OFFICE OF FISCAL ANALYSIS
Legislative Office Building, Room 5200
Hartford, CT 06106 (860) 240-0200
http://www.cga.ct.gov/ofa
sHB-5003
AN ACT CONCERNING EDUCATION FUNDING IN
CONNECTICUT.
Primary Analyst: DD 4/12/23
Contributing Analyst(s): JS
OFA Fiscal Note
State Impact:
Agency Affected Fund-Effect FY 24 $ FY 25 $
Education, Dept. GF - Cost 3.2 million 357.5
million
Legislative Mgmt. GF - Cost 80,214 80,214
State Comptroller - Fringe
Benefits
1
GF - Cost 34,347 34,347
Note: GF=General Fund
Municipal Impact:
Municipalities Effect FY 24 $ FY 25 $
Various Municipalities Revenue
Gain
None See Below
Various Municipalities Savings None See Below
Explanation
The bill, which overhauls funding for six major state education grants
or programs, is anticipated to result in substantial costs beginning in FY
25. The bill's cost to the State Department of Education is estimated to
be $3.2 million in FY 24 and $357.5 million in FY 25, when the overhaul
takes effect. An overview of the FY 25 General Fund cost impacts by
program is provided in the table below. The bill also results in savings
to districts that pay tuition to vocational agriculture and certain magnet
school operators, as tuition is largely eliminated.
1
The fringe benefit costs for most state employees are budgeted centrally in accounts
administered by the Comptroller. The estimated active employee fringe benefit cost
associated with most personnel changes is 42.82% of payroll in FY 24. 2023HB-05003-R000575-FN.DOCX Page 2 of 8
The bill additionally provides for annual, inflation-based grant
increases beginning in FY 26 to: (1) state charter schools, and (2) magnets
operated by regional educational service centers (RESCs) and Goodwin
University Educational Services.
2
Lastly, the bill makes changes to the Alliance District program that
are described below but generally have no fiscal impact.
Estimated Impacts to the General Fund
in FY 25, HB 5003
Program
FY 25
(In Millions)
ECS 163.4
State Charter Schools 22.3
RESC Magnets 95.7
BOE Magnets 31.6
Open Choice 27.2
Vo Ag 17.3
TOTAL 357.5
Notes:
1. Estimates use FY 23 data provided in February 2023
except March 2023 for ECS. The BOE magnets, Open
Choice, and Vo Ag estimates use the ECS student data
for sending towns from the February 2023 version
of the FY 24 ECS calculations.
2. Estimates include the impact of magnet seat
increases (for RESC and BOE magnets, and Open
Choice) as anticipated by the January 2022 Sheff
settlement.
Impact to school operators and towns. The bill has a net positive
impact to all school operators of the affected programs in FY 25, and a
net positive impact to all towns.
3
Savings are experienced by towns that
send many students to Vo Ag programs or to those magnet schools
which currently charge tuition. The extent of the bill's positive impacts
to school operators varies by program, as described below in the table
2
The magnet schools run by RESCs and Goodwin University Educational Services are
referred to as "RESC magnets" in this fiscal note, for simplicity.
3
Three towns have a net impact of zero but are likely to benefit from the Vo Ag portion
of the bill, as they are members of regional school districts that have Vo Ag programs. 2023HB-05003-R000575-FN.DOCX Page 3 of 8
and text.
Estimated Impacts to Program Operators
(Grant Recipients) in FY 25
1
Program
FY 25 Est.
Positive Net
Impact
(In Millions)
Number of
Operators With
Positive Net
Impact From
Component of Bill,
in FY 25
2
ECS 163.4 95 of 169
State charter schools 22.3 All 20
RESC Magnets 25.7 5 of 6
BOE Magnets 27.8 All 11
Open Choice 27.2 All 47
Vo Ag
3 4.9 All 20
1 The table includes the impacts of both the change in the state grant and
any tuition impacts for operators. (A few BOE magnet and Vo Ag
operators currently pay tuition to other operators in the same program.)
2 The operators without a positive impact are projected to have no net
impact from this component of the bill.
3 Increases to program operators may exceed these estimates by amounts
that cannot be determined, if the bill's lifting of the Vo Ag out-of-district
enrollment cap results in more such students.
