Income and schools

The first bill on the Legislature’s docket is an old one – it tries to improve Maine’s funding formula by removing local income as an influence on state funding. Whether lawmakers address this issue by eliminating income outright, as proposed by LD 1, or by finding another method to compensate for a funding shift from poorer to wealthier districts is less important than solving the shortfalls to the understandably aggrieved districts.

The problem from the point of view of the poor school districts is simple. Income, which accounts for 15 percent of state school funding, varies considerably less across Maine than does property valuation. (Average income levels vary about 3:1 between richest to poorest communities; property varies about 17:1.) That means the funding formula will not react as dramatically to a property/income valuation as it would to a property valuation alone.

There are extensive economic arguments to make for and against including income as a factor in the school funding formula, but they come down to this: Since income has been included, the gap between rich and poor communities has grown. Towns with lower income levels have lost; wealthier ones have gained, moving funding in the opposite direction of the formula’s goal.

This is not surprising because the sole purpose of the funding formula is to compensate communities that have little in the way of property to tax that is commercial or industrial development or waterfront property. When income is added as a consideration, the formula is diluted. It is pointed out that even in wealthy communities there are plenty of people who cannot afford to pay their property taxes, a significant portion of which goes to schools. Supporters of removing income as a factor agree that ability to pay is important, but name programs like the Maine Property Tax Program, commonly called the “circuit- breaker program,” as established assistance to low-income property-tax payers.

A further complication: Towns and cities can say exactly what their mil rates are and how much they generate in taxation, but the state can only guess, using dated Census figures, about income. With the 2000 Census complete, better data on income will be available in a year or so. Meanwhile, the formula is using inadequate income data, and several years from now will again depend on income figures that have not been calibrated in years.

The prime movers of getting income out of the funding formula are Republican Sen. Peter Mills of Cornville and Democratic Sen. John Nutting of Leeds. The defense of their rural school districts is based on the experience of seeing more money go into the system but a hefty percentage of that money go to property-rich districts. The result is not equity. Sens. Mills and Nutting have targeted the income factor in the formula, but the goal of the Legislature’s Education Committee ought to be ensuring that all districts have funding sufficient to meet essential services and that the funding gap closes rather than further divides the state.

If the committee’s members can devise a better way than removing income from the formula to achieve this, no doubt the property-poor community would be glad to hear about it.