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Administration and Finance

FY21 Preliminary Chapter 70 Aid and Net School Spending Requirements

January 22, 2020

Pursuant to section 6 of Chapter 70 of the General Laws, the Commissioner of Elementary and Secondary Education is issuing the preliminary estimates of Chapter 70 school aid and net school spending requirements for FY21. These estimates are based on House 2, Governor Baker's proposed state budget for the coming fiscal year. The proposal increases aid to districts from $5,176,002,652 to $5,479,534,540, an increase of $303.5 million or 5.9%.

These are preliminary estimates subject to change as the House and Senate deliberate on the budget. Our purpose in providing these estimates at this time is to assist cities, towns, and regional school districts in their budget preparations for FY21. We advise you to construct your local budgets with sufficient flexibility to accommodate the changes that typically occur in the state budget process. The Commissioner will issue the final, official school spending requirements as soon as the Governor and Legislature approve either the FY21 state budget or an earlier local aid resolution.

The FY21 Chapter 70 program reflects the passage in November 2019 of An Act Relative to Educational Opportunity for Students - commonly known as the Student Opportunity Act (the Act). The Act makes significant changes to the Chapter 70 formula, based in large part on the recommendations of the Foundation Budget Review Commission (FBRC). The updated formula is also codified in Chapter 70 of the general laws.

Statutory parameters

The updated formula includes three parameters to be specified in each year's general appropriations act. In House 2, these are specified as follows:

  • Total state target local contribution: 59%
  • Effort reduction: 100%
  • Minimum aid: $30 per pupil

Foundation budget rates

The Act establishes new, higher foundation budget rates in five areas: benefits and fixed charges, guidance and psychological services, special education out of district tuition, English learners, and low income students, all to be phased in over a seven-year period. For the first four categories, the rates have been increased by 1/7 of the gap between the FY20 rates and the final target rates. Because of the significant increase in foundation budgets associated with low income enrollment in FY21 (discussed below), and the directive in Section 30 of the Act to implement foundation and increment amounts in "an equitable and consistent manner", the low income increment rate increases are set at 4/100 of the gap. The number of tiers for the low income increment rates is increased from ten to twelve; districts with higher concentrations of low income students benefit from higher rates.

In addition to these targeted rate increases, all foundation budget categories have been adjusted upward to account for inflation. A new employee benefits inflation rate is applied to the employee benefits and fixed charges category. This is based on the enrollment-weighted, three-year average premium increase for all Group Insurance Commission plans; for FY21 the increase is 2.34%. An inflation increase of 1.99% has been applied to all other foundation budget rates, based on the U.S. Department of Commerce's state and local government price deflator.

The Act also adds a new minimum aid adjustment to the formula. This provides "hold harmless" aid to 25 districts that otherwise would have lost aid due to the new foundation budget factors.

Low income and special education enrollment

The Act reinstates the definition of low income enrollment used prior to FY17, based on 185% of the federal poverty level. It replaces the "economically disadvantaged" designation (based on 133% of the federal poverty level) used from FY17 through FY20. For FY21, a district's low income enrollment is the higher of: (a) the number of students matched through the Department's current direct certification process (which identifies students whose families have been approved for various federal and state benefit programs); or (b) the district's FY16 low income percentage multiplied by its current foundation enrollment. Statewide low income enrollment for FY21 is 389,380, compared to 342,575 identified as economically disadvantaged in FY20.

For FY22 and subsequent years, the Act directs the Department to recommend a new methodology for identifying low income students.

The Act increases the assumed in-district special education enrollment to 5% for vocational students and 4% for non-vocational students. This is also being phased in over 7 years, so the factors used in FY21 are 4.82% and 3.82%, respectively.

Required local contributions

The aggregate wealth model that has been used to determine local contribution requirements since FY07 remains in place. Pursuant to its codification in the Act, a provision introduced in the FY20 budget specifying a required local contribution of 82.5% of foundation for any city or town with a combined effort yield greater than 175% of foundation is continued in FY21.

The Act directs the Department and the Division of Local Services (DOR) to jointly study the issues relating to municipal fiscal capacity and required local contributions, and to report back to the Legislature by December 2020 with any recommendations for changes to this component of the Chapter 70 formula.

Districts with low and declining enrollment

Many of our smaller school districts, particularly in the rural parts of the state, have experienced significant enrollment declines over the past decade. These districts generally do not benefit from the Act's foundation budget increases, and their small size can create significant diseconomies of scale. The Act establishes a special legislative study commission to recommend potential strategies for addressing these unique issues. The commission's report is due by December 2020.

Charter school tuition

Foundation tuition rates for Commonwealth charter schools are based on the same foundation budget rates used in Chapter 70. The foundation budget rate increases being implemented in FY21 have been incorporated into our projected FY21 tuition rates. In addition, charter school low income enrollment for FY21 has been calculated in a manner consistent with the methodology used for districts. The facilities component of the tuition rate is held constant at FY20 levels, at $938 per pupil, with this cost fully reimbursed by the state as in prior years.

The reimbursement formula for transitional aid to districts remains unchanged from the change enacted by Section 38 of the FY20 budget, with an entitlement of 100% of any tuition increase in the first year, 60% in the second year, and 40% in the third year. Funding for first year reimbursements is prioritized first, followed by funding for second year reimbursements. The Act requires 75% of the total state obligation to be funded in FY21, 90% in FY22, and 100% in FY23 and subsequent years. The governor has recommended a $138.2 million appropriation for these reimbursements. This appropriation level is expected to meet or exceed the 75% requirement when tuition assessments are updated to reflect actual enrollments and district spending levels. The projected assessments and reimbursements for charter tuition payment at this point in time can be useful for budget planning but should not be viewed as final numbers.

Here are links to more detailed information on the governor's proposed budget:

Questions about the Chapter 70 program should be directed to:

Rob O'Donnell

Rob Hanna

Last Updated: January 22, 2020

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