School Committee - Special Meeting

for a special meeting of the Salem School Committee February 9th, 2026. Meeting taking place at 5:30 p.m. in school committee chambers, 29 Highland Avenue. The purposes of a financial overview for FY27. I will turn it over to our finance directors. Yes. And I think I will turn it over directly to you, James. I I don't know if you know everyone, so I wonder if it would be useful for us to do a quick once around. Um I will start. I am Elizabeth Paulie. I'm the assistant superintendent for finance and operations. Would you like to go next? Uh yes, we've met a few times. James Z, superintendent of schools.

Hi Kay Carboni, deputy superintendent, executive assistant chair. James Link, finance director. Just remember to speak up if you Oh, right. You get to you get to model. Don, mayor, chair, school committee. Camila Salazar, director of financial operations. Beth Cornell, school committee. AJ Hoffman, school committee. Yay, school committee. Meat, school committee.

Great. So tonight we are going to walk through the chapter 7 numbers and some initial FY27 budget assumptions and projections. We'll start with chapter 70. So the governor's budget recommendation came out on January 28th and we'll start with a little bit of a background on how the chapter 70 numbers are calculated. I know he's going to here and it's not hooked up to SAA. Oh, got it. Anybody have a presentation?

So, there are three steps in determining each district's chapter 78. The first is to define and calculate the foundation budget for each district. The second is then to determine the local contribution requirement. And then based on that, the third step is to calculate the state aid numbers. And in FY27, the target calculations assume that a local contribution should cover 69.52% of the statewide foundation budget with state a covering the remaining 30.48% which is the target date share and there is also a maximum local share of 82.5% thus ensuring that all communities will get some minimum amount of state funding.

Sorry Jer James, did you say that ours is 69% as Salem? The target is 69.52%. Thank you for the local chair.

So when we talk about chapter 70, a big part of the conversation in the past five to six years has been around the student opportunity act which was passed in 2019 and phased in over the last five or so years. It established new higher foundation budget rates in five specific areas and it also accounted for inflation um to be factored into the increases annually based on a formula. The big part to focus on here is that the S SOA did not make any changes uh to the part of the formula that determines a municip municipal municipality's ability to pay. So for inflation um a new employee benefits inflation rate is applied to employee benefits and fixed charge fixed charges categories and in FY27 that increase is 8.29% 29% and then for all other categories an inflation rate of 2.76% is applied for the student opportunity act low income and special education enrollment are big factors for FY27 the rates have been increased to close the final 16th of the gap between the rates in FY21 which was the base year used in calculations and the final target rates. So for uh special education enrollment that increases up to 5% and for vac vocational students that and that goes up to 4%. The required local contribution remains based on a wealth model that dates back to FY 2007. So it predates the student opportunity act. And for municipalities with required local contributions that are above their targets, the effort reduction component of the formula in

chapter 70 closes 100% of the gap between the preliminary contribution and their target contribution. However, for municipalities with preliminary required contributions significantly below their targets, the formula continues to apply an additional increment, and we'll talk about this when we get to later slides, to the required contribution to close a portion of their gap each and every year. And because the S so s S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S S O Sa does not account for a municipality's ability to meet targets, this essentially allows wealthy communities to contribute less and receive more in state funding um while putting an additional penalty on communities that are below their target set by the formula. So for FY26, the year we are currently in, Salem is receiving foundation aid. There was a $1.4 $4 million increase over FY25, which was 4.7% and that brought the total chapter 7 a number for FY26 to a little over $31 million. The big drivers for this year were a 5.45% increase in the foundation budget. Um, however, enrollment decreased by 12 students. There was a decrease in English language learners and low-inccome student categories. However, that was largely offset by rate increases under the S SOA and increase in vocational students um did not add increment under the SOA but is part of the base foundation calculation. So, we'll see the increase to chapter 70 has left the cost and in order to balance the school budget number 26, Salem public schools eliminated over 55 positions. Just before we leave this slide, I often when we talk about vocational education, which we offer at the high school as a way of offering comprehensive education, multiple paths to post-secary success, we often talk about it in the context of it brings money into the district. And so this is part of not entirely, but this is part of where that comes in. So it is a weight, as James mentioned, it's

one of the weights that is considered in the funding formula. how many kids we have in vocational programming. So, I just want to note that it's not that we get a check for every kid that enrolls in a vocational program, but it is, you know, looked at when they're looking at our entire demographic uh profile. Thanks, James.

