We Must Fix the School Funding Formula

School districts need funding that keeps up with inflation

Local officials across the Commonwealth are grappling with recent news of an unexpectedly low allocation of state funding for schools for the upcoming fiscal year. Despite the state’s well-conceived and robust system of financial support for public education, local officials this year are seeing surprisingly low aid allocations that do not keep up with costs. A longstanding, if rarely acknowledged, flaw in the Chapter 70 school aid formula is putting at risk both continued recovery from COVID learning loss and the core commitment of the Student Opportunity Act – to “ensure that every student in the state experiences high-quality learning opportunities.”  Fixing this problem should be a top priority as our legislators complete their work on the Commonwealth’s budget for fiscal year 2025.

How did this sudden shortfall in school aid sneak up on our state and local leaders? In 2020 and 2021 the attention of school officials was focused on COVID-related school closures. Then came the initial excitement over new aid flowing from the Student Opportunity Act (SOA) for fiscal year 2022, followed by an infusion of federal COVID recovery funds under the American Rescue Plan Act’s Elementary and Secondary School Emergency Relief (ESSER) program. As long as local administrators and officials had sufficient funds in hand and were busy organizing COVID recovery measures, they hardly noticed the latent problem being created by two years of inadequate inflation adjustments to state aid – a problem driven by a technical flaw in the Chapter 70 aid formula that imposes a hard upper limit on inflation adjustments at 4.5 percent.

In low-inflation years, this cap is not a problem. However, for fiscal years 2023 and 2024 the relevant inflation measures were 7% and 8% respectively, and the Chapter 70 formula allowed only a 4.5 percent adjustment each year. Cumulatively, the purchasing power of school aid fell behind by 6 percent over those two years. Additionally, aid in future years will be lower, as the lower inflation base from those two years is carried forward into subsequent state allocations. This represents a major setback in the funding needed to reach Student Opportunity Act goals.

The Healey-Driscoll administration proposes a 4 percent increase in Chapter 70 funding for fiscal year 2025, a figure that includes both funds to implement fourth-year requirements of the SOA and a 1.35 percent inflation adjustment. That is not sufficient for districts that now see costs rising, federal ESSER funds ending, and budget demands continuing for recovery from COVID learning loss. Only now, as districts prepare their fiscal year 2025 budgets, are local officials feeling the full effect of the shortfall in purchasing power created by the inflation cap over two successive years.

The necessary legislative fix would include two elements: (1) A bump up of about 6% to the proposed Foundation Inflation Index for fiscal year 2025, to fully account for cumulative inflation to date, and (2) Elimination of the 4.5% cap on inflation adjustments, so that school district Foundation Budgets and Chapter 70 aid would fully adjust for inflation in future years.

The Commonwealth is headed toward a major failure to meet its Student Opportunity Act promise to fund quality public education for all Massachusetts students. It is leaving local school districts, particularly those in the Gateway Cities, without the resources they need to complete their recovery from COVID learning loss, maintain their workforce in a tight labor market, and retain recent gains in education quality and equity. It just does not make sense that our school funding formula reduces school district purchasing power every time inflation rises above 4.5 percent. To fulfil the Commonwealth’s commitment, legislators need to act now to fix the Chapter 70 aid formula to provide school funding that keeps up with recent and future inflation.