minimum aid target. “We should be funding poor communities first who don’t have the ability to pay for education in this tough economy.”

Jim Slavas sits on the town finance committee in Wendell, which is part of the regional middle and high school district with Orange. “It is unconscionable to continue to divert this magnitude of scarce and critically needed resources to communities of vastly higher wealth and little need,” he says.

The state has, in fact, slowed down the effort to ramp up high-wealth districts to the minimum aid target. “It has assumed secondary priority in the midst of the budget crisis, and I think that’s appropriate,” says Paul Reville, the state education secretary.

No wiggle room

Many of the same school finance challenges facing Orange are playing out on a much larger scale in Fall River, another struggling former mill town. The South Coast city of 92,000 is trying to figure out how to maintain its schools amidst rising costs, a flat tax base, and the cuts in non-school state aid that all communities have had to contend with.

Superintendent Meg Mayo-Brown says the city must “back into” the minimum spending requirement much like Orange officials do, by first covering fixed overhead costs such as employee health care. “Whatever’s left is what we have to run our schools on,” she says, and “there’s not a lot of wiggle room.”

William Flanagan serves as both Fall River mayor and school board chair. That means he probably understands better than anyone the tension between the demands on Fall River’s school budget and the shrinking pool of money available to fund basic services. “We can’t ignore our commitment to students in our school district,” he says. “But it’s a struggle to also see that streets are safe, potholes are fixed, streetlights are on, and we have enough firefighters out there to battle blazes.”

The exploding costs for health insurance and mandated special education have forced Mayo-Brown to divert money from regular education. Those runaway costs were huge factors forcing the lay off 200 school department employees several years ago. While some were hired back through grant funding, that one-time money is gone. Unless she can convince the city to add $1 million to the $118 million foundation-level budget for the coming year, says Mayo-Brown, “I’m laying off personnel.”

With fewer regular education teachers, class rosters in the lower grades are bulging beyond recommended levels. Over half of the district’s elementary school classrooms have 26 or more children. At that point, she says, “Teachers can’t get to all the kids.”

Paul Reville, the state’s education secretary, says the state needs to adjust to a new budget reality. Photo courtesy The Patriot Ledger.

Fall River’s experience illustrates just how the problems with the funding formula are working their way down to the classroom level in poorer school districts across the state.

Reville acknowledges that “the foundation budget is under tremendous strain” because of rising special ed and health care costs. But he calls the idea that the funding formula is broken “an extreme characterization,” and says the Massachusetts Business Alliance for Education report offered a “hyperbolic conclusion” in saying that without a significant change it is no longer reasonable to hold schools accountable for student performance.

Reville—a leader in the state’s ed reform movement who served as the first executive director of the Massa­chu­­setts Business Alliance for Education in the early 1990s —says the state can’t “let the perfect be the enemy of the good.” The state is still spending some $4 billion a year on K-12 education, he says. And with Massachusetts students ranked first among all states in math and English scores, he says the combination of high standards and new funding from the 1993 education reform has “vaulted us from the middle of the pack to the top of the pack.”

 Reville says the state has to adjust to a new budget reality far different from the period following passage of the ed reform act. “We’re not going to have the revenue picture we had in the 1990s again anytime soon,” he says. Reville says measures like the recent move to have cities and towns join the state insurance system, which has done a better job restraining the growth of health care costs, represent the sort of approach that’s needed to attack the problem on the cost side rather than attempting to address it with new revenue.

State education officials say schools also need to do a better job utilizing existing resources to drive student learning. “Above a certain level, it’s not clear that more money yields results,” says Reville.

He and other state education leaders say the state must look toward promising results from initiatives aimed at getting the most from every dollar. For example, hiring math coaches to improve instructional quality rather than more regular classroom teachers to lower class sizes has been shown to be more effective in boosting student achievement with less financial investment. Increased use of online learning can also be a cost-effective way to increase course offerings, while supporting the diverse learning styles of students.

The question of funding versus reform strategies or instructional innovations, of course, isn’t an either-or proposition. Adequate funding of schools is necessary, but not itself sufficient, to ensure quality education.

Nonetheless, Michael Weisman, the lead plaintiff attorney in both the McDuffy and Hancock cases, wonders whether the state again could be ripe for a court challenge to the funding system. He points to language in Marshall’s decision in the Hancock case that he says left that door ajar. “Nothing I say today would insulate the Commonwealth from a successful challenge… under different circumstances,” Marshall wrote. According to Weis­man, growing disparities in educational quality and resources “are the circumstances that make it the right time to bring forth a new challenge.” If the Hancock decision bought the state more time, he says, “time’s up.”

Greaney, the former SJC justice, doesn’t think the state’s highest court has an appetite to dive back into the issue. “I doubt any of the justices would do a U-turn on it,” he says of the court’s current stand that these issues are issues best left for the Legislature to grapple with.

Lawmakers now seem ready to dive in—at least to a point. The Senate included in its version of the 2013 budget a provision calling for the convening of a Foundation Budget Review Commission, a panel provided for in the 1993 law that has been dormant. If the move is approved by the House, the stage will be set for a formal examination of many of the concerns over what has happened to the grand bargain of adequate school funding in exchange for rigorous new standards and accountability.

Given the tough budget straits the state is in, members of the Foundation Budget Review Commission are likely to find it much easier to raise good questions than to answer them.

Linda Enerson covers Orange for The Recorder. She also works at the Collaborative for Educational Services in Northampton, which provides services and training to area school districts.