So, now looking forward to FY27, Salem will receive foundation aid. Again, there is an increase in the governor's budget recommendation of.8 uh million or 5.9% um over FY26, bringing total chapter 7 aid up to 32.89 million. And this was largely driven by a 6.32% increase in the foundation budget and an enrollment increase of 1.33% or 57 students. So, the foundation budget is increasing, but and that's pushing up chapter 78, but is also increasing local contribution requirements. And just a note that these are all based on the governance budget recommendation that came out on January 28th. As the budget moves to the House and the Senate, these numbers are subject to change and could have different amounts by the time the GAA is passed in late June, early July. Can I just make an addition for um for our new members also which is that those student enrollment numbers are set in October, right? So we get a lot of students after October. So it's like that's another sort of pain in the neck about the formula is that it doesn't actually represent the students that we have. I believe it's all based on October 1st. So these next few slides are all data provided by DESIE. Um so in order to receive foundation aid um each year if we look at line number four

which actually we can't see the line numbers. So if you can just describe the lines that would be helpful. Oh yes we can. Sorry. Strike that from the record. Thank you for that reaction.

I didn't see I feel better. Sorry. So line number four is the foundation aid that is calculated, which is the $32.89 million figure we just talked about. In order to receive foundation aid and not just the minimum aid, that number needs to be higher than line one, which was the chapter 70 um number for FY26. Moving on to the next slide. This slide addresses a community's ability to pay on the left side of the calculation. And this is where the target local contribution is determined. On the right side, it shows the impact of the ability to pay determination on the city's aid allocation. And it also shows in line number 23 the added increment amount, which we talked about a little bit and we're going to continue to talk about as we move further into the presentation. And this essentially reduces the aid the city receives in order to push the community to utilize more of local resources. Um this increment issue is cumulative and it pushes the required local contribution up every year and it's never captured. Um it is then compared to prior years uh chapter 70 numbers and that determines if the city gets foundation aid or minimum aid. Um, one other thing to note here in line 26, this $53.7 million figure, that also includes Essex Tech. And that's why line 26 isn't the same number as the numbers um on the summary slide. Let me just let that on this next slide. Uh, so this is the enrollment data used to calculate FY27 foundation budget and chapter 78. Uh so what you'll see here is um enrollment is growing based on the July uh the October 1 snapshot. Um and in terms of sort of context for the district, enrollment it's growing.

Education educator retention is up. Uh chronic absenteeism is down, graduation rates are up. Um and all this is to say that the state funding formula is not necessarily serving as um an enabler of of all the success but in some cases can be a barrier to it.

And can we just pause for a minute? The increment I think is very confusing. So, um, James, correct me if I have this wrong, but if you look at what is labeled as slide nine, that has the bar chart on the bottom. The required district contribution, which is on the right hand side where it says comparison to FY26, it's 1 2 3, it's the third row down. It's $48 million. The chapter 70 was 31. and they the state estimates based on the demographics of our students that our budget should be 79288062 and we fall below that because our budget in FI26 is $78 million. So we're below effort and so this increment is applied to us and then it just gets baked in year over year. So, if you've heard um in the past when we've talked about chapter 7, you've heard me say, you've heard the superintendent say, you've heard Anna Freriedman, and now you hear James saying like this just becomes part of the calculation. And we've talked about that as something that really hurts Salem. And we were talking this morning that there are actually 211 communities in Massachusetts that fall below what the state thinks they can pay. So, that came out of the chapter 70 hearings that the mayor gave testimony at, the superintendent gave testimony at that

this is a problem for a lot of people and I'm sorry to bring us back there, but I find the increment piece to be confusing. So, I just wanted to pause over that in case others were confused. Thanks. And and that's a great point. So that that 224 districts that represents 64% that are below effort and for context in FY19 34 districts were below below effort which was only 10%. So 34 to 200 in a span of 6 years. Yeah. Thanks.

