Equalization Aid Formula

Since the mid-1970s, Wisconsin has distributed state general aid to public school districts through a tax-based, cost sharing equalization formula. Prior to the 1995-97 Wisconsin State Budget, a two-tiered formula had been used. Effective with the 1996-97 aid distribution, a three-tiered formula structure was put into place. This is a brief explanation of the three-tiered formula which is still in use today.

In an equalization formula, the state and the local district each contributes a portion of the guaranteed valuation per pupil and assumes a corresponding amount of cost. The methodology seen here is referred to as the "percentage method" of calculating Wisconsin Equalization Aid. Aid amounts are computed at each of the three tiers and are determined by using the same arithmetic methodology, but each tier uses different numbers in its calculation. Although this is not the actual calculation specified in state statutes, it is a close approximation and an effective pedagogical tool for those seeking to understand how the formula works.

Primary Aid Level

The first-tier computation provides equalization aid for per-member shared cost up to the state-determined primary cost ceiling level of $1,000 per member (referred to as primary shared cost) for those districts having up to the state primary guaranteed valuation (referred to as the primary guaranteed valuation.) The portion of the $1,000 per-member required to be paid for by the district's tax base is the same percentage the district's per-member value is of the state per-member primary guarantee.

Tier 1 Example: If a district's per-member value is $200,000, and the state per-member primary guarantee is $1,000,000, then the district value ($200,000) would be 20% of the state primary guarantee ($1,000,000). For this district, its tax base would be required to fund 20% of $1,000 per-member cost, or $200. The state aid for this district at the primary level, referred to as Primary Equalization Aid, would be the difference between $1,000 and $200, or $800 per member.

Secondary Aid Level

The second-tier computation provides equalization aid for per-member shared cost between $1,000 and the state-determined secondary cost ceiling (referred to as secondary shared cost) for those districts having up to the state secondary guaranteed valuation (referred to as the secondary guaranteed valuation.) By statute, the secondary cost ceiling level is computed as 90% of the statewide average shared cost per member, so each year, the secondary cost ceiling changes as the statewide cost changes. Secondary cost, then, can be defined as the cost above $1,000 but below the secondary per-member cost ceiling. The portion of the secondary per-member cost required to be paid for by the district's tax base is the same percentage the district's per-member value is of the state per-member secondary guarantee.

Tier 2 Example: If a district's per-member value is $200,000, and the state per-member secondary guarantee is $800,000, then the district value ($200,000) would be 25% of the state secondary guarantee ($800,000). For this district, its tax base would be required to fund 25% of the secondary cost. So if the secondary cost ceiling was $7,000, the amount of secondary cost in this tier would be $6,000 ($7,000 minus the $1,000 already aided in the primary tier). Given the previous information, this district's tax base would be required to fund 25% of $6,000 of per-member cost, or $1,500. The state aid for this district at the secondary level, referred to as Secondary Equalization Aid, would be the difference between $6,000 and $1,500, or $4,500 per member.

Tertiary Aid Level

The third-tier computation provides equalization aid for per-member shared cost ABOVE the state-determined secondary cost ceiling level (referred to as tertiary shared cost) for those districts having up to the state tertiary guaranteed valuation (referred to as the tertiary guaranteed valuation.) By statute, the tertiary guaranteed valuation is 100% of the statewide average per-member valuation. The portion of the tertiary per-member cost required to be paid for by the district's tax base is the same percentage the district's per-member value is of the state per-member tertiary guarantee.

Tier 3 Example: If a district's per-member value is $200,000, and the state per-member tertiary guarantee is $500,000, then the district value ($200,000) would be 40% of the state secondary guarantee ($500,000). For this district, its tax base would be required to fund 40% of the tertiary cost. So if the secondary cost ceiling was $7,000, the amount of tertiary cost in this tier would be any per-member cost in excess of $7,000.

Let's say this district had $400 of tertiary cost. (Their total shared cost was $7,400.) This district's tax base would be required to fund 40% of $400 of per-member cost at this tier, or $160. The state aid for this district at the tertiary level, referred to as Tertiary Equalization Aid, would be the difference between $400 and $160, or $240 per member.

Total Equalization Aid

A district's total state Equalization Aid is the sum of the state aid from each tier. The district in our example would receive $5,540 in Equalization Aid per member, and its tax base would fund $1,860 per member, equalling the total shared cost of $7,400.

There are two important additional features to understand about Equalization Aid:

1.) If a district's value per member exceeds the state guarantee at the secondary or tertiary tiers, negative aid is generated. Because district Equalization Aid is the sum of the state aid from each tier, negative aid at any tier can reduce, or in some cases, eliminate a district's positive aid from another tier. A hold-harmless provision in state statutes entitles a district to receive at least the positive aid generated at its primary tier, regardless if the sum of all three tiers is a negative number. Districts not generating positive aid at the primary tier do not get any Equalization Aid from the state.

