DIGEST OF FINDINGS AND RECOMMENDATIONS

OVERVIEW

Findings

• Total funding for education increased steadily since the early 1980s.
• Even though the state increased its support for education, its share of education expenses declined since 1990.
• Local governments still provide the majority of funding for education.
• As a percent of the total state budget, state funding for education was fairly flat in the mid-1990s, but has increased recently.
• While the vast majority of money the state allocates for education is distributed through the unrestricted ECS grant, more emphasis has been placed on specifically earmarked grants and school construction over the last several years.
• The wealthiest towns in Connecticut have the highest per pupil expenditures and the property-poor towns, while not the lowest, still lag about 20 percent behind the richest towns.
• The teacher retirement contribution made by the state on behalf of municipalities is one of the last significant disequalizing grants
• In 1999, Connecticut was one of the top states when it comes to revenue raised per pupil for education. However, if education revenues are considered in relation to personal income, Connecticut raises less education revenue than 38 other states.
• Compared to other states, Connecticut is one of the most reliant on local government revenue to fund education.
• Overall school revenues declined as a share of personal income since 1992 from $46.08 to $43.84 per thousand.

EQUAL EDUCATIONAL OPPORTUNITY MEASURES

Expenditure Measures

Findings

• All statistical measures indicate disparity in educational expenditures declined over the last 26 years and that the state has made significant progress in this area since 1974.

_ The 95:5 ratio dropped from 87 percent in 1974 to 29 percent in 2000.

_ The McLoone index improved from .881 in 1974 to .931 in 2000.

_ The coefficient of variation declined since 1974 from .18 to .12 in 2000.

• However, the spending measures show little variability in the late 1990s, perhaps indicating the funding system as currently configured and supported has reached its maximum level of equity.

Other Resource Equity Measures

Findings

• Spending patterns of the top and bottom ERGs, which represent the wealthiest and poorest districts in the state, are similar; both generally spend above the state average across major cost categories.
• Indicators of staff and equipment resources (i.e., ratios of staff to student, student to compute, and class size) are also fairly close for the top and bottom ERGs but disparities in input measures related to facility condition and student characteristics (i.e., preschool experience, and participation in advanced courses) are large.
• The gap between the top and bottom ERGs on all outcome measures is substantial. ERG I is below the state average for each indicator of student performance as well as for the portion of graduates pursing higher education; its drop out rate is well above that for any other group.

Recommendation

The state board of education shall, in a format developed in consultation with the legislature's education committee, submit to the governor and the General Assembly each year by January 1, an analysis of key performance measures of resource equity and equal education opportunity. The measures should include but not be limited to generally accepted school finance equity statistics, specifically the 95:5 ratio, the McLoone Index, and the coefficient of variation, and indicators of instructional program quality such as student-to-staff ratio, class size and instructional hours, teacher quality, adequacy of equipment and facilities, and student achievement, such as standardized test results and post-graduation pursuits.

In addition, a fiscal impact statement shall be prepared for any bill related to the education cost sharing grant and shall include at a minimum an analysis of the impact of the bill's provisions on three school finance equity statistics, the 95:5 ratio, McLoone Index and coefficient of variation, calculated using the most recently available fiscal year data.

STATE FUNDING AND TAX EFFORT

State Funding and Per Pupil Spending

Findings

• Since the Horton decision (1973), the state increased its share of funding for education and the overwhelming majority of state funding for education takes into account each town's ability to pay, but the goal of equal state-local funding has not been met.
• The difference in average per pupil operating expenditures between the wealthiest towns and the poorest towns has been reduced.
• Property-poor towns (tenth decile) receive the most state aid - an average of $5,519 per pupil or 62 percent of the average total spent in FY 2000.
• The statistical relationship between property wealth and the amount of per pupil operating expenses has been reduced since the mid-1990s.
• Still, the average total per pupil spending is about 20 percent greater in the wealthiest towns compared to the poorest.

Education Mill Rates and Local Share for Education

Findings

• The difference in the mill rate for the local share of education expenses between the property-rich towns and the property-poor towns, while still significant (42 percent), has decreased.
• The equalized education mill rate among the towns does not meet the principle of a uniform mill rate - that is similarly situated taxpayers paying the same mill rate for education.
• When adjusted for income, mill rates indicate wealthier towns' (top 10 percent) tax burden is less for the local share of education expenditures.

Local Share For Education and Income

Findings

• Generally, the wealthier the town the greater the proportion of median household income dedicated to local share of education expenses.
• Except for the two wealthiest deciles, the wealthier the town the greater the proportion of total town income dedicated to local share of education.

EDUCATIONAL COST SHARING GRANT PROGRAM

Foundation

Findings

• Using the cost of 80^th percentile need student to establish the foundation as set forth in the original ECS statute would require a foundation level of $7,349, an increase of $1,458 over the current level of $5,891.
• Adjusting the original foundation level for inflation would require a present day foundation of $6,871, and increase of $980.
• Per pupil spending by every town in the state exceeds the current foundation level.
• The gap between the current foundation level and the statewide median net current expenditures per pupil for 2000 was $1,451.
• The spread between real net current expenditures per pupil and the current foundation has been growing at annual rate of slightly more than 3 percent a year over the last four years.

