OKAY, EASIEST READING YET OF PENALTY LETTER

Dear Superintendent Latham:

As you know, the Commonwealth's school finance statute, Chapter 70 of the General Laws, establishes an annual minimum local contribution requirement for each Massachusetts school district. This local contribution, when added to a district's Chapter 70 aid, equals its "net school spending requirement". Failure to comply with this requirement may result in the loss of Chapter 70 aid, delays in the approval of your municipal tax rate by the Department of Revenue, and/or enforcement action by the Attorney General.

Lynn's End-of-Year Financial Report shows that the district did not meet its spending requirement in FY13. Its required net school spending was $168,333,399. Reported net school spending was $159,747,443, which was $8,585,956 below the requirement. Of that amount, $8,285,391 is carried forward and added to the FY14 formula requirement. The remaining $300,565 constitutes the net school spending penalty for FY13. Chapter 70 requires that these funds be repaid to the Commonwealth through reductions in the city's monthly local aid payments. Because we are more than halfway through this fiscal year, I will permit the repayments to be spread across both FY14 and FY15. The Department's School Finance staff will be in contact with your office and city officials to finalize the exact repayment schedule.

I am aware that Lynn is one of the communities that are not permitted under current law to count retired teachers' health insurance costs toward net school spending. Last year the Legislature considered but did not adopt a proposal to permit all communities to include such costs. If such legislation is enacted in the future, we will adjust districts' net school spending reports as required. But until and unless such legislation is enacted, we must implement the penalty as currently required by statute.

Lynn's FY14 Chapter 70 formula net school spending requirement is $173,772,186. The $8,285,391 carryover from FY13 is added to that amount, resulting in a total requirement of $182,057,577. Schedule 19 budget data show that the district plans to spend $166,338,461 which results in a shortfall of $15,719,116 or 9.05 percent. If actual FY14 spending were to match the amounts reported on this year's Schedule 19, then there would be an $8,688,609 carryover into FY14. THERE WOULD BE A CHAPTER 70 AID REDUCTION OF $7,030,507 IN FY15 BASED ON THE FY14 SPENDING.

If you have any questions concerning this information, please contact Roger Hatch in the School Finance unit at (781) 338-6527 (rhatch@doe.mass.edu).

Sincerly,

Mitchell D. Chester, Ed.D
Commissioner of Elementary and Secondary Education 

c: Hon. Judith Flanagan Kennedy, Mayor, City of Lynn