2.) The equalization aid formula accommodates the differing configurations found in Wisconsin districts. For elementary school districts (grades K-8), the guaranteed valuation is adjusted to one-and-a-half (1.5) times the K-12 guaranteed valuation, and for high school districts (grades 9-12), the guaranteed valuation is adjusted to three (3) times the K-12 guaranteed valuation.

Sample District Equalization Aid Computation

The previous narrative used round numbers for explanation purposes. The following example illustrates how aid was calculated at the primary, secondary and tertiary levels in 2008-09 for a sample K-12 district.

Local district factors:

District membership = 799
District total shared cost per member = $10,511.93
District equalized value per member = $347,286

Statewide factors:

Primary Cost Ceiling: $1,000 (used by all districts)
Secondary Cost Ceiling: $8,868 (used by all districts)
Primary K-12 Guaranteed Valuation: $1,930,000*
Secondary K-12 Guaranteed Valuation: $1,375,991
Tertiary K-12 Guaranteed Valuation: $563,373

(* For K-8 and UHS districts, the guaranteed valuations above are multiplied by 1.5 and 3, respectively.)

Primary Aid Calculation

District factors used in the Primary Tier:

Membership = 799
Value per member = $347,286
District Per-Member Shared Cost = $1,000

State factors used in the Primary Tier:

Primary Guaranteed Valuation = $1,930,000
Primary Cost Ceiling = $1,000

This district has $347,286 in value per member, which is 17.99% of the primary guarantee of $1,930,000 valuation per member. Therefore, 17.99% of the total primary cost of $1,000 ($179.90) is funded through local property tax. The other 82.01% of the total primary cost of $1,000 ($820.10) is funded through primary state equalization aid.

 Local    =      $347,286  =       17.99%  x     $1,000.00   =           $179.90

 State    =    $1,582,714  =       82.01%  x     $1,000.00   =           $820.10 

 Total    =    $1,930,000  =      100.00%  x     $1,000.00   =         $1,000.00

Secondary Aid Calculation

District factors used in the Secondary Tier:

Membership = 799
Value per member = $347,286
District Per-Member Shared Cost = $7,868 ($8,868 - $1,000)

State factors used in the Secondary Tier:

Secondary Guaranteed Valuation = $1,375,991
Secondary Cost Ceiling = $8,868

This district has $347,286 in value per member, which is 25.24% of the secondary guarantee of $1,375,991 valuation per member. Therefore, 25.24% of the total secondary cost of $7,868 ($1,985.88) is funded through local property tax. The other 74.76% of the total secondary cost of $7,868 ($5,882.12) is funded through state secondary equalization aid.

 Local    =      $347,286    =       25.24%  x      $7,868.00  =         $1,985.88

 State    =      $1,028,705  =       74.76%  x      $7,868.00  =         $5,882.12 

 Total    =      $1,375,991  =      100.00%  x      $7,868.00  =         $7,868.00

Tertiary Aid Calculation

District factors used in the Tertiary Tier:

Membership = 799
Value per member = $347,286
District Per-Member Shared Cost= $1,643.93 (district cost ABOVE the secondary cost ceiling)

State factors used in the Tertiary Tier:

Tertiary Guaranteed Valuation = $563,373
Secondary Cost Ceiling = $8,868 (to determine cost ABOVE the secondary ceiling)

This district has $347,286 in value per member, which is 61.64% of the tertiary guarantee of $563,373 valuation per member. Therefore, 61.64% of the total tertiary cost of $1,643.93 ($1,013.32) is funded through local property tax. The other 38.36% of the total tertiary cost of $1,643.93 ($630.61) is funded through state tertiary equalization aid.

 Local    =     $347,286  =       61.64%   x     $1,643.93  =       $1,013.32

 State    =     $216,087  =       38.36%   x     $1,643.93  =         $630.61 

 Total    =     $563,373  =      100.00%   x     $1,643.93  =       $1,643.93

Total Equalization Aid

Total state equalization aid per member for this district is:

Primary aid per member = $820.10

Secondary aid per member = $5,882.12

Tertiary aid per member = $630.61

Total aid per member = $7,332.83

The total dollar amount of state equalization aid for this district is the total aid per member ($7,332.83) multiplied by the district membership (799), equalling $5,858,931.**

** May differ slightly to the actual number due to rounding. The per-member percentage formula seen here is not the exact formula prescribed by statute, although it is very similar. The method seen here is a better pedagogical teaching tool for those just learning the formula. (For most districts, the aid amounts generated by both calculations are within $100 of each other.)

For questions about this information, contact dpifin@dpi.wi.gov (608) 267-9114

Last updated on 5/13/2009 7:33:12 AM

Equalization Aid Formula - A Three-Tiered Formula