Areas for Improvement

While the latest Education Cost Sharing (ECS) formula, passed as part of Connecticut’s biennial budget for fiscal years 2018 and 2019, takes several steps in the right direction toward equitable and fair funding, there are several areas where improvement is needed.

More than 10 Different Funding Formulas

The latest ECS formula only applies to local public schools and maintains Connecticut’s complex and disjointed system of more than 10 different education funding formulas. All other types of Connecticut public schools (magnet schools, local and state charter schools, the Connecticut Technical Education and Career System, agriscience programs, and the Open Choice program) will continue to be funded by different formulas/statutory amounts.

While the ECS formula takes into student and community needs into account and provides additional resources for students who are low-income or English Learners, this is not the case for Connecticut’s other school funding formulas. These formulas continue to not be based on student and community needs, and are instead largely arbitrary.

Counting Low-income Students

Under the latest ECS formula, low-income students are identified — for purposes of allocating additional funding through a low-income student weight and a concentrated poverty weight — based on whether they are eligible for the free and reduced price meals program of the U.S. Department of Agriculture, known in Connecticut as free and reduced price lunch (FRPL).

Unfortunately, the use of FRPL-eligibility as a proxy for identifying low-income students has become functionally unusable for the purposes of a school finance system. The need for a more accurate, verifiable proxy for low-income students is growing quickly as a result of the Community Eligibility Provision (CEP) of the federal Healthy, Hunger Free Kids Act of 2010, which allows all students to receive no-cost meals if their school or district qualifies and participates. To qualify for CEP, at least 40 percent of a school or district’s enrollment must be identified as eligible for FRPL via direct certification.

Since its introduction in 2010, CEP participation rates have increased annually and are likely to continue increasing as more and more eligible schools and districts adopt the program. While CEP is a valuable nutrition program for students, families, and school districts, it makes FRPL functionally unusable as a proxy for low-income students.

CEP causes FRPL rates in participating schools and districts to be inaccurate because all students receive no-cost meals through CEP, regardless of family income. Additionally, because CEP eliminates the need for families to submit applications to be eligible to receive free and reduced price meals, it will no longer provide individual, student-level data for all eligible students — further resulting in imprecise FRPL identification rates.

For the 2018-19 school year, 25 local public school districts and an estimated 172,000 Connecticut students are participating or eligible to participate in CEP. With nearly one-third of Connecticut’s students receiving, or eligible to receive, no-cost meals through CEP, and participation in the program expected to continue increasing, the use of FRPL as a proxy for low-income students is not a useful measure. As a result, an alternative proxy for measuring low-income students will need to be identified in order to effectively and accurately provide critical resources to higher-need students under the ECS formula.

For more information about this issue, check out our June 2016 report, Achieving a Better Proxy for Low-income Students in Connecticut.

Funding Special Education

The latest ECS formula does not disentangle special education funding from the ECS grant, and instead leaves state aid for special education “incorporated” into the foundation amount. Approximately 22% of the foundation amount is attributable to special education.

Continuing to incorporate special education funding into the foundation, while also reducing total ECS spending (compared to fiscal year 2017 levels) in fiscal years 2018 and 2019, puts Connecticut at continued risk of violating its federal maintenance of support (MOS) requirement, which is the primary fiscal measure by which states are judged to be eligible for federal funding under the Individuals with Disabilities Education Act (IDEA). To be eligible for federal IDEA funding, a state cannot provide less state financial support for special education than it did in the preceding fiscal year. If a state is found to have failed to maintain support, the U.S. Secretary of Education may reduce federal funds to that state.

By leaving special education funding incorporated into the ECS formula’s foundation, and then reducing ECS funding, Connecticut runs a serious risk of violating its MOS requirement, which could result in the U.S. Department of Education reducing federal IDEA funding to the State. Under Connecticut’s biennial budget for fiscal years 2018 and 2019, the combined special education funding through ECS and the Excess Cost grant is projected to fall short of the level required to fulfill the State’s MOS requirement.

Sticking to the Phase-in Plan

The latest ECS formula would be phased-in over 10 years, and over that period, would increase overall ECS funding by an estimated $345 million — over fiscal year 2017 funding levels with rescissions — to reach full funding.

Potential declining revenues and continued growth of fixed costs, including unfunded pension and debt service obligations, are expected to stress the State’s finances for the near future, potentially causing large deficits. As Connecticut faces significant fiscal challenges ahead, the State could resort to not fully funding the formula or abandon it altogether like it has in the past.

Connecticut stopped using the previous ECS formula because the State did not have enough money to fund the formula’s phase-in plan. With fiscal and economic obstacles, and a longer 10-year phase-in schedule, sticking to the latest formula will be a continual challenge for the General Assembly.