Recommendation

An educational cost commission to set and systematically update the foundation level shall be established.

The commission's initial foundation level shall be reported to the governor and General Assembly on January 1, 2003, and every four years thereafter.

The governor and General Assembly shall in all actions relevant to state financing of local education follow the foundation level set by the commission.

The commission shall consist of nine members including: the commissioner of education; two representatives of local boards of education appointed by the governor; two representatives of superintendents of local school districts, one appointed by the speaker of the house and one by the minority leader of the senate; two representatives of local school district teachers, one appointed by the senate president pro tempore and one appointed by the minority leader of the house of representatives; and two representatives of municipal governments, one appointed by the senate president pro tempore and one appointed by the minority leader of the house of representatives.

The foundation shall reflect the minimum amount of money necessary to provide an adequate education for an average student.

In developing the foundation the commission shall contract with the Connecticut Center for Economic Analysis at the University of Connecticut or a similar entity to provide technical support and services.

Need Students

Findings

• The weights increased the statewide resident student count for October 2000 by about 6.6 percent.
• On a town-by-town basis, weighting for need increased the student count from less than 1 percent (Simsbury) to nearly 23 percent (Hartford).
• Fifty-seven percent of the weighted students are in the state's 17 poorest towns (The state's five largest cities contain 48 percent of the state's total weighted students).
• Changing the weights has a large impact on formula aid (Doubling all the weights increased formula aid in 2002 by $189 million, while eliminating the weights reduces formula aid by $188 million).
• There is no statistical evidence supporting the size of the current weights for poverty, performance, or English proficiency used in the ECS formula.

Recommendation

The educational cost commission established to set and systematically update the foundation level should also set and systematically update the weights assigned to students exhibiting characteristics of poverty, remedial-level performance on standardized proficiency tests, limited English proficiency, and any other characteristics specifically designed by state statute.

The weights should reflect the amount of money necessary to provide an adequate education for the average student in the classification being weighted.

In developing the weights the commission shall contract with the Connecticut Center for Economic Analysis at the University of Connecticut or a similar entity to provide technical support and services.

The commission's initial weights shall be reported to the governor and General Assembly on January 1, 2003, and every four years thereafter.

The governor and General Assembly shall in all actions relevant to state financing of local education follow the weights set by the commission.

Measuring Town Wealth (Base Aid Ratio)

Findings

• How town wealth is measured is a policy choice having a significant impact on the amount of state educational aid a town receives.
• Current policy directs nearly 60 percent of ECS base aid to the 34 poorest towns (bottom 20 percent) and slightly more than 2 percent to the 33 wealthiest towns (top 20 percent).
• The five alternative methods of measuring town wealth examined by committee staff caused between 125 and 159 towns to experience a change in base aid.
• Of the five alternative methods of measuring town wealth examined by committee staff, only median household income increased the amount of base aid called for under the ECS formula. (MHI resulted in an increase of $41 million, while the decrease called for by the other four ranged was from -$165 to -$43 million.)
• All five alternative methods of measuring town wealth examined by committee staff except per capita income caused a shift of base aid share away from the 34 poorest towns (bottom 20 percent) toward the 33 wealthiest towns (top 20 percent).
• In most instances, whether a change in how wealth is measured would cause a town's base aid to increase or decrease defied a systematic explanation.

Recommendation

The current method of measuring town wealth should be continued.

Supplemental Aid

Findings

• Supplemental aid adds only $6 million to the ECS formula aid total (about 0.4 percent).
• On a town-by-town basis, supplemental aid ranges from a low of $20 to a high of $1.5 million with the median value is $1,220.
• Ninety-three percent of the supplemental aid is distributed to 10 percent of the towns.
• The five largest cities accounted for 72 percent of all supplemental aid.
• The number of students added to a town's residential student count based on the weighted need criteria is the variable most highly correlated with supplemental aid (.98).

Recommendation

The supplemental aid component of the ECS formula shall be terminated at the end of FY 03 in conjunction with the adoption of a set of weights for counting students with special needs recommended by the education cost committee.

Regional Bonus

Findings

• The regional bonus adds just over $2 million to ECS formula aid, the amount provided to towns before the cap and other special adjustments are applied.
• Forty-seven towns were entitled to a regional bonus in amounts ranging from almost $1,700 to more than $318,000 for FY 02.
• The exact contribution of a regional bonus to a town's final ECS grant is difficult to determine, given the effect of special minimum and maximum aid provisions on final payments.

Recommendation

The regional bonus component of the ECS grant program should be terminated at the end of FY 03 and funding to address specific needs of consolidated school districts should thereafter be part of a categorical grant program.

Grant Cap

Findings

• Between FY 96 and FY 01 the money withheld from towns based on the imposition of the cap ranged from about $67 million to almost $152 million per year.
• Between FY 96 and FY 01, only 21 towns were not affected by the cap, many were capped for multiple years, and 35 were capped every year.
• In FY 02, 60 percent (101) of all towns were subject to the cap.
• Taking into account a $25 million grant cap supplement made available to capped towns in FY 02, the ECS cap is estimated to save the state just over $90 million for FY 02.
• The estimated cap supplement received by the 101 capped towns for FY 02 ranges from $2,719 to $1,692,139. In about a dozen cases, a town's cap supplement is greater than the ECS grant payment it is entitled to under the capped formula.

