The 2010 formula is a “foundation” type of formula that calculates aid for districts in three steps.
In Steps 1 and 2, the formula develops a basic cost to educate the students in the school district as follows:
In Step 1, the formula develops the “core instruction budget” that represents the per child cost of basic education programs times the number of children in the district. The current “core instruction budget” amount is $8,922.
In Step 2, the formula adjusts the “core instruction budget” to account for the greater costs involved with educating children with above-average needs. In the case of the 2010 formula, there is a “student success factor” of .4 for children who quality for free or reduced lunch. Thus, for each child qualifying for free or reduced lunch, the district’s budget is increased by 40% x $8,922 or $3,569. This produces the total foundation budget or total “core instruction budget.”
In Step 3, the formula allocates that basic cost between the school district’s budget and the State’s budget. This allocation is made based on ability to pay, which is generally measured by each district’s value of taxable real and tangible property per student. The basic concept is to create a “pot” of money to distribute equal to a uniform property tax rate assessed against all of the property in the State, and then to allocate the “pot” based on each community’s relative wealth.
To create a comparison across local tax bases, the formula uses the following process:
1.The tax bases for all cities and towns are “equalized” by bringing them up to 100% valuation and verified by the Department of Revenue’s Division of Municipal Finance. For each city and town, the Department of Revenue calculates a normalized tax base, called the “equalized weighted assessed valuation” or EWAV. The State’s total EWAV tax base is approximately $124 billion, or approximately $889,000 per student. This Tax Base Table compiles the data used to make this calculation, which appears in Column A.
2.The State then makes a second adjustment for median family income. If a community has more affluent residents, then it is possible to pay more in tax for a given level of assessed property value and vice versa. To recognize this reality, the Department of Revenue prepares a second calculation for each city and town called “adjusted EWAV.” The adjustment is made in a way to retain the same overall total Statewide tax base, so the State’s total adjusted EWAV tax based is also approximately $124 billion, or approximately $889,000 per student. The calculation appears in the same Tax Base Table in Column B.
3. This calculation helps indicate each community’s relative ability to pay. There is a wide range across the State, from more than $22 million in property value per student on Block Island to $214,500 per student in Woonsocket, a range of more than 100:1.
4. The State began using the EWAV and AEWAV principle in funding formulas dating back to 1960. Just prior to the 2010 formula, the State used AEWAV to calculate the state share for charter school aid as follows:
- Calculate the community’s AEWAV/Student, call it r1
- Calculate State’s AEWAV/Student, call it r2
- State Share (SSRC) = 1 – .5 (r1/r2)
5. If, for example, a community’s wealth per student equaled the State average, it would receive a State share of 1-.5, or 50%.
6. If a community’s wealth per student equaled ½ the State average, it would receive 1-.25 or 75%.
7. If a community’s wealth per student equaled twice the State average, it would receive 1-1 = 0.
8. If a community’s wealth per student exceeded twice the State average, it would receive zero.
9. The State share calculation in the 2010 Formula begins with a similar format, making the calculation of an initial share ratio equal to
SSRC = 1 – .475(ri/r2)
10. This is similar to the previous example, except the “average” community receives a State share of 52.5%, rather than 50%. If a community’s property wealth per student is more than 2.1 times the State average, its share is zero. You can see these calculations for the 2010 Formula in Column D of the Tax Base Table
11. The 2010 formula makes an adjustment called the “quadratic mean.” It is based on a second ratio, namely the percentage of free/reduced lunch, or FRPL%. The new ratio is calculated as the square root of half of the sum of the squares of SSRC and FRPL%. Call this number “State Share Quadratic Mean”.
12. State aid equals the total core instruction budget times State Share Quadratic Mean. You can see the 2015 Formula’s calculation of Quadratic Mean Share on this Quadratic Mean Table.