Topic:
MUNICIPALITIES; SCHOOL FINANCE; LEGISLATION; GRANTS; SCHOOL DISTRICTS;
Location:
EDUCATION - FINANCE;

OLR Research Report


July 6, 2007

2007-R-0436

NEW ECS GRANTS AND MINIMUM BUDGET REQUIREMENT

By Judith Lohman, Chief Legislative Analyst

This report provides an explanation of changes in the Education Cost Sharing (ECS) formula and the minimum budget requirement (MBR) enacted by the General Assembly in PA 07-3, June Special Session, “An Act Implementing the Provisions of the Budget Concerning Education.” The changes are effective July 1, 2007.

SUMMARY

The act changes several key factors in the ECS formula to (1) increase the level of per-student spending ECS aid helps towns achieve, (2) increase the state's contribution to the overall cost of education, (3) provide a higher level of minimum aid, and (4) increase student need weightings for poverty and limited-English and update the data for the poverty weighting. The act simplifies the ECS formula and its subformulas by eliminating supplemental aid to towns based on poverty concentrations and higher-than-average population densities. It also eliminates a factor that provided additional aid for low-achieving students. The act phases in the increased state aid, specifying the percentage increases for FY 08 and FY 09. For those years, it provides minimum annual increases of 4.4%.

The act also establishes a new minimum budget requirement (MBR). Instead of requiring towns to spend 100% of increased ECS grants on education, as the law previously required, the act allows towns to spend part of the aid increase for other things. It requires towns to spend between 15% and 65% of the ECS increases on education, with the exact MBR percentage determined by each town's relative current education spending, wealth, and student achievement. Low-performing school districts, as determined by consistent failure to make adequate yearly progress (AYP), must increase their MBRs by an additional 20 percentage points. These districts are also subject to increased supervision by the State Department of Education (SDE) under the act's accountability provisions.

ECS FORMULA

Basic Formula

The new act returns the ECS formula to its basic three-part structure, which the act calls the “fully funded grant.” That formula multiplies three factors: (1) a base aid ratio of each town's wealth to a designated state guaranteed wealth level (GWL), (2) the foundation, and (3) the number of each town's resident students adjusted for educational and economic need (“need students”). A per-student bonus is added for towns that are part of regional school districts. (A copy of the amended ECS formula and subformulas is attached for reference at the end of this report.)

Formula Factors

The new law changes several of the factors used in the main ECS formula and its subformulas.

Foundation. The act increases the ECS foundation from $5,891 to $9,687. The new foundation applies through FY 12. The foundation is the level of weighted per-student spending ECS grants help towns achieve. The higher foundation increases grants to all towns.

State Guaranteed Wealth Level (GWL). The ECS formula is designed to allow towns to tax themselves to raise a portion of the foundation based on an equalized tax burden, with the state making up any difference between what a town can raise and the foundation, up to the state guaranteed wealth level. The new act raises the GWL from 55% to 75% above the wealth of the median town (1.55 to 1.75 times the median town wealth). A higher GWL increases the state's share of total education funding.

Base Aid Ratio and Minimum Grant. The base aid ratio (or percentage) represents the relationship between each town's wealth (measured by equalized grand list adjusted for income) and the state GWL. To avoid having towns whose wealth is higher than the GWL get no state aid, the ECS formula establishes a minimum base aid ratio. The act increases this minimum from 0.06 to 0.09 for most towns and to 0.13 for the 20 school districts with highest concentrations of low-income students. Thus, the act increases grants for wealthier towns from 6% to 9% of the foundation amount for each need student (13% for wealthier towns with a high proportion of low-income students).

“Need Students.” By law, the ECS formula weights student counts for educational and economic need. It does so by increasing a town's resident student counts for students in certain categories to yield a “need student” count. The act makes the following changes in the need student count.

1. It increases the weighting for limited-English-proficient (LEP) students not participating in bilingual education programs from 10% to 15%. This change increases aid for towns with low concentrations of students with non-English dominant languages. (The law requires schools to have bilingual programs if they have 20 or more students with the same non-English dominant language.)

2. It increases the weighting for low-income students from 25% to 33% and changes the basis of the weighting from students on welfare in 1997 to children eligible for federal Title I education aid as of each October 1. The latter change updates data used for the low-income student weighting.

3. It eliminates the 25% weighting for students who perform below proficiency on mastery tests (“mastery count”).

4. In FY 09, the act reduces need student counts by 25% of the number of full-time students from each town who attend interdistrict magnet schools receiving state magnet operating grants. Currently and for FY 08, all such students are included in ECS student counts. This change reduces grants for towns with students attending interdistrict magnet schools on a full-time basis. The act also requires SDE, by October 1, 2007, to notify local school boards to anticipate that the number of such students included in the need student count in FY 10 will be reduced to 50%.