All right. So on slide 12, the foundation budget enrollment in two categories. While overall enrollment based on the October 1st snapshot increased by 57, um the enrollment in five out of these six key categories based on the S SOA actually were either decreased or flat in the case of special education tuition note. So for municipal contribution added increment and going back to this added increment piece um it accelerates the required local contribution and it's visible in this chart here. So now that Salem is receiving foundation aid the below target share added increment is having a particularly negative impact. In other words, if not for this penalty of 1,8,442 Sale would be receiving an additional $1,8442. Um, and just looking back at historical context from FY20 to now, that's more than tripled. And it's also it's cumulative. So this is never recaptured and it's an ongoing issue every year built into the calculations.

This is a shocking chart. This next slide, uh, CLM chapter 70 historical view shows that increment again over the past 8 years, it also shows the chapter 70 percentage of foundation. And so what really drives this home is as that increment is increasing, the chapter 70% of foundation is decreasing. So for each of the last six years while the added increment has grown from 358,000 to over a million during that same time the chapter 70% accreditation has decreased from over 43% down to 39%. So the ultimate impact of all this is increased pressure on local resources. So Salem's target aid share the chapter 70 formula has driven Salem's contribution up and the state's contribution down. And in fact Salem experienced a 10% decline in target age share from the state in just the three years following the implementation of the student opportunity act. And since 2019, the growth in Salem's target local contribution is 73% and the growth in required local contribution is 57%. For context, the average local contribution among gateway cities is 38.5%. And Salem's local contribution is almost double that. Now, the caveat being Sale Salem is smaller than most other gateway cities. However, the city's most recent MCAT scores, Salem public schools achieved more of their accountability targets than any other gateway city district. A lot of what we talked about with

regard to chapter 70 and the student opportunity act and the issues with the formula aren't new. In fact, Bessie commissioned a study in 2020 that alluded to what we are now seeing in present day. Um, as foundation budgets increased statewide under S SOA, the requirements for the statewide target contributions, coupled with the cap on local contribution requirements, have financially punished communities like Salem. More and more districts find themselves falling victim to the very deficiencies that Essie identified in their 2020 study. And going back to our point, in FY19, 34 districts were below effort. Today, that is 224 districts. That's a change from 10% up to 64%. And I'm sorry I stole your thunder with the increment, but uh do you want to pause before we go on to the city's budget to just see if there are any questions about chapter 70, which is complicated and confusing? So, we kind of knew this was going to happen again this year, right? Um, but is next year the year that we're expecting new legislation to correct?

So the the state the administration is doing their listening tour. They're creating legislation that then has to go through the legislative process. Mhm. I think FY28 would be optimistic but not impossible for them to have some kind of correction because the local on the calculation of the local contribution like that's the deficiency in the act but you know it's the legislative process. How long did the SOA take like from adoption? So

yeah. So I mean I can I can I just I mean there there's two things happening. I mean the the the formula is broken but at the same time districts are getting hammered by um declines in enrollment. And if you even for us, well, we're kind of an anomaly because our enrollment is increasing, but we are it's increasing in the wrong ways because we're we're losing low-income students and we're losing um uh ML students and special education students. A lot of that has to do with federal immigration policies, right? And everything we and and families being forced well families not coming to us, which really hurts communities, really hurts uh I think it could ultimately really hurt Salem. It's really hurting Chelsea, Framingham, Everett right now. Um, but it does hurt us because we could we, you know, we were growing, especially right after the pandmic as more and more kids were coming. We were growing in the percentage of kids that were high needs. Now we're going in the other direction, which is not necessarily a good thing, which I would argue is not a good thing for us. So, I would also argue I think another piece that came up in the chapter 70 hearings that you referenced is the S SOA, the Student Opportunity Act included an inflation

increment, but inflation has been much higher than what was anticipated was anticipated. And I'm not sure that that was like a misstep by the legislature as much as like we're in uncharted waters. And so I think between the declining population statewide um and in Salem and the uh inflation, you know, increment being smaller than actual inflation. I think those are all sort of creating this perfect storm for many communities. most communities I would say based on those numbers to 24

and I don't know that we could even speculate on how they're going to think about trying to correct it because if you want to address the 82.5% cap that could potentially hurt some districts and the inflation cap could potentially open up the state to having to fund an un known level of inflation or consider it in their calculations. There's also other deficiencies in chapter 70 that don't reflect well in Salem like it doesn't include prek students. Um and we partial partial yeah and we working intentionally to kind of grow those programs and invest more in that and um yeah like the support for it that I think we ought to be.

