Ending the Kindergarten user fee!

When I returned to the school committee, I came back with a few items of unfinished business. There were a few things I wanted to achieve that were not possible during my earlier two terms (2001-2007). The biggest unfinished item will be crossed off the list tomorrow night. We are about to eliminate kindergarten fees. We are about to refund the fees paid for the 2012-13 school year. The state is going to pay us to get rid of the kindergarten fees.

Why can we do this? To understand why this works, you need to understand how the state funds local school districts and the Chapter 70 formula.

The state’s Chapter 70 program is based on a few simple components:

  1. A foundation budget, based on the cost of educating the children educated in the district, is calculated. The foundation budget is based on what is known as the October 1 count, which is the student enrollment reported on October 1 of the previous school year. (For example, the funding for the 2012-13 school year is based on the enrollment on October 1, 2011.)
  2. The state determines how much a city or town can afford to contribute to the foundation budget, and requires the municipality to contribute that amount. This is the required local contribution.
  3. The difference between the foundation budget and the required local contribution is funded through the Chapter 70 local aid account.

For Fiscal 2013 (the 2012-13 school year) Arlington’s numbers are:

Foundation Budget: $45,702,617.25
Required Local Contribution: $ 37,180,313.00
Chapter 70 Aid: $8,522,304.25

The Required Local Contribution is a function of the previous year’s Required Local Contribution. It is determined by multiplying last year’s Required Local Contribution and increasing it by the Municipal Revenue Growth Factor (the amount of growth in local municipal revenues).

(Fiscal 2012 Required Local Contribution) $35,933,423
* (Increase by Arlington’s Municipal Revenue Growth Factor of 3.47%)  1.0347
= (Fiscal 2013 Required Local Contribution) $37,180,313.00

No matter what happens to the foundation budget, the Required Local Contribution remains the same. It is a function of the previous year’s Required Local Contribution and the Municipal Revenue Growth Factor, and nothing else. (This is the key to the equation.)

If something happens to increase the foundation budget, and the Required Local Contribution doesn’t increase, the state must fill the gap with Chapter 70 state aid.

What could happen that would cause an increase in the foundation budget?

Generally, the foundation budget goes up when enrollment goes up. If the number of English Language Learners goes up, the foundation budget goes up even more. If the number of free or reduced lunch students goes up, the foundation goes up even more.

For the current school year (FY13 – based on last year’s October 1 count), here’s how much a student contributes to the foundation budget.

Half-day kindergarten: $3,576.91
Full-day kindergarten: $7,153.90
Elementary: $7,197.06
Jr. High/Middle: $6,822.68
High School: $8,508.67
ELL Half-day kindergarten: $4,573.40
ELL Full-day Kindergarten, grades 1-12: $9,146.78

On October 1, 2011, Arlington had 344 half-day kindergarten students and 30 ELL half-day kindergarten students. Almost all of these students attended full-day kindergarten, but the second half of the school day was funded by a user fee that tops out at $3,000.

Here’s how these students contribute to our foundation budget:

(Not ELL) Half-day kindergarten: $3,576.91 * 344 = $1,230,455.94
ELL half-day kindergarten: $4,573 * 30 = $137,202.04
Total half-day kindergarten:  $1,367,657.98

We currently budget $970,000 in user fees to support these students.

What happens if we decide we aren’t going to charge a user fee for full-day kindergarten? Half-day kindergarten students who pay fees become free full-day kindergarten students who cannot legally pay fees. The district loses $970,000 in fees. However, it changes the foundation budget as follows:

(Not ELL) Full-day kindergarten: $7,153.90 * 344 = $2,460,968.71
ELL Full-day kindergarten: $9,146.78 * 30 = $274,403.46
Total full-day kindergarten: $2,735,372.16

Moving all our half-day kindergarten students into free full-day kindergarten seats increases the foundation budget by $1,367,685.77. The required local contribution (what Arlington pays) does not change. Because the required local contribution increases by the municipal revenue growth factor, and not the foundation enrollment, every dollar increase in the foundation budget that comes from converting to a free full-day kindergarten must be funded by the state through the Chapter 70 formula. Next year.

Bottom line. If we eliminate $970,000 in user fees this year (2012-13) we receive approximately $1.4 million in additional Chapter 70 aid next year, and that number will be incorporated into our Chapter 70 aid every year thereafter.

Tonight (September 12), the Finance Committee voted to endorse a plan to take $970,000 out of reserves and appropriate it to the school committee. The Finance Committee plans to adjust our fiscal stability plan to allocate an additional $970,000 to the schools in subsequent years (to cover the elimination of the user fees), and the remainder of the Chapter 70 increase will be returned to reserves. This will pay the town back for advancing the $970,000 in this year’s budget.

When I was on the school committee in 2001, we inherited a fee-based full-day kindergarten. The fee started at $1500, and we were able to reduce it to $500. We were poised to eliminate it in 2003, but that was the year that Mitt Romney became governor and reduced our Chapter 70 aid by 20%. That year, we were forced to make significant cuts and raise fees.

Eliminating the kindergarten fee is a dream deferred, but it’s a dream we will realize on September 13, 2012.

