The ABC's of ECS

Finding the “Base Aid Ratio” Variable

A town’s ability to cover the costs of educating its students is represented by the Base Aid Ratio.

This is the most complicated of the three variables in the Education Cost Sharing (ECS) formula because it considers the wealth of a town, both in terms of property and in terms of income. This means we need to first establish a value for each town’s property wealth and a value for each town’s income wealth before we can get a number for the overall Base Aid Ratio.

A Town’s Property Wealth

Let’s start by figuring out a town’s property wealth. Every year, Connecticut’s Office of Policy Management develops an estimate of all taxable property within our towns, called the Equalized Net Grand List (ENGL). Since the value of property is often in flux, we measure a town’s wealth by finding the average ENGL per capita over the prior three years. (This prevents any singularly unusual year in property values from unduly influencing how wealthy a town appears.)

But the value we are really searching for is not merely the town’s average property wealth value. In fact, we want to know the town’s wealth capacity as compared to the state’s expectation of capacity. Therefore, we take the median ENGL statewide, and multiply it by a made-up number known as the “threshold factor”.

The threshold factor changes in different iterations of the ECS formula. (In the 2013 formula, the threshold factor is 1.5.) It plays an important role in determining what percentage of the costs the State will pay. When the threshold factor is higher, the state pays more.

We divide the town’s average ENGL by the product of the median statewide ENGL and the threshold factor.

Now, remember, the Base Aid Ratio is going to give weight to both property wealth and income wealth. Under the 2013 formula, we give 90% weight to property wealth. So we take the number we’ve just worked out, and multiply it by 90%.

Property-Wealth1

That’s the property value that we’ll be using in our Base Aid Ratio.

A Town’s Income Wealth

The income value of the Base Aid Ratio is found in a similar way. You take the median income in the town as the numerator. And you take the state’s median income (confusing in and of itself because this is determined by making a list of town medians and finding the median in the list–the median of the median!), multiplied by the threshold factor, as the denominator. Then, you multiply that value by 10% because the 2013 formula assigns a 10% weight to income.

Income-Wealth1

Finding the values for property wealth and income wealth are definitely the most confusing pieces of the ECS formula. But just remember that what you’re trying to do is represent a community’s average wealth as compared to the state’s average wealth.

Putting the Two Values Together: A Town’s Base Aid Ratio

Let’s play it out in an example. Assume the following:

  • The threshold value for this year is 1.5.
  • The median ENGL/person in the state is $138,000.
  • The median median household income in the state is $79,000.
  • We are looking for the Base Aid Ratio of a low-income town that has an average ENGL of $60,000 and a median household income of $29,000.

To find the town’s property wealth, we take the town’s average ENGL, and we divide it by the product of the state’s median ENGL and the threshold. [60,000/(138,000 x 1.5)]=.29

Then, we multiply the solution by 90%. (.29 x .90) = .26.

That’s the value for the town’s property wealth. Now we need to find the value for the town’s income wealth. We take the town’s median household income, and we divide it by the product of the state’s median household income and the threshold. [(29,000)/(79,000 x 1.5)]=.24

Then we multiply the solution by 10%. (.24 x .10) = .02.

These numbers combined represent the proportion of the total education costs that the State expects the community to pay. So if we subtract both numbers from “1” (which represents the whole cost of education in the town), the difference describes the percentage of the total cost that the State should cover. In this case, 1.0 – .29 – .02 = .69. The Base Aid Ratio of .69 says that the State of Connecticut should pay 69% of the town’s overall costs.

So go stick the Base Aid Ratio into the rest of the ECS Formula, and you will have figured out a town’s entitlement to the ECS grant! Phew.

But that’s still not the end of the story; there are still some strange exceptions and complications to read about!