Mass Senate Struggles to find the Right Inflation Fix for School Funding

Two proposals would benefit Haverhill and other Gateway Cities for the coming school year

Our state Senators have offered varied solutions to a tricky problem – how to sustain the school districts that are most dependent on state funding in a tight budget year. Eleven amendments to the Senate budget have been filed that attempt to address a glitch in the state Chapter 70 funding formula. The problem arises from a cap on the inflation adjustment that under compensates for past inflation in current and ongoing school funding.

Of the 11 amendments filed, only two would clearly help Haverhill and other Gateway cities with additional funding for the coming school year. Others might address the problem in the longer run. Here is a summary of the proposed budget amendments in this area:

Amendments with appropriations for fiscal year 2025

The two amendments that would provide school districts with temporary funding relief outside the Chapter 70 funding formula for the coming fiscal year. These amendments (Moore #743, Payano, #758) specify funding amounts for fiscal year 2025. The Moore amendment provides for an “Extraordinary Relief Reserve” of $217 million for districts to account for the difference between actual inflation and inflation adjustments under Chapter 70. It does not specify how funds are to be distributed among school districts. The Payano amendment, “Inflation Relief Fund for School Districts in Gateway Municipalities,” provides for $100 million targeted to the Gateway municipalities and allocates those funds in proportion to fiscal year 2024 Chapter 70 allocation [which for these cities is proportional to the impact of the inflation adjustment shortfall].

A couple of other amendments suffer from odd or unclear specifications. Amendment #666, from Senator Lewis, would appropriate about $18.6 million to Gateway cites meeting a specific configuration of local revenue and local contribution that presumably includes Malden. #799 from Senator Feeney would appropriate $5 million for low-spending school districts, However, it is not clear that any municipality would meet the two required criteria for aid under this amendment.

Amendments for changes without appropriations

Three amendments call for 4.5 percent “inflation” adjustments indefinitely using language included in a proposal from AFT MASS MASC and MTA. These amendments (Tarr #644, O’Connor #735, Kennedy #798) However, none of these amendments include an appropriation amount for fiscal year 2025. The Tarr amendment would not affect funding for this fiscal year. Amendment 735, from Senator O’Connor, would try to bank inflation obligations and provide extra funds to make up lost districts after high inflation returns to below 4.5 percent. It calls for an escrow account, though the source of funds for this account is unclear. It make no appropriation for fiscal year 2025. The Kennedy amendment also calls for 4.5 percent inflation adjustments.

It should be noted that all three of these amendments use language that does not precisely describe what appears to be intended. The ratio of implicit price deflator for the current year to that for 2019 will always be above 1.045 because it measures inflation over a several year period.  Also, it is the inflation adjustment, not the increase in the index, that may be intended to be restricted to 4.5 percent.  The index for fiscal year 2025 is 1.0135. Increasing that by 4.5 percent would produce a new index of 1.0591, which would provide for increasing “inflation”adjustments of 5.9 percent the first year and 10.7 percent the following year. If any of these amendments are adopted into law, this language will need to be revised at some point in the future to better capture the intent and/or to clarify how long such catch-up inflation adjustments would continue.

Amendments for study groups

Finally, three amendments call for study groups to look at the Chapter 70 funding. Senator Tarr #643 calls for a “Chapter 70 Local Contribution Formula Working Group,” Senators Lewis and Rausch (amendment #660) call for a Chapter 70 Study Group, and Senator Tarr in amendment #691 calls for a Study Commission on minimum aid school districts to focus on non-rural districts with declining enrollment.

Conclusion

The best bet for Haverhill and other Gateway cities are the Payano and Moore amendments, as they would provide significant funding targeted to the communities most affected by the under-correction for inflation in fiscal years 2023 and 2024, a problem that has reduced foundation budgets and carries forward into fiscal year 2025 and beyond. See posts below.