On education bill, funding and taxes loom large

THE RELEASE OF a long-awaited bill updating the state’s education funding formula immediately raised one big question: Would new state taxes be needed to pay for the $1.5 billion plan?

In a word, “no,” said House Speaker Robert DeLeo at last Thursday’s press briefing unveiling the legislation.

The reality may be more complicated than that.

Also complicated are the bill’s implications for how much local districts would have to spend on schools. Just days before the Student Opportunity Act was released, Gov. Charlie Baker cautioned against legislation that he said would put cities and towns on the hook for big increases in local school spending.

Communities are responsible for a share of the required per pupil spending in the state formula that the Legislature is revamping. But legislative leaders say the governor’s warning overstates the impact a big increase in state aid would have on most local budgets.

It all makes for an intriguing setup, as the Legislature appears poised to move quickly on a bill calling for a $1 billion larger increase in state spending on schools than the governor has proposed.

The legislation, which was unveiled with the backing both of DeLeo and Senate President Karen Spilka, would ramp up state education aid to local districts by $1.4 billion over seven years and commit another $100 million to other school-focused efforts. The state currently sends $5.2 billion to local school districts.

“We concluded that this was within what we can do,” Rep. Alice Peisch, the education committee co-chair, said of delivering the funding increases without new taxes. She said analyses showed that would not be possible with a five-year phase-in, and that shaped the decision to call for a seven-year implementation schedule.

While the bill, which is scheduled for debate next Thursday in the Senate, has received widespread praise across the education landscape, Baker has been reserved in his comments.

“We’re still doing our homework on it,” he told reporters on Monday. “We’ll have more to say about it later.”

The governor’s guarded reaction likely has something to do with the $1 billion difference between the bill and the proposal he filed to update the school funding formula.

Sen. Jason Lewis, the co-chair of the education committee, said the state has already been funding big increases in school aid in recent years, with an additional $268 million committed in the 2020 budget. Increasing annual aid by slightly more than that amount in each of the next seven years, he said, would fully fund the bill the education committee crafted.

That said, Lewis acknowledged that it’s impossible to anticipate all the variables that could change in the coming years.

“Obviously, there is some risk if the economy were to go into recession,” he said. “On the other hand, if we are successful with the Fair Share Amendment, that would help with additional revenue,” he said of a proposed tax surcharge on high earners that sponsors are aiming to put on the 2022 state ballot. It’s estimated that the measure could yield as much as $1.9 billion a year in additional state revenue.

Whether new taxes are needed down the road “is up to future legislatures,” Spilka said earlier this week on WGBH radio, adding that if the economy keeps growing the hope is “that we will be able to afford this.”

The education bill comes four years after a state commission found that Massachusetts was underfunding its schools by more than $1 billion. The commission said the formula determining school spending failed to keep pace with costs in several key areas, including employee health care, special education, and educating English language learners and low-income students.

On the most contentious issue — how much to boost state aid to districts with low-income students — the bill landed at the top end of the range recommended by the 2015 commission, a provision that will send millions of dollars more to Gateway Cities with large low-income student populations.

Colin Jones of the liberal-leaning Massachusetts Budget and Policy Center applauded the bill, calling it “a very significant move forward,” but added that the idea that there will be no need for new revenue over seven years to pay for it is “a lot to assume.”

The funding proposal carries an echo of the 1993 Education Reform Act, which established the school funding formula that lawmakers are now revamping. The landmark 1993 bill also called for a dramatic increase in state funding for districts, with lots of the money directed at poorer communities. Both bills also set out a seven-year schedule to phase in the new state aid, with no dedicated funding stream or new taxes to pay for it. For the 1993 law, the funding schedule worked out, as the state experienced strong economic growth through the rest of the decade.

“We happened to hit, serendipitously, a rising tide in the 1990s,” said Paul Reville, who served as education secretary under Gov. Deval Patrick and was director of the Massachusetts Business Alliance for Education, the leading advocacy group pushing the bill, at the time the 1993 law was passed.

Rolling out the new education bill without a dedicated revenue stream also may be a strategic consideration given the agenda for the current legislative session. DeLeo has signaled that the House is prepared to take up this fall the issue of new taxes for transportation needs. The Legislature’s appetite for taxes is never strong, so one big revenue push per session may be its limit.

In crafting the legislation, lawmakers drew largely from two bills filed in January — one by Baker and another, dubbed the Promise Act, by a group of legislators led by Sen. Sonia Chang-Diaz. The governor’s bill called for a $460 million increase in state education aid, while the Promise Act called for $1.4 billion in new support to districts, according to an analysis by the Mass. Budget and Policy Center.

Although the bill released last week differs in a number of ways from the Promise Act, the total amount of new state money it calls for is comparable. In January, Chang-Diaz said the Promise Act would require new revenue to be fully funded.