We don't the um the chapter 70 formula doesn't uh doesn't cover our prek cost. So, we're actually subsidizing quite a bit of the prek costs unlike the rest of um K to2 like and that's something that needs to change that uh especially as districts are offering more and more prek seats. You get half a half like basically they count as half a child

even though they're here with us full full-time. That's a problem and that's a decision we made with the hope that that would change. It hasn't changed and and I don't think we want to eliminate our pre-k programs, but it does dig into what we pay for it through school choice dollars to keep it going, but we don't get full reimbursement for it. So hopefully that will change. Any other questions about the formula before we dig into Salem specific? Another question. So you said Essex Tech doesn't had like a separate number related to it. Is it not part of the formula at all? Like is it kind of on the side? I didn't quite understand that comment

or is that something we cover in the future which is um I think you're talking about on slide 10 two different totals. Yeah. Yeah. So correct me if I have this wrong. This is this includes the students that we send to Essex Tech. Um whereas our other required local contribution number which is on line 13 does not. Is that correct James? Yeah.

So these line 13 are kids who go to the Salem public schools. Line 26 is Salem kids including those who go to Essex Tech. So that additional number is that like an in-n-out number, right? That's the assessment we Okay,

this is essentially reflecting that the local contribution includes the assessment for the tech as well as payment for the for the appropriation for public schools. Any other question? All right. On to the FY27 budget. So before we talk about specifics, some high level principles for the city budget and our processes. The budget must balance. So revenues have to match expenditures. We forecast conservatively. So we hope for the best, but we plan for the worst. We match recurring revenue with recurring expenses and onetime revenue with onetime expenses. And the budget reflects the community needs priorities, challenges, and opportunity. The process starts in December each one year where guidance and an exercise is sent out to all departments that is then returned to the finance department in the end of January and throughout the month of February and into March. Department heads meet with the mayor and the finance director to review their budget requests and capital requests for the next fiscal year. By the beginning of May, that budget is filed with city council and then by the end of June, that budget is finalized prior to the start of the new fiscal year on July 1st. Um, so this process where we are right now is we started meeting with departments this week and continue to do that into mid-March and once we have all the department meetings um we'll start to get more clarity onto the city's overall budget picture.

The city faces a lot of the same challenges that the schools face. Energy costs, materials and supplies, cost increases. We talk a little about, you know, the inflationary factor in in chapter 70 at 2 point I think it was 76% for most categories, but I think we've all seen fixed costs increase at a much higher rate than that. um healthcare costs were anticipating between 11 and 12% increase over FY26 which in and of itself was about an 11% increase over FY25. Um other major challenges debt service that's something we'll have to be very mindful of um over the next couple months as we have conversations about the new high school and the new debt service that that would generate. Um and then some of the more school specific costs, school transportation, special education, tuition, um and other contractual payments, school expenses on the city budget. Um there are some costs related to the schools that are funded on the city side of the budget, mainly health insurance, um tuition costs, growth, i.e. Essex Tech, debt service, state assessments, nonMTRS pension assessment, Medicare and retirement buyouts. And all these figures are going to be coming into focus during the budget process over the next couple of months. Um, but from context for past years, some of these items have grown fairly substantially, including health insurance, SX tech costs, debt service, um, and other items. And on this next slide, so we talked a little bit about sort of the required local contribution and that added increment penalty. The problem with that

is what is being looked at in those chapter 70 calculations doesn't take into account a lot of the expenses that are on the city's budget for the schools that are not being captured in that process and in those formulas. So if you look at the required net school spending amount for FY26, it's budgeted at $79.288 million. If you look at what's in the school committee budget and what's being dedicated from additional city funds in FY26, the total spending related to the schools is 97.966 million. So in reality, the variance with the net school spending amount is $18.6 million above what is required. The problem is a lot of those costs are not being captured in the chapter 70 formula. And looking historically at the last couple years, the growth in chapter 78 in the school's budget for the last 5 years, the uh increase to S public schools has been 4.26% 26% on average, while the average increase to chapter 70 during that same time period has only been 3.8%. Meaning that as costs go up, more and more of the burden falls onto the city side of the budget with a cumulative variance over 5 years of being $9.5 million. And the final slide sort of touches upon a lot of things that we've already talked about, but just to sort of emphasize the areas that we're being cognizant of as we go through the budget process over the next couple months. Healthcare costs, which again is not an issue specific to the schools or to Salem. It's a statewide issue. um homeless student transportation, out of