It’s a win-win all the way around, and the most joyous vote I will take as a school committee member.

11 Replies to “Ending the Kindergarten user fee!”

  1. Why does this work? Who can we thank?

    Simply speaking, the bulk of the thanks goes to a bunch of high growth communities who thought the old Chapter 70 formula was unfair. They had a point.

    On October 1, 2011 you submit your student enrollment report to the state. That number determines your state aid funding for the 2012-13 school year, which means your funding in June, 2013 is based on the number of children enrolled in October, 2011. If lots of people are moving in to town, your state aid doesn’t keep up with the influx.

    They fixed this problem by capping the required local contribution at the rate of municipal revenue growth. As a result, a community that has a growth in foundation in excess of growth in municipal revenues will get more aid.

    What does that mean for Arlington? We’re a growth community. We increased our enrollment by 50 students (October 1, 2011) over the previous year. We also don’t have a lot of growth in property tax revenues, as we don’t have much vacant land, so our municipal revenue growth numbers tend to be average at best.

    This works for us, because our foundation budget growth increase already exceeds our municipal revenue growth (which governs the required contribution). Before kindergarten enters the picture, we are getting additional state aid to compensate for our growth in enrollment.

    Here are the differences in Arlington between Fiscal 2012 and Fiscal 2013.

    FY 2012 Foundation Budget: $41,361,536
    FY 2013 Foundation Budget: $43,488,849
    Difference: $2,127,313

    Fiscal 2012 Minimum Local Contribution: $34,480,956
    Fiscal 2013 Minimum Local Contribution: $35,379,353
    Difference: $898,397

    Because of our enrollment growth, and the growth in other factors (such as ELL students), we are past the point where our local revenues will support this growth. The result is that Arlington received $1,228,916 in additional Chapter 70 aid because our growth outpaced local revenues by that amount. Our growth puts us in a position where any additional growth in foundation (such as converting more than 300 kindergarten students from 0.5 to 1.0) will generate additional aid. We are already well beyond the maximum increase in local contribution, so every dollar of increase will be paid out of Chapter 70 aid.

    Our growing enrollment is the prime reason why this works. This would not work in Sharon, which has a declining enrollment and significant growth in their local tax base.

    Here are the differences between Fiscal 2012 and Fiscal 2013 in Sharon.

    FY 2012 Foundation Budget: $29,804,845
    FY 2013 Foundation Budget: $30,203,332
    Difference: $398,487

    Fiscal 2012 Minimum Local Contribution: $23,242,013
    Fiscal 2013 Minimum Local Contribution: $24,076,220
    Difference: $834,207

    Because the growth in the town’s Minimum Local Contribution is $635,720 greater than the Foundation Budget, the taxpayers of Sharon would have to pick up $635,720 before the state would contribute a dime toward the increase in foundation that would be generated by eliminating kindergarten fees.

    So, to make this work, we needed to be in a year in which our growth exceeds the growth of local revenues, and Chapter 70 needs to be fully funded. All things came together this year, and that’s why we are able to eliminate kindergarten fees and have the state pick up the difference.

  2. Will the schools continue to offer half-day K as an option for those who want it? What about the issue of creating a dedicated half-day class so that half-day kids aren’t stigmatized by having to leave when their peers are staying?

  3. Paul, this is great news!
    My recollection is that when we initiated FDK , the fee was $500. I think at one point it may have even been lower – perhaps $300.
    Our hope was to reduce it and then eliminate it. Unfortunately, we were not able to fully recover from the recession (02-03) and Romney’s 20% cut in funding and thus we kept increasing the fee.
    Question: If enrollment decreases do we loose money? How stable is the rise? bg

    1. Barbara:

      I know how hard you worked to start a full-day program. You fought for the debt exclusions that brought us elementary schools with the facilities for a full-day program.

      This state aid adjustment becomes a permanent part of our base, and barring any legislative changes to the formula, the money will a stable part of future years allocations.

  4. Hi Paul,

    You mention that all things came together this year. If you ran the same analysis for last year or the year before (“What if we had eliminated the fees in 2011-2012? 2010-2011?”) would the State still have picked up the tab in those years?

    Brendan

    1. It’s hard to say. In theory, this might have worked a couple of years ago, but the Chapter 70 formula was not fully funded. Stimulus money was used to fill the gap so districts didn’t lose funding. Would the state have used stimulus money to fund a new program? Given the circumstances, probably not.

  5. Hi Paul:

    This is terrific news, certainly for those of us with new kindergartners. How will the refunds be processed? In the manner they were paid, or will the city issue checks to everyone? And is there a time frame for this?

    Thanks,
    David

    1. The school department will immediately being the process of refunding kindergarten fees. Given the amount of work required to do this processing, and the fiscal controls on town disbursements, the superintendent has cautioned that it may take some time for people to receive this money.

  6. Just a question, but would the same situation apply to other types of user fees the school system charges? For example, if we eliminated user fees for athletics, would the state have to pick up the difference?

  7. Nathan: The answer is no. The reason why the state is funding the kindergarten fee is that the elimination of the fee has a direct impact on the foundation enrollment and the foundation budget. Eliminating other fees have no impact on the state funding formula.

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