You asked for an explanation of how the Education Cost Sharing (ECS) minimum budget requirement works and how it would apply in FY 10 and FY 11 based on currently proposed state budget plans for ECS.

SUMMARY

There are three requirements that currently apply to towns receiving ECS grants. The first is that they must spend their entire ECS grant for education. The second is that they cannot use an increase in their ECS grant in any year to supplant local funding for education (the nonsupplant requirement). The third is that they must budget at least the same amount for education that they budgeted in the previous year plus a percentage of their increased ECS grant (the minimum budget requirement or MBR).

The first of the three requirements applies in all years, regardless of the amount of a town's ECS grant. The latter two, the nonsupplant requirement and the MBR, apply only when a town receives an ECS grant increase over its grant for the prior year. The General Assembly has not yet enacted a state budget for FY 10 and FY 11. Neither the governor's budget proposal nor the Appropriations Committee's approved budget calls for an increase in ECS grants for FY 10 or FY 11. If a town receives the same ECS grant in FYs 10 and 11 as it received in FY 09, under current law, it is free to reduce its local budget for education for those years, but not below the amount of its ECS grant.

ECS MINIMUM BUDGET REQUIREMENT

State law requires towns to spend 100% of their ECS aid for educational purposes and to spend the funds only on the authority of the town's local or regional board of education. In addition, starting with FY 1999, towns are barred from using increases in ECS funding to supplant local education funding (CGS § 10-262i(c)).

In 2005, the General Assembly made the prohibition against supplanting local education funding more explicit by enacting a minimum budget requirement (MBR). The MBR required the budgeted education appropriation of any town that receives an increase in ECS funding over the amount it received in the previous year be at least equal to its appropriation for education in the previous year plus 100% of the ECS increase (PA 05-245).

In 2007, because of the substantial increase in ECS grants appropriated for FY 08 and FY 09, the General Assembly modified the MBR for those fiscal years. Instead of having to spend 100% of their ECS increases for education, towns were permitted to spend some the FY 08 and FY 09 increases for non-educational purposes (PA 07-3, June Special Session).

Under the 2007 act, for FY 08 and 09, the MBR was determined as follows.

● Each town's education spending had to be at least its budgeted appropriation for education for the prior year plus from 15% to 65% of its ECS grant increase.

● The exact MBR percentage of its ECS grant increase each town had to spend for education is determined by an average of the differences between the town and the highest-ranked town in three categories: (1) current program expenditures per student, (2) per capita wealth (equalized net grand list adjusted for income), and (3) percentage of students who score below proficiency on state mastery tests.

● The bigger the average of the differences, the higher a town's MBR percentage (i.e., the closer to 65%).

● Any town whose school district was in the third year or more of failing, as a district, to make adequate yearly progress (AYP) in math or reading, had to add 20 percentage points to its MBR for education (i.e., a minimum of 35% and a maximum of 85%).

In 2008, the legislature modified the MBR to require towns to devote a minimum of 50% to 80% of any ECS increase to education for FY 10 and each fiscal year thereafter. For FY 10 only, towns with school districts in the third year or more of failing to make AYP in math or reading must spend 80% to 100% of their ECS grant increase on education (PA 08-170).

2009 PROPOSALS

Minimum Budget Requirement

Starting with FY 10, sHB 6688, An Act Concerning Education Grants, (File 899) favorably reported by the Education and Appropriations committees, restores the pre-FY 08 requirement that a town spend no less than the amount of its budgeted appropriation for education for the prior year plus 100% of any ECS increase it receives. The bill repeals the 2008 MBR changes that are scheduled to take effect July 1, 2009. But if sHB 6688 becomes law, its MBR if a town receives an increased ECS grant, it would still not apply unless a town receives an increased ECS grant over its FY 09 amount. Neither the governor's nor the Appropriations Committee's budget contemplates any ECS grant increases for the next biennium.

20% ECS Holdback for Districts In Need of Improvement

Under current law, if a district is in the third year or more of failing to make AYP in math or reading, 20% of any ECS grant increase the town receives for the year must be held back for the education commissioner to spend on the district's behalf. As with the MBR, under current law, this hold-back requirement does not apply if there is no ECS grant increase.

However, sHB 6688 proposes to change the law to set the hold-back amount at the greater of (1) 20% of the district's ECS grant increase or (2) the same dollar amount that was held back in the previous year. If enacted, this change would prohibit towns with school districts needing improvement from redirecting the hold-back amounts to non-educational purposes.

JL:ak