Fiscal Capacity Measurement and Equity in Local Contributions to Schools: The Effects of Education Finance Reform in Massachusetts

In Massachusetts, state aid to public schools fills the gap between a district's foundation budget and its required local contribution. Historic inequities in required local contributions and the resulting inequities in state aid across districts led to a call for education finance reform. Since 2007, the state has put in place a number of measures intended to improve fairness in regard to local contributions. Recent reforms include using both local income and property values to set target local contributions, capping target contributions at 82.5% of foundation and providing funding mechanisms to bring required district contributions closer to these targets. The goal of this article is to examine the effects of these new policies. Results indicate that the impact of the decision to include income in measuring fiscal capacity has been limited by the imposition of the cap on contributions. Further analysis reveals that the reforms, in general, have been more successful in increasing fairness in districts that previously received too little state aid than in requiring more of perennially under-contributing districts. It is also shown that the ratio of required to target contributions across districts shows a positive relationship with community wealth. Finally, an examination of the 2010 policy that reclassified voluntary excess contributions as required contributions in some districts indicates that smaller communities as well as those with more college graduates were more likely to have seen a reduction in state aid as a consequence of this policy.