DLS Recommends Study of Disparity Grant Formula

A budget analysis by the Department of Legislative Services (DLS) highlights the inequities caused by recent changes to the Disparity Grant program.  The disparity grant is a state wealth-based grant distributed according to a formula to counties with per-capita income-tax revenues of less than 75 percent of the state average. In the fiscal 2016 proposed budget, the Administration is capping the grant at the fiscal 2014 level resulting in a formula reduction of $2.1 million.

From the budget analysis,

Over the last five years, there have been three different capping provisions placed onto the disparity grant formula, from the cap to fiscal 2010 amounts, to the tax effort floors, to the currently proposed cap at the fiscal 2014 level. These caps have had the effect of perverting the proportion of the average statewide per capita tax yield to each jurisdiction under the disparity grant formula.

Given all of the inequities in both the current law and in the proposed BRFA, it would be prudent for the General Assembly to take an in-depth look at the Disparity Grant program over the 2015 interim and make some decisions regarding the overall level and distribution of funding. Until then, the grants should continue to be funded under the provisions provided for under current law. The Department of Legislative Services (DLS) recommends striking the contingent reduction in the budget bill, as well as striking the new provisions relating directly to the disparity grant formula in the BRFA. DLS also recommends that a workgroup be convened over the 2015 interim to further study and make recommendations concerning the Disparity Grant program and how the formulas and allocations shall be determined in the future.

If adopted, this recommendation would fund the disparity grant at the currently mandated level of $129.8 million.

In its response to this recommendation, the Department of Budget and Management (DBM) requested support for the Governor’s allowance to fund the program at $127.7 million and stated it would offer an amendment to clarify the Administration’s intent to cap the grant at that amount.  DBM also indicated its willingness to work with the budget committees and DLS during the interim to study the disparity grant formula.