district special education costs, um energy costs, impacts from federal policies, um cost increases for materials and equipment, um and going back to debt service, um especially with regards to the new high school, potential increased costs for borrowing due to potential interest rate fluctuation. And I would just add um the previous slide, slide 23, the average 5-year budget increase for SPS at 4.26%. That reflects the last two years a much higher than average increase um of 4.8% um in the last 2 years. Prior to that, I would have said, oh, it's usually about 3.5%. So the city has increased over the last two years um significantly uh it's it's appropriation uh for the schools and just I don't know if we talk about on the areas to monitor with the exception of healthc care costs because they don't appear on our budget although we are part of the city so they are cost of the city we talk about these things often so I don't know if folks have questions about any of these issues issue areas that we're monitoring But we will I will say and Camila you can correct me if I'm wrong. We have um our homeless the enrollment of our student population who is experiencing homelessness went way up in the last couple of years like almost doubled in the last 5 years and then has been declining this year. I spoke to Jodie Connelly, our homeless liaison about this in I want to say December and she said that part of the issue is our um declining population and fewer students moving in who fit that category. Right? We have closed the migrant shelter. So, we

aren't bringing in as many um families who are experiencing homelessness, but also our previously unhoused families are being housed. So, um, we haven't seen the same kind of pressure on our homeless transportation that you've heard from me in years past. Um, so that could be good news for a lot of reasons, including financial. um out of district special education costs have been steady but not also not experiencing the same kind of um upward spike that we have seen in the last few years. We're still gathering what the um tuition increases will be for the next year um for both the for the tuition but also the transportation. Um energy and utility costs are not something that is causing me to lay awake at night about how we're going to pay our bills this year. I don't know how else to say it. I think that is partly at least partly a reflection of the ESCO upgrades that we've been doing to the schools. We aren't seeing the kind of runaway costs that we have been seeing. Um we did also pretty dramatically increase our budget. Um so I wouldn't say that we've solved it and most certainly we haven't solved it at the high school. Yeah. Um but we did increase our budget pretty dramatically. Um, so we have been able so far, we're not all the way through winter.

Um, we have been able to um, manage that. Camila, would you add or edit anything I said? Um, no. I mean, for the for the utilities, I think these are like the the months that we usually spend more. So, we're just not laying awake at night, but we're still just closely ranking that and keeping track of it month. We haven't paid January. Yeah. And we haven't seen February, but so far we've been trending lower and we have more money in those lines.

Uh and then on the cost increases, everything is more expensive and we've seen that across the board in our custodial supplies, in our Chromebooks, um in just about everything in our subscriptions for curriculum costs are going up. So, did I forget anything, James? If you're forgetting it, then I'm done.

All right. So, I think that's what we have for you. Um, but part of why we like to do this is especially for new members, but really for anybody that's not immersed in this every day to sort of bring you back into this space so that as we get deeper into budget season and we're talking about the formula and what the city is doing for us, um, we just want to create space for a a learning conversation or a refresher and we have our expert, our Salem expert here. Um, so any questions? Can you explain that 18 number the variance with page

oh page 22 sorry like is that what the so that top number the required net school spending um that's the sum of the required local contribution and chapter 78. So that's what a district must spend to be in compliance. what we have down here, this total, this 97.966 million, that's the total of what we're actually spending on all school related costs in FY26. And so essentially, the city is spending $18.678 million more than what is being required. Okay.

The issue is that's not being reflected in a lot of what the chapter 7 formula is is calculating. Okay. And that 79288062 on slide 22 is also on slide 9 where DESIE has calculated what our foundation budget should be. So you can see that's what DESIE thinks it costs to educate the students that we have. So that's where that number came from.

