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Median
Income
Option Introduction
Rationale
for
Establishing
the Median
Income Option
Methodology
and
Formula
for
Computing
the
Median
Income Option
Analysis
of Widely
Held Assumptions
about Nonresident
Taxpayers
Perspectives
Index
Perspectives
on Education
Issues
A
Proposal for
Fair and Equitable
Distribution of
State Education Aid
When School
Expenses Rise,
by Allen Larson
Perspectives
on Housing
Issues
* * *
Why two formulas? Why not incorporate median income into the current formula?
The consensus is to move toward a simpler and fairer formula that most can understand and calculate themselves. Trying to insert median income in equal weight would further complicate an already virtually incomprehensible formula. Making one simple change in the formula’s configuration can skew many other calculations down the line.
Further, median income has been factored into the current formula for years. But the way it is presently applied makes it almost meaningless. For example, in FY02, the last year Chapter 70 funding increased across the Commonwealth, the inclusion of this median income component increased the Chapter 70 funding for my town of Barnstable by a grand total of $35,002. Governor Romney’s FY04 Chapter 70 formula, which factors median income in the same manner, increases Barnstable ’s total by $0.
Now, the big question: What will it cost?
$109,809,143
However, keep in mind that this number is the difference between the increase that the Median Income Option would bring in FY05 and the final FY04 Chapter 70 numbers, which have been reduced in most communities by 20 percent. Moreover, if the level funding of FY03 is taken into account, the final amount may be closer to $70 or $80 million.
The Median Income Option in FY05 would increase Chapter 70 funds for 69 communities and 9 regional school districts.
* * *
So, why is it important to implement the Median Income Option in a deficit year in which aid to schools is likely to be trimmed further?
It is important because any further decreases are calculated on a percentage basis of what a community would otherwise receive in a non-deficit year. Obviously, a 20 percent cut of a higher Chapter 70 allotment under the Median Income Option would leave a town with a smaller decrease. And as the economy incrementally improves, Chapter 70 allotments will incrementally increase until fully funded.
In closing, this formula does not reduce any municipality’s Chapter 70 funding nor does it attempt to hold any district harmless, which any town would interpret as a cut when increases occur in non-deficit years. The Median Income Option seeks only to add funding when the state is not in deficit to those communities traditionally shortchanged by the current property values–based formula.