Nonpartisan staff cost. The bill results in an additional cost to the
General Fund of approximately $114,531 ($80,214 in salary and $34,317
in fringe benefits) annually beginning in FY 24 associated with hiring
one nonpartisan analyst within the Office of Legislative Management.
This will maintain the nonpartisan staff's ability to model, upon request,
potential changes to the programs affected by the bill. The bill's new
grant structures substantially increase the amount of time needed to
model any changes to programs affected by the bill. For example, due
to the bill's new grant structures, every request affecting certain ECS
components must also consider the impacts to several other grants. This
work will be complex and cannot be done within available resources.
Impact by Program. The bill's impact on each program is discussed
in further detail below. 2023HB-05003-R000575-FN.DOCX Page 4 of 8
ECS. The bill continues the phase-in and phase-out schedule for FY
24 and then fully funds the underfunded towns beginning in FY 25 at
an estimated cost of $163.4 million (seven percent) above current law.
These towns receive no further ECS increases after FY 25.
4,5
The
overfunded towns continue the phase-out to full funding in FY 30, as in
current law. The bill has no impact on ECS grants in FY 28 (when full
funding for underfunded towns is reached under current law) and
beyond.
State charter schools. The bill results in: (1) in FY 24, a cost of
approximately $3.2 million to provide a small additional phase-in to the
weighted student formula in place for FY 23, and (2) in FY 25, an
estimated cost of $22.3 million (a 17 percent increase) above FY 23 to
fully fund the formula. In FY 26 and beyond, annual inflation-based
growth is projected to increase costs by approximately $6.4 million to
$6.9 million (3.8 to 4.4 percent) every year.
RESC magnets. The bill is projected to increase state funding to RESC
magnets by approximately $95.7 million (67 percent) in FY 25, when the
new funding system is adopted.
6
A majority of this funding replaces
town tuition, which the bill largely eliminates. The new weighted
student funding structure for RESC magnets is the same as for state
charter school students, except that Sheff region operators receive an
additional weight.
The bill's FY 25 net revenue increase to the RESCs is approximately
$25.7 million (12 percent); most of the increase in state funding replaces
lost tuition revenue of nearly $74.3 million (approximately the
4
Under current law, the underfunded towns would continue to receive smaller annual
increases and in FY 28, reach full funding (the same full funding level that the bill
would provide in FY 25).
5
Unless increases are required by changes in a town's student or town data
components of the ECS formula.
6
The new funding system for RESC magnets is based on applying the ECS formula's
student components to the RESCs' magnet enrollments, with an additional weight
(increase) for the Sheff region operators. The additional weight begins at 30 percent in
FY 25 and declines by two percentage points per year until FY 30, when the weight is
20 percent, where it remains thereafter. 2023HB-05003-R000575-FN.DOCX Page 5 of 8
aggregative savings to sending towns).
7
The bill benefits five of six
RESC magnet operators for all fiscal years beginning in FY 25; the sixth
(held harmless from revenue losses under the bill) is begins to benefit in
FY 27, due to the inflation-based increases provided to the RESC
magnets.
In FY 26 through FY 30, costs are anticipated to rise annually by 2.7
to 7.4 percent, with the largest percentage increases in FY 26 and FY 27,
due to the net impact of several factors: (1) inflation-based increases
provided by the bill; (2) the Sheff region additional weight, which
changes annually until FY 30; and (3) anticipated student increases to
the Sheff region operators as required to meet the terms of the 2022 Sheff
settlement. The bill allows RESCs to charge tuition to sending towns if
the inflation-based increase is not funded, which may result in
aggregate board of education costs of approximately $10 million in a
year.
BOE magnets. The bill is estimated to increase state funding to BOE
interdistrict magnet operators by $31.6 million (25 percent) in FY 25,
when a new funding system is adopted. Each of the 11 BOE magnet
operators will experience a net revenue increase beginning in FY 25,
gaining approximately $27.8 million in additional revenues and tuition
savings collectively.
8
The bill's tuition elimination results in a savings
of approximately $4 million aggregately to sending towns (including
BOE magnet operators). In FY 26 through FY 32, as Sheff settlement seat
increases for certain BOE magnets are phased in, state grant costs for
BOE magnets under the bill will continue to be approximately $31.8
7
This figure includes: (1) approximately $4.3 million in tuition paid by the Department
of Education to partially defray town tuition costs for K-12 students at RESC magnets
sent by East Hartford and Manchester, and (2) expected additional RESC magnet
tuition costs to towns in FY 25 (under current law) of approximately $4.2 million
attributable to RESC magnet seat increases planned to meet demand under the 2022
Sheff settlement.