Okay. Thank you. This isn't like helpful to us, but just so I'm clear, when we're talking about that 18 million number um as part of the city contribution not being included in the chapter 7 formula, this isn't like anomalous to us though. I mean, no, everybody's nobody's foundational budget is is considering healthcare costs and that sort of stuff. So like I I take your point, but that's the well that's baked into the into chapter 70 or it's it's purposely Go ahead. I'm asking.

No, I jumped in before you finished. So in other districts, in other communities, the healthcare costs are actually part of the school budget. Smaller districts. Uh I guess I wouldn't know enough to be able to categorize what kind of other districts. I also don't know why, and I'm not asking for them to be on our side. You can have it. No, I do not. Um, but I don't know why they're not in ours, but it is not uncommon, as I hear from my colleagues, my school business administrator colleagues, for them to have to be managing for them to have the opportunity to manage their health care costs. Do you know?

I don't know. I mean, it's one of those this is the way it's always been done. If it if it helped the district achieve the the target that the state is setting then I think it's worth exploring like if we can do that with the debt payments for school projects and with health insurance costs bottom line like it's all coming from the same thing which is taxpayers right so where it shows up in the budget if it's really just a I'll say a paperwork thing but if it's really just kind of how we show it it helps us avoid like the added increment or whatever challenges we're otherwise facing with this formula finance where things require

and the financial data and this is where Camila I need you to jump in the financial data that we share with Desi back from which they base all of these calculations come from our end of comes from our end of year report which um do you just want to describe what that is? Oh,

um I don't know the per like the the right way, but it's um basically we look at our actual spending versus um for grants and for anything on general fund and we um put them in different categories uh which then we generate um our next funding um and sorry I asked you and I'm stepping over you but we we never see the healthcare cost. So when we go into MUN when Camila who does this massive end of year report when we go into Munice and download everything we've that's been charged against our budget lines we never even see that and so we don't report that

to DESIE to your point there are other communities who are in that boat with us but I would not say that it is every other community I I I'm not sure I know does the budget document reflect grants the end of your report it doesn't chapter 70 the net school spending do we get credit for brand funds that we get in our endofear report but I don't think in our foundation budget calculations

so we tell them about all the federal and competitive grants that we apply for for ving accounts can I ask another question about tech um the so the local contribution includes Essex So does that change if we pull out of that agreement or is that just a regional thing? Does it is it inclusive of Essex Tech because of the agreement that we have? There's everybody who has access to it. Let me I'm trying to make sure I answer your question. It might not be clear. There's Okay. Well, we if we pull out of Essex Tech, we would have to pay for any students who remain.

Yeah. Right. and any assessments that are part of the um the the building that was built uh whatever you know whatever is left the debt cost. Yeah. But over time, you'd wean yourself off of that. And while the district doesn't see that, the dollars don't come to us. It goes to the city. And the city could choose to use those dollars. Well, we'd love to have them back here, but they could use them in other ways because we wouldn't be paying um to send kids there. Does it affect chapter 70? It it does. It'll it would change line 26 on that local contribution chart.

Which page does that change? uh page 10. So that 53.744 million mobile contribution includes the the communities. So basically the cost of educating every child whether we're going to s public schools or that extent. So it would reduce that. Okay. Correct.

But we pay less per student to go to Essex than the wealthier communities do. uh if you look at their annual um what is it called their annual report right they break it down by communities in Salem but I mean I don't like paying anything to them but there is um our our contribution is less than other communities because of our um you know because of our lack of wealth relative to those communities. Yep. Just to your question though, it would affect that $53 million number because those students would be counted, right? So, well, but they would some portion of them would be attending sound. That's right.

So, it would still be a contribution from Right. You mean students who currently go to Essex Tech? Well, like in a hypothetical Yes. Right. That's right. I ask why does Dusty think we need less? Like you're saying that that's what they they average us to need versus what we need. How do they get that?

So that they so as part of the formula they look at how many and who are our kids. Then they look at how much do they think Salem can pay based on community wealth metrics.

And so this is what they think it costs based on who we have. This is how much they think we can pay. And so then they our aid is the difference. So the um do you remember what slide number that was where you talked about the wealth calculation? required local contributions. So, this is where I'm going to lean on you because I don't really understand the aggregate wealth model that they use. Okay. Um, but it is uh at they look at I guess property taxes. They look at

each community. Is our levy capacity built into that? because we're not. James, I stumbled my way through that. Would you add anything?