Recommendation

Termination of the ECS cap should be moved from the close of the state fiscal year ending June 30, 2004, to the close of the fiscal year ending June 30, 2003.

Stoploss / Hold Harmless / Minimum Increase

Findings

• The minimum base aid ratio of 6 percent affects 44 towns and costs the state an estimated $28 million.
• Aside from the base aid ratio and before the FY 02 minimum increase is applied, hold harmless provisions assisted 58 towns in obtaining additional funding. This amounted to nearly $32 million, ranging from a low of $494 to $3.8 million per town.
• The percentage difference between what a town was entitled to and what it received due to the hold harmless provisions (other than the base aid ratio), ranged from less than 1 percent to over 200 percent. Twenty-eight towns received a percentage difference that was in the double digits or more
• Sixty-four towns benefited from the 1.68 percent minimum increase, receiving in the aggregate nearly $6 million more than last year. The total amount of this increase for each town ranges from approximately $2,200 to $420,000. All 64 towns received more than the ECS formula called for.
• At present, 14 towns have priority district status and another 13 have transitional school status. None of the priority districts and only one transitional district benefited from the special 70 percent/40 percent minimum aid provision for FY 02. This amounted to about a $580,000 increase.
• The alternative minimum increase based on prior year per student funding applied in the cases of two priority districts, increasing their ECS aid in total by nearly $39,000.

Recommendation

All but the minimum base aid ratio hold harmless provisions shall be terminated by the end of FY 02, except for the fiscal year ending June 30, 2003 no town shall receive less than its total ECS grant for the fiscal year ending June 30, 2002. For purposes of calculating the ECS grant, fiscal year ending June 30, 2003 shall be considered the base year.

Density Supplement

• The density supplement adds on about $5.5 million to the formula aid, which represents approximately 0.4 percent of total ECS funding.
• In FY 02, 46 towns are entitled to receive a density supplement and the amounts ranged from approximately $8,000 to just over $1 million.
• Twelve towns account for over 70 percent of the density supplement aid distributed.

Recommendation

The density supplement component of the ECS grant program should be terminated at the end of FY 03 and any funding to address specific needs of urbanized school districts should thereafter be part of a categorical grant program.

Distribution of Entitlement Aid

Findings

• Frequent changes in the foundation and state guaranteed wealth level aimed at saving state funds has begun to undermine the state's credibility when it comes to funding local education.
• Imposing caps on the amount of state educational aid a town can receive distorts the outcomes of the ECS formula and implies it is flawed.
• Imposing a floor (hold harmless) on the amount of state educational aid a town can receive distorts the outcomes of the ECS formula and implies it is flawed.

Recommendation

For the fiscal year ending June 30, 2004 and each fiscal year thereafter, if the state does not fully fund the ECS grant program, each town shall receive the same percentage of the funds budgeted for the ECS grant program as the town's percentage share of the total base aid calculated under the provisions of CGS Section 10-262h (6), except in no instance shall a town receive less ECS grant aid than the amount of its ECS grant for the fiscal year ending June 30, 2003 in any succeeding year.

ECS Grant Calculation

Recommendation

The state education department shall make an interactive ECS grant calculation spreadsheet available on its website beginning January 1, 2003.

SUPPLANTING OF LOCAL FUNDING

Findings

• In FY 99, ten towns reduced their local share. State ECS aid increased in six of the towns. In the other four towns, state ECS aid was reduced but the local share reduction was greater than the ECS aid reduction. The amount of the reductions ranged from $20,000 to over $1.1 million.
• In FY 00, 11 towns reduced their local share as state ECS aid increased in each town. The amount of the reductions ranged from $28,000 to over $2.5 million.
• The no-supplant provision redefines ECS as solely an education grant and eliminates any local tax relief component from the state's equalization aid program.
• The current statutory language is unclear and, in certain circumstances, may be unreasonable.

Recommendation

Clarify the intent of the no-supplant provision and make the spending restrictions more reasonable, C.G.S. Section 10-262i(c) should be amended to incorporate the following provisions:

• definitions of the terms "supplant" and "local funding for educational purposes" and the funding time period;
• a method for calculating changes in local share of a town's education spending based on cumulative totals over a three-year period;
• specific authority for the state education department to monitor compliance with the no supplanting requirements;
• a specific penalty for noncompliance, such as permitting the state education department to reduce state aid in the succeeding year by an amount equal to the reduction made in local share;
• allow a municipality to request approval from the commissioner of education to reduce its local share of education spending, with approval only being granted if the town demonstrates reductions are related to significant cost efficiencies or reductions in student needs, receipt of state aid to compensate for prior under funding, or other circumstances the commissioner deems reasonable; and
• require the commissioner to annually report to the legislature all instances of reductions in local education funding including approved requests, indicating the amount of and reasons for the reduction of local share.

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