Introduction

Connecticut's Public School Finance System

Local control of public schools is well established in Connecticut although state government has a constitutional responsibility to provide children substantially equal educational opportunity. In 1977, the Connecticut Supreme Court held the state's system for funding elementary and secondary education, which relied primarily on revenues from local property taxes, was unconstitutional (Horton v Meskill). The court found the system failed to take into account wide differences in town wealth and lacked any significant equalizing state support.

The General Assembly subsequently enacted a series of school finance reforms intended to offset disparities in the ability of municipalities to provide students with equal educational opportunities. Over the last two decades, the state's share of public school expenditures has increased substantially, with the bulk of state aid directed to communities with less wealth and greater student need.

The Legislative Program Review and Investigations Committee initiated a study of Connecticut's system for funding public elementary and secondary education in light of state legal obligations and policies related to equity in April 2001. The study focused on two main questions:

1) how well is the system meeting the state's goal of equal educational opportunity, particularly in terms of reducing variance in spending among school districts; and

2) how fairly does the system treat local taxpayers across districts?

The committee examined the relationship between equity goals and each type of state funding for local schools including: the Education Cost Sharing (ECS) grant, the formula-based equalization aid program that provides the bulk of state money for local school operating costs; over two dozen categorical grants that target aid for specific education purposes such as pupil transportation, special education, school readiness and other defined activities; the school construction grant program; and payments to the teacher retirement system. Key measures used in the Horton case to assess student and taxpayer equity were applied to the present state education finance structure to determine the current status of funding disparities.

According to education finance experts, an effective school funding system incorporates the following elements:

• equity -- educational resources and the tax burden to support them are distributed fairly;
• adequacy -- resources are provided at the level needed to meet goals and standards;
• accountability -- funding is linked to outcomes; and
• stability -- revenues and expenditures are predictable over time.

Some would add, from a practical standpoint, that a successful funding structure is also understandable - the system's underlying concepts and procedures are clear to all concerned parties -- and politically acceptable - provisions avoid major disruptions in existing levels of spending and services.

Using these elements as a framework, the program review committee found the state's system of equalization aid and categorical grant funding has reduced disparities in spending among districts. Whether student and taxpayer equity has been achieved is more difficult to assess, as equity is a value-laden concept. The committee found the ECS grant is not performing as well as it could in distributing aid based on student need and local wealth and made several recommendations to correct distortions.

In terms of adequacy, Connecticut was found to be a high total spender on education compared with other states, even taking into account our high cost of living. However, like equity, what is adequate is not easy to answer. It is clear from the committee's review that continuous action by the legislature to control state spending in times of budget crisis by freezing key components of the ECS formula and instituting caps on annual increases has jeopardized the grant's effectiveness in supporting the costs of basic educational services. The committee proposes a new, simpler way to control ECS expenditures in response to statewide spending problems and priorities. Expert review of the formula's foundation spending level and weighting for student need is also recommended.

Accountability in Connecticut's funding system is achieved through several statutory measures, most importantly a minimum spending requirement within the ECS grant and restrictions on supplanting of local education expenditures. The program review committee found modifications of the supplanting statute are need to make it work as intended.

The state's education finance system has provided relatively stable funding levels over time. Revenues are raised from a mix of sources - state income and sales taxes, state bond funds for construction costs, and the local property tax. The legislature has also employed various hold harmless provisions within the ECS grant and specialized short-lived categorical grants to protect local districts from budget disruptions. These provisions, however, have contributed to one of the great weakness of the current state financing structure -- its complexity. The program review committee believes much dissatisfaction with the current ECS formula is due to the difficulty in understanding its many components. Several recommendations are aimed at simplifying the ECS formula.

Finally, one of the great strengths of the current system is its general political acceptability. While many at the state and local level are not entirely satisfied with the ECS formula or the state's wide array of targeted education aid, the system promotes local control and directs state aid, for the most part, to the types of student everyone agrees have the greatest needs. The overall aim of the committee recommendations is to make the existing structure, which incorporates the essential elements required for an effective school finance system, work better. The study's main findings, along with the actions proposed by the committee to address them, are summarized by topic in the table presented below.

Methods

A variety of resources and methods were used to gather and analyze information for this report. The basis for most committee staff analysis of education funding trends and patterns was the extensive computerized databases on grant payments to towns, districts, and other education entities (e.g., charter schools, regional education service centers), school district characteristics, state and local education expenditures, and federal funding maintained by the State Department of Education. Outcome measures and indicators related to resource equity and equal educational opportunity developed and monitored by the department were also examined.

Additional information on local revenues and expenditures, tax base composition, and income and property wealth factors by town were compiled from census data. Connecticut data were compared, when appropriate, with relevant national school finance statistics and information available from other states.

Current statutes and legislative histories related to all state funding programs for local and regional school districts, as well as materials from the school finance court cases and state education department policies and plans, were reviewed. Committee staff also reviewed the education finance literature, current research on school funding issues, and publications from a number of national education organizations. Major studies of the state's school finance system carried out over the past three decades, including documents prepared by the Education Equity Study Committee, the ECS Task Force, and the Connecticut Education Association were examined.

Key staff from the state education department and representatives of the main school finance interest groups in the state were interviewed during the study process. The committee held public hearings in October and November 2001 in three locations (Hartford, Norwich, and Weston) to obtain views on the education funding system from interested parties throughout the state. On December 6, 2001, the committee also sponsored an afternoon workshop for legislators on key school finance issues with the help of the Center on Education Finance of the National Conference of State Legislatures.

Report Organization

The committee's report is organized into seven chapters. The first provides an overview of Connecticut's education funding system as well as an analysis of funding trends and patterns over time. Chapter II summarizes state legal obligations and goals related to education finance and assesses the current status of equal educational opportunity measures considered by the court in the Horton lawsuit. The third chapter contains a full analysis of the ECS formula while the fourth and fifth chapters describe, respectively, state categorical grant funding and the school construction grant program. Information related to state education funding and tax effort is presented in the sixth chapter. Accountability measures, specifically the ECS minimum expenditure requirement and statutory ban on supplanting of local education funding, are discussed in the Chapter Seven.

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