Maryland Politics Watch Questions State Wealth Formulas

A September 21 post on Maryland Politics Watch by Adam Pagnucco criticizes the State wealth formulas that are used to determine local aid in a variety of areas.  Mr. Pagnucco suggests that the formulas be tied to the number of poor people residing in a jurisdiction, or else be abolished.

Maryland’s wealth formulas are typically driven by two components: assessable property tax base and net taxable income. Both components have problems. First, high-value properties are often encumbered by high mortgages. People with highly assessed properties, big mortgages and little or no equity are hardly wealthy. Second, high incomes usually reflect high costs, and those are not considered in the wealth formula at all. Both of these issues plague Montgomery County, which has high incomes and high property values but also has big mortgages, high gasoline costs and lots and lots of foreclosures.

But perhaps a bigger issue is that the wealth formulas are utterly unrelated to the number of poor people living in each jurisdiction. Helping jurisdictions educate and provide services to the poor should be a central goal of any state as dedicated to income redistribution as is Maryland. Otherwise, why do it? Poverty is an especially important consideration in public school spending, which accounted for 88% of all state aid in FY 2010, because poor kids are likely to need free-and-reduced price meals as well as extra instruction. …

In FY 2010, the state spent an average amount of $14,202 for every Marylander living in poverty. But that figure fluctuated wildly between the jurisdictions. Baltimore City leads the state in aid ($1.2 billion) and in poor people (119,340), but is dead last in aid per poor person ($9,704). Howard County, which has the highest median household income in Maryland, gets the most aid per poor person ($27,318). Why should the state’s richest jurisdiction get three times the aid per poor person as the state’s poorest jurisdiction? Montgomery County fares badly on this measure, having the state’s third-highest population in poverty and yet getting less than the state average ($12,397) in aid per poor person. Prince George’s County, which actually has fewer poor people than Montgomery, receives much more aid per poor person ($21,378).

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