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
TownbyTown
Spreadsheet
Perspectives
Index
About
Perspectives
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 twoformula 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
5050 measurement of the two main wealth indicators: income and
property.
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