In an op-ed piece last week in the Boston Globe, three days before the education bill was unveiled, Baker said his proposal updates the funding formula in keeping with the recommendations of the 2015 state commission “without requiring a tax increase.”

He also warned that, although the Promise Act would commit more state aid to cities and towns, more than 300 school districts would have to increase their share of local funding more under the bill than under his proposal.

Baker cited half a dozen communities, including Lowell and Worcester, that would be required to spend more local dollars, necessitating a tax increase or diversion of money from other local needs.

But local officials and budget watchers suggest the governor is missing the school spending forest for the trees.

While Worcester, for example, would have been required to increase its local education spending by $3 million under the Promise Act, it would have received $74 million in addition state aid, according to the Mass. Budget and Policy Center.

While details of how the bill now before the Legislature would affect individual districts have not been released, it would also mean an enormous increase in state aid to Gateway Cities in exchange for a small hike in local spending.

“They’ll make that trade easily,” said Jones, the Mass. Budget and Policy Center analyst. “They’re lining up for that.”

Brian Allen, the chief financial officer for the Worcester Public Schools, said the state’s second largest city is ready to jump in line.

Because of the failure of the failure of the school funding formula to keep pace with costs, Worcester has 773 fewer teachers than called for under the original formula, and has had no reading or literacy specialists since 2004.

“The bill seems extremely favorable, it’s checking all the boxes from the foundation budget commission report,” Allen said. “I think there’d be some expected level of municipal increase [in spending] as a result of the bill, but the amount of new Chapter 70 aid is going to far surpass any amount of local increase.”

Eileen Donoghue, the city manager in Lowell, said the bill would be a boon to her community. “This would have a very tremendous impact for the city of Lowell in a positive way,” she said. There would be a required increase in local school spending, but “the contribution would be dwarfed by the overall increase in Chapter 70 aid,” she said, referring to the state education aid statute.

The education funding formula is establishes a level of minimum per pupil spending deemed necessary to provide an adequate education, with the share paid by the state and local communities determined by household income and property wealth in a district. The state pays more than 85 percent of the cost in Lawrence, for example, while the wealthiest districts receive the minimum allotment of 17.5 percent.

But districts are free to use local dollars to spend above the required minimum “foundation budget” — on average, just under $12,000 per student — and most of them do. The average district spending is 26 percent above the mandated state minimum.

Peisch and Lewis, the education committee co-chairs, took issue with the idea that the bill would require lots of districts to significantly increase local school spending.

The “overwhelming majority of districts now spend far in excess of the required local contribution,” said Peisch, so their local spending would not be affected by the bill’s increase in the mandated minimum spending.

For most districts, “it will have no budget impact on them,” said Lewis.

Baker’s office declined to comment on the bill’s implication beyond a statement issued last week saying he would evaluate its “fiscal impact, effect on municipal finance and ability to improve our schools for every kid.”

The bill could put the governor in an awkward position. He’s been committed to an update of the education funding formula – and clearly wants to sign legislation doing that — but lawmakers seem prepared to send him a bill designating far more money to that effort than he wanted to spend.

While lower-income communities that currently spend close to the required minimum, such as Worcester and Lowell, will see increases in state aid far greater than any required new local spending, for the small number of higher-income communities that have been spending close to the minimum, “some of those have the capacity to spend more,” said Peisch. “So I think it’s appropriate that we make it very clear that the actual costs providing an education are greater than what the current foundation budget provides for, and that every district needs to step up.”

Melrose, a middle-class Boston suburb that is responsible for the lion’s share of its school costs, would have to increase local school spending under the bill. The city currently funds its schools at only 4 percent above the required minimum.

“Do we have the capacity to pay more?” asked Ed O’Connell, chairman of the Melrose school committee. “Sure.” He pointed to the fact that voters passed a $5.2 million tax override in April to increase school funding.

Melrose “is not going to make a big score” with the bill, said O’Connell, but he called it “the right thing to do” for the state. “This is one of those situations where we all step up, where we have a shared responsibility,” he said.

Lewis said he and Peisch spent months visiting districts to understand the impact things like pre-kindergarten classes, longer school days, or after-school programming can have on less advantaged students. “We didn’t approach this by saying, OK, we have a certain pot of money,” he said. “We said, what is it going to take to be able to provide every public school district in Massachusetts with equitable resources so that every student is going to have the same opportunity?”

From that research, he said, lawmakers drafted the bill, arrived at a price tag for it, and developed a timeline they thought was realistic for implementing it without new taxes.

Donoghue, the Lowell city manager, who previously served in the state Senate, said there will “certainly have to be some balancing through the budget process” to meet any new required city spending on schools. “But if you are on the ground day to day in Gateway Cities,” she said, “you see the need is real.”