The Boston Foundation Education Health Care Report

The Boston Foundation and the Massachusetts Business Alliance for Education issued a report last month dealing with education funding in Massachusetts. The report looked at the financial impacts of the Education Reform Act, and how the larger amounts of state aid for K-12 education mandated by that act have been spent.

The Education Reform Act of 1993 sought to insure that school districts in Massachusetts had adequate financial means to provide a quality education to our children. The impetus for the Act was a lawsuit, known as McDuffy, which contended Massachusetts was violating the (state) Constitutional rights of children to an adequate education. From the website

In the Massachusetts education finance case, McDuffy v. Secretary (1993), Massachusetts students claimed that their own less affluent school districts were unable to provide them with an “adequate” education. Based on an analysis of the Massachusetts Constitution’s “Encouragement of Literature” clause, the Supreme Judicial Court concluded that the Commonwealth has an obligation to educate all of its children and held that children in less affluent communities “are not receiving their constitutional entitlement of education as intended and mandated by the framers of the Constitution.” Moreover, the court adopted the guidelines set forth by the Supreme Court of Kentucky in Rose v. Council for Better Education to define the standard of education that the Commonwealth must provide.

At about the same time that the court issued its McDuffy decision, the legislature passed and the governor signed the Education Reform Act (ERA) of 1993, which established a “foundation budget” for each school district to be phased in over seven years.

So the Commonwealth had multiple reasons to send additional monies to the localities, but the principal impetus was the lawsuit and the notion of equalized funding between property rich and property poor communities.

So what does the new report find about that stream of money, and is the money being targeted to where it will do the most good for our students? Here are the key findings of the Report:

1. Health Care Costs:
The explosive growth in the cost of health care for school employees has caused a major funding shortfall. From 2000 to 2007, costs rose by 13.6 percent per year, while the overall inflation adjustment was growing at only 3.4 percent. Over this period, annual health care costs in school budgets grew by $1.0 billion – $300 million more than the increase in Chapter 70 aid.

2. Impact on Teachers, Education Materials, Training:
With health care costs rising rapidly but overall district spending increasing at more modest rates, there has been relatively little left over for other areas of the school budget that directly affect student learning — teachers, instructional materials, and teacher training. Since 2000, per-pupil spending statewide on these key elements of school budgets, adjusted for inflation, has been falling. From 2000 to 2007, spending on books fell by more than half and spending on teacher training by almost a quarter.

3. Inflation Adjustment Falls Short:
The price indicator used to adjust the foundation budget to keep it in line with inflation has increased much more slowly than the actual cost of running schools in Massachusetts – only 3.4 percent a year from 2000 to 2007. As a result, the foundation budget, and the state aid and local spending requirements that depend on it, have failed to keep up with rising costs. The foundation budget shortfall was $1.2 billion in 2007 and is now almost $1.7 billion.

4. Equity Not Achieved:
Over the 17 years since the Education Reform Act passed, there has been virtually no equalization in spending or state aid between rich districts and poor. The gains made by the neediest districts in the years before 2000 have been all but nullified by losses in the years since. With growth of only 2.3 percent per year from 2007 to 2010, the per-pupil spending in needy districts was a full percentage point less than the wealthiest suburban districts (3.4 percent). As a result, they made very little progress relative to the foundation goal, properly adjusted for inflation. Poor districts were 21 percent below in 1993, rose to within 3 percent of the goal in 2000, and were back down to 6 percent below in 2010.

In addition to the impact of skyrocketing healthcare costs for their own employees, school districts are also hurt by soaring increases in Medicaid and health insurance for state employees – increases that are crowding out all other areas of the state budget. From 2000 to 2010, health care consumed two thirds of the entire increase in state spending. Controlling health care costs has therefore become a critical education issue.

The inability to increase state aid, and the resulting cuts in spending, particularly in the neediest districts, call into question the historic bargain created in the Education Reform Act of 1993. If we cannot bring resources in the classroom to the foundation goal – either by increasing state assistance or reducing costs in health care, student transportation, school operations, central administration, and other areas that don’t directly impact teaching and learning in classrooms – we cannot in good faith
continue to hold teachers and principals accountable for reaching the reform law’s performance goals.

So the report shows that health care costs for school districts rose by $300 million dollars more than Chapter 70 (state aid to education) over the 7 year period 2000-2007. And yet people at the local level seem incredulous that education funding is being squeezed, with health care spending crowding out everything else. When folks talk about the “challenges of education funding in Massachusetts” they don’t really need to look beyond that number.

Today the Tribune ran a story on the report, talking with Mayor Fiorentini and I. I have been getting some criticism (already) due to Methuen’s unions having already stepping up to make major plan changes that cost employees substantially through increased co-pays, and deductibles of $1000-$2000 in this fiscal cycle. The criticism centers around my ingratitude for such plan changes, but misses some essential points. The first is that the Boston Foundation Report deals with statewide funding, not funding for Methuen. My comments were based on the fact that in so many instances unions have refused to move on health care plan design, saddling communities with plans that are simply too rich for taxpayers. 80-20 splits, $5 co-pays, and so many vestiges of plans that are not affordable in health care at current pricing. My second point is that while I do appreciate the movement in Methuen, those changes still cost taxpayers an increase of over $1.5 million dollars. Additionally, although we all saw the health care deficit coming last year CURRENT STATE LAW prevented me from managing it by making plan design changes that would have protected both taxpayers and employees. In Methuen as I started preparing the budget submission for this fiscal year I was looking at increases for health care and pensions that outstripped our Proposition 2.5 levy capacity by about $2 million dollars. In layman’s terms that means if I was willing to recommend to City Council a levy increase of $3 million dollars we still would have been $2 million dollars short.

Change needs to come in this area, and people need to start paying attention to numbers in government. These numbers do not lie. They tell a startling story that is destined for a bad ending unless we get people to make some hard and difficult choices.

boston-foundation-mbae-school finance report

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