Uh, and the only thing I would add is the that part of the formula dates back to 2007. And so, while other things in the formula have been updated since, that's sort of a legacy of a time before student opportunity act. And I think that's part of what some of the issues that have been created over the last couple years have set for me. I'm going to preface this by reminding everybody that I can't do math. So, but have we like not that I want to absorb $18 million by paying, you know, like or whoever like let's say health care costs into the the school side of the budget. Have we ever have has a city ever looked at what if how that might affect the chapter 70 contribution if that was moved to the school side?

That's my again I don't want to do that but I mean I don't know if there's any benefit to that. I mean if there's this is where I don't understand math if math if it if it over here helps us is that something worth looking at if we can like look at other but isn't isn't that still part of the school's contribution to to the district even if it's on that side I think that's what is that what you're saying so it is part of what the city is the city is spending on the schools it is not counted in our endofyear report as part of net school spending report it. So it is not below net school,

right? It is one of the reasons why we're below net school spending. Um and I think it's probably worth at least exploring this idea. I I I just don't know enough to know why it is the case. I do know that our lives are much simpler for it. That's not a reason not to do it. Obviously that's not worth a million dollars, but um 18 sorry could be 18. So I I think it's worth digging in and learning a little bit more about it and I I just don't know enough to know.

I mean it might be I was just wondering if we could you know get a get a sense from those districts that that are including that on that side of the of the ledger. like if this if the state sees like if we're varying city contributions that can't be helping us. Um but there's no point in going through that exercise if we're going to break even or if we're going to lose, you know, but I mean we can still go through the exercise. We're not committing to anything, but it seems worth looking at if they don't see $18 million of the city's contribution to the school district. Um I don't know just looking at it.

Yeah. I mean when we've so in the last few years we've tried to write the city budget with a way that provides more transparency around what is this for health insurance or uh unemployment? What are the other cost centers that are reflected on the city side of the budget that are actually related to the educator workhorse in the school department? So, we've been trying to show that in the budget document, but it's not actually literally showing up in the school department's budget, right?

And I So, I do think it's worth learning more and certainly for I'll include you, us to get smarter about this. I I do also think, you know, back to the original question about the formula. I do believe like this 2007 way of estimating how wealthy Salem is, wealthy or not wealthy Salem is. I think that is part of it.

So I think you know moving healthcare costs maybe maybe that is the right thing to do and also I think part of the problem is Salem looks like it has very deep pockets and can pay. Um, and I'll I'll leave it to you all to, you know, to determine our consensus opinion about that. But I think the formula is outdated enough and we heard that in the chapter 70 hearings that I think that is the other piece of it. Unfortunately, that is the piece that is completely out of our control. Right. And I think just to expand on that, I I don't know all the details of of what is in the formula for the municipal the wealth factor that they calculate, but I do know because it's related to like property values and taxable property. Some of our most valuable and largest pieces of property are tax exempt. Um and so the state is considering Salem Hospital, Salem State University, the courts their own properties museum as being part of our wealth. We derive no revenues from that. There's certainly not enough revenues that I would say it's comparable to what we would get if they were on tax.

Is there a way to challenge that chapter 70 like I mean to like go to them and be like you're we're not math is wrong.

We've done this enough that every year we're coming up short and you're we're not looking at your part. I think they know because in the 2020 report that Desi issued they identify these things like the cap the 18.5% caps creates this baked in inequity for for non-aff or less affluent communities. um the you know that they knew there was deficiencies and now they are having this listening sessions I think start hearing about what the problems are and we've been trying to be clear like that cap the local contribution calculations the inflation uh limit the cap on what they consider for inflation once you go above that cap you're eating the cost of that inflation 100% on the district as opposed to chapter 70 um you know even the timing of when enrollment is calculated is to the disadvantage of communities that tend to have a more um population that comes in throughout the year as opposed to a very stable residential base population which will always have their enrollment pretty clear in October and it's not likely to increase. So it's just like a multitude of things. I think it's not any one thing. I think it's a multitude of things and I think they're looking to looking at it now.

