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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
When School
Expenses Rise,
by Allen Larson
Perspectives
on Housing
Issues
RATIONALE
FOR ESTABLISHING THE
MEDIAN INCOME OPTION
The Median Income Option Formula Proposal
Under this proposal, the towns would receive the higher number of the two formulas:
- Property tax–based formula: The current and, most likely, future formula
- Median income–based formula: The new formula
The Rationale for Creating Two Formulas
The failure of the current formula has been acknowledged: The Governor, the Department of Education, and the Legislature have acknowledged the failure of state’s property value–based formula to accurately and fairly gauge a community’s wealth or ability to pay by introducing alternative formulas attempting to mitigate the formula’s inequity to a broad number of communities.
Most alternatives proposed include, in essence, a two-formula approach: Almost since the formula’s inception, the three branches have appointed a number of ad hoc committees to study Chapter 70 funding, including two in FY04. Most have kept the foundation budget formula intact and proposed new wealth measurements.
Five Previously Proposed or Implemented Alternative Formulas
1. Pothole money: This plan was introduced by the Legislature.
- This formula was used in the late 1990s and 2003; it was temporary.
- The extra funding increased the formula's final numbers for those communities historically shortchanged by the formula.
2. Median income component: This proposal was introduced by the Department of Education.
- This formula has been used since 1994, but it was reconfigured in FY02 to its present and permanent structure.
- Its purpose was to mitigate EQV rates at behest of communities historically shortchanged.
- However, to most communities, its effects have been minimal. Instead of using property values as a 100 percent measurement of wealth and/or ability to pay, it has reduced to about 90 to 95 percent the measurement of wealth—far from an even 50-50 measurement of the two main wealth indicators: income and property.