Supplements

The new law eliminates two ECS grant supplements that, under the prior law, were used to compensate certain types of towns. It eliminates the density supplement, which provided additional aid to towns with higher-than-average population densities, and supplemental aid, which provided additional aid based on concentrations of low-achieving and low-income students.

PHASE-IN GRANTS FOR FY 08 AND FY 09

The act phases in full funding of the new ECS grants and establishes the first two years of the phase-in grant as follows.

1. For FY 08, each town must receive the ECS grant it was eligible to receive in FY 07 plus 17.31% of the difference between that and its fully funded grant, but no less than a 4.4% increase.

2. For FY 09, each town must receive 23.3% of the difference between the FY 07 base and its fully funded grant, but no less than 4.4% more than its FY 08 grant.

MINIMUM BUDGET REQUIREMENT

Prior law required any town that received an increased ECS grant to increase its local budget for education by at least the amount of the increased aid. The act modifies the minimum budget requirement (MBR) to allow towns to spend part of their FY 08 and FY 09 ECS grant increases for non-educational purposes.

The minimum percentage of each town's ECS grant increase that it must spend on education is determined as follows.

1. For FY 08 and 09, each town must spend at least its budgeted appropriation for education for the prior year plus from 15% to 65% of its ECS grant increase.

2. The MBR percentage is based on an average of the differences between each town and the highest-ranked town in three categories: (1) current program expenditures per student, (2) per capita wealth (equalized net grand list adjusted for income), and (3) percentage of students who score below proficiency on state mastery tests.

3. The bigger the average of the differences, the higher a town's MBR percentage (i.e., the closer to 65%).

4. Any town whose school district is in the third year or more of failing, as a district, to make AYP in math or reading, must add 20 percentage points to its MBR for education (i.e., a minimum of 35% and a maximum of 85%).

By September 15, 2007, the act allows local school boards to ask the education commissioner to defer part of their aid increases for FY 08. If the commissioner approves, the deferred amount must be added to the town's FY 09 grant. Deferred funds must be spent in compliance with the town's MBR for FY 09. The act bars a town from deferring aid increases that it must spend because of its failure to make AYP for three or more years (i.e., the aid attributable to the extra 20 percentage points referred to above).

The act defines “current program expenditures” and “current program expenditures per student” for purposes of the education MBR. Under the act, those expenditures are the existing “regular education expenditures” plus expenditures for special education and student transportation.

The act also makes a conforming change to repeal a penalty for a town that did not meet its ECS minimum expenditure requirement (MER). By law, this penalty was already part of the MBR. (The penalty is twice the amount of any shortfall.)

JL:ro

ECS GRANT FORMULA

(As amended by PA 03-7, June Special Session)

Fully Funded ECS Grant = (Base Aid Ratio x Foundation x Need Students) + Regional Bonus

Base Aid Ratio = Greater of: (a) 1 minus Town Wealth/State Guaranteed Wealth Level (1.75 times the median town wealth) or (b) 0.09 (9 %) for most towns and 0.13 (13%) for towns ranked in top 20 according to Title I Count/Population aged 5-17

Town Wealth = (((ENGL/Need Students) + (ENGL/Population))/2) x (((PCI/HPCI) + (MHI/HMHI))/2)

ENGL = Equalized net grand list (three-year average) (CT Office of Policy & Management)

PCI = Per capita income (U.S. Census Bureau)

HPCI = PCI for town with highest PCI in the state

MHI = Median household income (U.S. Census Bureau)

HMHI = MHI for town with highest MHI in the state

Population = Total town population (U.S. Census Bureau)

Need Students = See below (State Department of Education)

Foundation = $9,687

Need Students = Resident Student Count + 33% of Poverty Count + 15% LEP Count (*For FY 09, subtract 25% of resident students attending full-time interdistrict magnet schools receiving state per-student operating grants.)

Resident student count = Students enrolled in public schools at town expense on the preceding October 1, adjusted for school days under or over 180 in the school year.

Poverty count = Number of children aged 5 to 17 from families in poverty as determined under Title I of federal No Child Left Behind Act as of each October 1.

LEP Count = Number of limited-English-proficient students not participating in state-funded bilingual education programs.

Regional Bonus = $100 per resident student enrolled in K-12 regional districts, $46.15 for each student enrolled in a 7-12 district, and $30.77 for each student enrolled in a 9-12 district.