And I I I will also add that like for the millions of viewers watching this at home that um you know Dr. Right. And the mayor and Rep. Cruz have been like instrumental in getting this like the state to take a look at this because of the way that it's affecting Salem. So folks should know how hard they've been working, you know, badgering about this. So I don't think that they're they have not played a small role in getting in getting them to like as a school committee we could put

we signed off on something. We Yeah, we signed something. It might have been right before you came on though. Um or maybe it was one of those things where you signed it, you know, right after you started. Um but yeah, we've we've anytime it's like sign this thing because chapter 70 is broken, you know, we're all on it. So, but it's the snails piece of the legislature and the changing the changing demographics of the students are also affecting that. So, the chapter 70 formula is giving us more favorable um aid numbers for English language learners. Like you can see like the preK5 ELLL has gone from 449 kids to 416 kids. So that is

you know our enrollment is going up but it's not going up in a way that is necessar mathematically helping us with the chapter 74 based on student operations.

Uh just two two things to for the to consider. I mean one is now when when Salem first got on the journey of like chapter the student opportunity act wasn't working for us. We were kind of an outlier. Now it's really not working for everybody and to the point where you're now seeing districts are all everywhere now laying off people having to go for overrides and so the good news is there's a lot of uh company now and for the school committee to get active you know this you know I think it's not a bad idea to get to to get involved with um you know every other district now that's in in this boat. The other thing I just that I don't want to make things more complicated, but it is important to note and maybe I I don't know if I missed this, but um one thing that's really important for Salem is to stay out of the bottom 10% of districts performance-wise. We talked about

No, no, this is really important. This is really important because what happened with

it's generally a good Yeah, it's good. But for financial reasons it um so at different points in its history Salem has been in and out of the bottom 10%. And that's purely based on MCAST achievement and growth. Um and um pre- pandemic Salem was out then sorry was um in the bottom 10 and then when they moved Bentley to a charter that um Bentley became its own school and so Salem got out of the bottom 10%. And then we went back into the 10 bottom 10% right after co and the good you know which is unfortunate for one year but then the last two years our performance has been very strong and so we're out of the bottom 10 but when you go into the bottom 10% your charter cap goes from 9% of students population to double that to 18%. And that means that more kids can go to charters not just Salem Academy. Uh that was what Salem Academy was using to try to expand. Um, and that's why it was so important that we worked to to not allow for that expansion because the reality is like it would have been baked in their their numbers of students. Um, but now but they could have also gone to Marblehead Charter. They could have gone to uh there's what's the other one that Pioneer that's over uh I think they're moving across from Bishop Fenwick, right? Um and so that is important. So there is a probably a little I think there not probably there is a bump because for this it was based on last year's numbers and so our numbers we uh for last year we uh there you could go over 9%. Now it's back capped at 9% for FY27 and then hopefully beyond. So the district needs to stay out of the bottom 10% because that has huge fiscal implications. So a lot of urban district like Lynn is subject to the 18%. So they can have 18% of their student population attend charters and the cost is borne

totally on the city. If more kids go to a charter beyond the 9% for Salem now the state has to pick up the cost not the municipality. So we're we're capped at nine. You want to stay capped at nine but we want to stay capped at nine for you know perpetuity. So just just as a that is a significant factor.

Thank you. That's really important. And I don't anticipate us I mean I think our data I know we'll be off again because of our performance it's it lags by a year and our performance was strong last year again. So, so what happens now is we um we work with these guys uh to try to figure out like how much the city can uh increase our appropriation which is a I would say organic process as you see other things that are coming in as we're looking at things we and either maximize our efficiencies with or reduce or increase our revenue. So we're, you know, trying to figure out what our actual costs are going to be. All the departments are presenting to the city now. And so I think that is the stage of the process that we're in, which will go from now until

mid-March. Mid-March. Any other questions or comments? Do we have an idea of what the city's contribution will be this year? Nope. In the previous two years has been 4.8% but that is higher than what it has historically. That's what it looks like. Thank you. putting this together. Yeah. Thank you. No further questions.

Is this a standing report or is this a general? It's a special committee. The special I just have gym planning in my head. Oh, I was going to receive file after we do. Are you going to share that in announcements or schedule? Yeah. Yes. Is there a motion to adjurnn? Yes. I'm not going to tell this committee what a motion to adjurnn. Second. All in favor? We are here.