Ever since 1996, when household income began to be used as a factor in the formula for distributing state aid to local schools, the income element has been controversial.

The battle over whether the income factor should stay or whether it should go is set to be rejoined Monday at a legislative hearing in the Augusta Civic Center. A crowd is expected. Crudely put, it is a fight between rural and urban schools, between inland and coast.

On one side, a bipartisan group of rural lawmakers, led by Sen. John Nutting, D-Leeds, wants to strike the income factor from the formula.

On the other side, a bipartisan group of coastal and urban legislators, led by Sen. Joel Abromson, R-Portland, wants to keep the income factor and in fact strengthen it, increasing it from 15 percent of the operating calculation to 25 percent.

“No other state uses income in distributing school aid,” Nutting said.

But more importantly, since median household income is based on a school district’s residents, “it makes the coast look poorer” because it doesn’t include the incomes of people who own second homes along the ocean, Nutting explained. This causes money to flow to school districts with high property values, the ones most able to fund schools adequately.

Property values and enrollment are the other two major factors in figuring out how state aid is distributed.

Communities along the coast and those with large businesses, such as mills, are “hiding wealth” behind the income factor, Nutting said. The mills pick up a larger share of the cost of education through property taxes. Since they report no income that can be taxed at the local level, they pay proportionally less when income is factored in.

This is because, across the state, the range between the highest and lowest median household incomes is not as wide as between the greatest and the least amount of property value per student. That value is based on the total property value of a community divided by the number of students within that community.

In 1998, median household income ranged from $8,750 in Highland Plantation in Somerset County to $64,729 in the town of Cumberland, for a ratio of roughly 7-to-1.

In contrast, according to Nutting, the ratio between the town with the highest property value per student to the lowest is about 17-to-1.

As the gaps between rich and poor are narrowed by the inclusion of income in the formula, property-rich communities get more money from the state.

The income factor takes money from those with the least ability to pay – based on property value per student – and gives it to those with the most ability to pay, said Rep. Irvin Belanger, R-Caribou.

“And the reality is that the only way to raise money [locally] for education is through the property tax,” Belanger said. “Towns can’t tax income.”

Abromson counters that the income factor helps his Senate district because, while many people believe Portland is wealthy, its median income is pretty average. In fact, in 1998, the city’s median household income was about $60 below the state average.

Because Portland has high valuations and average income, “we feel it is fairer to consider other elements than just property values,” said Rep. Joseph Brannigan, D-Portland, a co-sponsor of Abromson’s measure. “We have tons of poor people.”

Rep. James Skoglund, D-St. George, also backs the measure. His coastal district has high property values, but his constituents don’t have equally high incomes, he said. That is why it is important to include income as a measure of a person’s ability to pay for education.

But Sen. Mary Cathcart, D-Orono, retorts, “There is no accurate way to calculate income. In small towns, such as Alton, the income used in the formula seems much higher than it can possibly be.”

The state Education Department hires a private firm to calculate the median household income based on 1990 census data periodically updated. But since 1998, income levels have been frozen in the formula because of uncertainties over the accuracy of the updates.

“If you can’t do it accurately, you shouldn’t do it at all,” Cathcart said.

Looming over the whole issue of the state’s school-aid distribution formula is a new approach based on providing “the essential programs and services,” which are defined as the “educational resources that must be provided for all students to meet the standards” of the Learning Results.

Rep. Shirley Richard, D-Madison, co-chairman of the Legislature’s Education Committee, said given the fact that the state is on the verge of moving toward an “essential programs and services” funding model, it is unlikely that the school funding formula will be overhauled this year.

For the past four years, the State Board of Education has overseen research to figure out what the essentials are and how much they cost. The group studying the matter has calculated that it would take an additional $140 million in combined state and local school funding to provide them.

A bill sponsored by Richard lays out a timetable for implementing the new funding model. Though the actual model won’t be unveiled until next year, the idea is to phase it in over four years so it is in place by the 2006-07 school year, the first year the Learning Results are to go into full effect.

Richard’s bill also calls for the eventual elimination of any “cushions” in the funding formula because “such cushions are inequitable.”

The cushion is a lump sum of money allocated by lawmakers that, instead of being poured into the funding formula, is held in reserve and disbursed to schools that face a decrease in state aid. But critics say keeping the money outside the school funding formula reduces the equity the formula is meant to bring about.

The school funding plan under consideration by the Legislature for next school year includes two cushions: $4.65 million approved by the Appropriations and Education committees and a second $1 million added by the state Senate.

The latter cushion was added unexpectedly by the Senate on Thursday as it worked on the proposed state budget.

The two cushions are part of slightly more than $701 million lawmakers are looking to put toward K-12 public schools next fall. That is an increase of roughly 5.6 percent over the current year’s allocation of $664 million.

Using the current funding formula with the $4.65 million cushion plan endorsed by the Education and Appropriations committees, a total of 183 school districts across the state would get more state aid over the current year, 20 districts would see no change, while 82 would get less state aid. The most common reasons for a district getting less state aid are either declining enrollment or rising local property values, or both.

The $1 million is earmarked to help 38 of the 82 losers, paring their losses by roughly 60 percent. For example, Medway was to see its state aid drop by $67,674, but the second cushion will hold that drop to just $25,094.

Bangor schools are expected to see an increase in state aid of nearly $392,000, less than $8,000 of which is due to the cushions.

City school officials hate cushions.

“The cushion takes money away from the districts who need it and it takes away from equity,” Phyllis Shubert, vice chairwoman of the Bangor School Committee, said.

The school board’s chairwoman, Martha Newman, agreed. “It has nothing to do with a commitment to students. It’s all about politics.”