MUNICIPALITIES; STATISTICAL INFORMATION; LEGISLATION; GRANTS; SCHOOL DISTRICTS; EDUCATION (GENERAL); SCHOOL FINANCE;

EDUCATION - FINANCE;

October 11, 2006 |
2006-R-0639 | |

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By: Judith Lohman, Chief Analyst |

You asked for a brief explanation of the Education Cost Sharing (ECS) statutory formula as well as of the temporary ECS formulas used to distribute funds since 2004. You also asked for a brief summary of the latest school funding lawsuit filed in November 2005.

**SUMMARY**

The statutory ECS formula determines each town's ECS grant by multiplying the number of students enrolled in its public schools at town expense (weighted for educational need) by the amount the state has determined a district should spend to provide an adequate education (the foundation) and by an aid percentage based on the district's wealth. Once the basic grant is calculated, the law imposes minimum and maximum grants and adds supplements for such things as population density and students attending regional school districts.

For the last several years, the legislature has overridden the statutory ECS formula and, in annual state budgets and budget implementing bills, has substituted a series of temporary formulas to distribute ECS funds. In general, these temporary formulas distribute money proportionately to towns based largely on the ECS grants they received in the prior year.

The ECS formula was created to help the state comply with a 1977 Connecticut Supreme Court ruling that the state has a constitutional duty to distribute education aid to towns in a manner that compensates for disparities in towns' ability to fund education from property taxes. But the state's allegedly inadequate aid, including lack of full funding for the ECS formula, has led 16 towns and several students to file a new education funding lawsuit against the state.

**BASIC ECS FORMULA**

The basic ECS formula has three factors: students, town wealth, and a “foundation” amount.

*Students*

The student factor starts with the number of regular and special education students enrolled in public schools at town expense on October 1 in the year before the grant year (“resident students”). This number is then weighted for need. First, each student on welfare in 1996-97 is counted an extra 25%. Second, each student who performs below the remedial standard on the state's annual mastery tests also counts an extra 25%. Third, students with limited English who are not served by the state's mandated bilingual programs count an extra 10%. The resulting total is called “need students.”

*Town Wealth*

The ECS formula is designed to distribute state aid to compensate for disparities in towns' wealth used to fund education. Town wealth is determined by averaging each town's property tax base and its residents' income. The property tax base is the total of its taxable real and personal property at 100% of market value, averaged over three years. The property tax base is measured on both a per-student (with the number weighted for need) and a per-capita basis. Income is measured on a per-capita and median-household basis and each town's income is compared to that of the highest-income town in the state.

*Foundation*

The foundation is the level of per-need-student spending that state aid helps towns achieve. Although originally intended as a measure of the minimum cost to adequately educate an average student, the foundation has been frozen at $5,891 by law for several years. The foundation is the same for all towns.

**BONUSES, SUPPLEMENTS, MINIMUMS, AND MAXIMUMS**

*Base Aid*

The ECS formula is supposed to allow all towns to tax themselves at the same equalized rate to raise their relative shares of the foundation amount, while the state makes up any difference up to a state guaranteed wealth level (GWL) of 55% above the wealth of the median town. The higher the GWL is, the higher the state's share. Each town's state aid percentage (“base aid ratio”) is determined by comparing its wealth to the state GWL. The wealthier a town is, the lower its base aid ratio. In 1999, the General Assembly set a minimum base aid ratio of 6%, thus ensuring that every town, no matter how wealthy, receives an ECS grant.

*Supplemental Aid*

Towns receive supplemental aid based on their concentrations of poor and remedial students. The maximum supplemental aid ratio is 4%. Any town that has more than 25% of its population aged five to 17 on welfare receives the full 4%.

*Regional Bonus*

Towns that are members of regional school districts receive a regional aid bonus of $100 per enrolled student for a K-12 region or a proportionate share of that amount for regions with fewer grades.

*Cap*

After each district's ECS grant is calculated, the law imposes a limit on its year-to-year aid increases. The limit is called a “cap.” From FY 1999 through FY 04, the maximum cap was 6%, although actual caps could be less because they were calculated based on wealth. If a town's wealth was at or below the 90^{th} percentile, it had the highest cap (+6%). Starting in FY 05, the 6% maximum cap was eliminated, although overall aid was still capped and capped towns were still affected because grants are based on prior years' grants (see below).

*Density Supplement*

The ECS formula also has a factor designed to send additional money to any town whose population density is higher than the state average. This density supplement is not subject to the cap. It was eliminated for FY 04 but restored for FY 05 and thereafter.

**RECENT ECS DISTRIBUTION FORMULAS**

The General Assembly has not used the statutory ECS formula to distribute funds for several years. Instead, it has adopted a series of simpler annual distribution formulas largely based on proportional increases in grants towns received the year before.

For example, for FY 05, each town's ECS grant was: its FY 04 grant plus 23.27% of the difference between its FY 04 grant and its full ECS entitlement, subject to several minimum grants (PA 04-254). For FYs 06 and 07, each town received a 2% increase in its FY 05 grant, plus a specified sum for each of the two years (PA 05-245). In 2006, the legislature established minimum grants for all towns. For FY 07, the minimum is 60% of each town's full entitlement. For FY 08 and thereafter, each town must receive an ECS grant that is (1) at least equal to its previous year's grant or (2) 60% of its full ECS entitlement (PA 06-135).

**NEW SCHOOL FUNDING LAWSUIT**

The ECS formula arises out of the Connecticut Supreme Court's 1977 *Horton v. Meskill* decision, which held that (1) education in Connecticut is a basic and fundamental right, (2) public school students are entitled to equal enjoyment of that right, and (3) a system of school financing that relied on local property tax revenues without regard to disparities in town wealth and that lacked significant equalizing state support was unconstitutional.

On November 22, 2005, the Connecticut Coalition for Justice in Educational Funding (CCJEF), which includes several elementary and high school students and 16 towns, filed a new lawsuit against the state's current system of funding education. The suit alleges that “by failing to maintain an education system that provides children with suitable and substantially equal opportunities, the state is violating their constitutional rights” and has fostered an “educational underclass.” The complaint contends the constitutional violations are the result of a flawed school funding system. It cites the following shortcomings in the current ECS formula as part of its evidence:

● An arbitrary cap on annual municipal ECS grant increases

● An arbitrary “foundation amount” that bears no relation to the actual cost of providing a suitable and substantially equal educational opportunity

● Special education funding, which is largely incorporated into the ECS formula, is unrelated to the actual cost of providing the services

● Weightings for student need are inadequate and unrelated to the cost of educating students with such needs

● Use of 1997 Temporary Family Assistance data to determine the weighting for low-income students is outdated and inaccurate

● The municipal wealth calculation “does not provide an accurate assessment of a municipality's ability to raise funds” for education

● The state GWL has been arbitrarily reduced and frozen to control the state's costs and does not relate to municipalities' actual ability to raise funds for education

● Roughly 1% of ECS aid is arbitrarily distributed through supplemental aid, regional bonuses, and a population density supplement

The lawsuit was filed on November 22, 2005 in Hartford Superior Court (Docket Number HHD-CV-05-4019406-S). Since then, according to news accounts, CCJEF as an organization has been eliminated as a plaintiff for lack of standing and Nekita Carroll Hall is now the lead plaintiff. Plaintiffs are being represented by Yale Law School's education adequacy clinic. The case is scheduled for a status conference on November 13, 2006.

JL:ro