8
Eight of the 11 BOE magnet operators pay tuition for their students who attend
magnets operated by other boards of education. Five BOE magnet operators charge
tuition, including Hartford (which may only charge tuition for students attending one
school, Great Path). 2023HB-05003-R000575-FN.DOCX Page 6 of 8
million to $32.4 million higher annually than under current law.
Open Choice. The bill is anticipated to increase state funding to
Open Choice receiving districts by approximately $27.2 million (127
percent) in FY 25, when the new funding system is adopted. Each of the
participating districts (currently 47) will receive an increase. The
increases are largest on a per-student basis for those receiving districts
that are: (1) outside the Sheff region, as Sheff region schools receive a
higher level of Open Choice funding under current law (but still less
than the lowest per-student grant under the bill); and (2) receiving fewer
students as a share of the district's total enrollment, as such schools have
the lowest per-student grant rate under current law. In FY 26 through
FY 29, as Sheff settlement seat increases for Open Choice students from
Hartford continue to be phased in, state grant costs under the bill will
be approximately $27.6 million to $28.8 million higher annually than
under current law.
Vo Ag. The bill is anticipated to result in additional state costs for Vo
Ag of nearly $17.3 million in FY 25, when a new funding system is
adopted. Each of the 20 Vo Ag operators is anticipated to experience a
net increase, totaling approximately $4.9 million (16 percent), in
additional revenues and tuition savings. The bill's tuition elimination
results in a savings of approximately $13.1 million aggregately to
sending towns (including Vo Ag operators).
The bill's lifting of the cap on out-of-district Vo Ag enrollment,
beginning in FY 25, may produce a higher number of such students. If
that effect occurs: (1) Vo Ag operators may experience higher revenue
gains under the bill; and (2) state grant costs will rise. The level of
impact depends on any growth in out-of-district and in-district Vo Ag
students, and the student need levels of the out-of-district students'
towns.
Numerous factors. The bill's fiscal impact in the biennium and the
out years is subject to changes in many factors, including: (1) enrollment,
including enrollment changes related to the Sheff settlement; (2) student
characteristics; (3) the number of students sent from each town to any of 2023HB-05003-R000575-FN.DOCX Page 7 of 8
the affected programs; (4) new or closed schools or programs (beyond
those within the January 2022 Sheff settlement); (5) tuition levels; and
(6) inflation.
The bill's grants to BOE magnets, Open Choice, and Vo Ag operators
depend in large part on the student characteristics of the towns sending
out-of-district students to the programs, which vary from year to year.
While in a year the average change across towns is typically small, the
change to the grant amount associated with students from any one town
can be large (either lower or higher). Any such changes will result in
different grant totals than projected above (impacting the anticipated
General Fund appropriations) and affect grants to the towns or districts
operating the programs. In FY 24, used for this estimate, the grant
amounts for these students ranged from $11,554 (students sent from
New Canaan) to $15,872 (students sent from New London).
Changes to Alliance District Program
The bill replaces the alliance district designations, beginning in FY 25,
with: (1) educational reform districts, which are districts that have the
20 lowest accountability index scores, and (2) legacy alliance districts,
which are districts that were designated as alliance districts between FY
13 and FY 24.
The bill's provisions regarding these designations result in 16 current
alliance districts no longer being subject to the alliance district
constraints regarding a portion of ECS funding, beginning in FY 25.
There are no impacts on the overall level of funding to current alliance
districts from ECS or other grant programs, as the ECS and PILOT
protections for alliance districts are extended to the new designations.
The Out Years
The bill's projected annual costs to the General Fund (compared to
current law) in FY 26 through FY 30 range from $322.1 million (FY 26)
to $249.1 million (FY 28). Costs relative to current law will decline in FY
26 through FY 28, and then rise annually beyond FY 30 due to the 2023HB-05003-R000575-FN.DOCX Page 8 of 8
inflation provision for state charter schools and RESC magnets. As
discussed above, the fiscal impact of the bill depends on many factors
and will vary, possibly markedly, from this estimate, and year to year.