Lynchburg Business

How the State Funds Virginia Schools

Issue: March 2010 by Daniel T. Richardson in Education, Inside The Magazine

With rampant announcements of budget cuts, along with rumors of lay-offs and closings of some local public schools, it is beneficial to understand the process by which Virginia’s public schools are funded. As it turns out, the history of this money trail can be traced all the way back to our country’s founding documents.

The 10th amendment to the Constitution of the United States of America states, “The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.” It is by this amendment that the states assume the majority of the responsibility for public education. Part of that responsibility within the state of Virginia is deciding not only the minimum educational curriculum of a given district, but also minimum requirements for programs and staffing.

Virginia’s budgets are created in a biennium with necessary revisions made in odd years. The state is currently entering the 2010-2012 biennium. The funding of public education makes up the largest portion of the state budget. In the 2008-2010 budget, public education accounted for 39.4 percent of the total operating costs of the state.

The constitution of Virginia requires the state’s Board of Education to formulate Standards of Quality (SOQ) for Virginia’s public schools. The specific requirements for the SOQ are laid out in the Code of Virginia. The General Assembly is responsible for revisions to the SOQ as well as determining the costs for the implementation of the Standards and apportioning the costs between the state and localities. Localities are required to match state funds through a required local expenditure. Although the SOQ set forth minimum standards, localities can choose to spend more than the required amounts on programs and employ staff beyond that required by the SOQ.

The SOQ is the primary, but not only, determinant for state funding of education. While it makes up a little over 90 percent of state apportioned money for public schools, the remaining 10 percent comes from lottery proceeds, categorical and incentive programs, and supplemental education. There are three driving components of SOQ funding: 1) required number of instructional positions, including salary and benefits, which are determined by Board of Education regulations, 2) recognized support positions which includes non-instructional staff salary and benefits, and 2) non-personnel costs which includes supplies and utilities. The calculation of the costs of these separate components depends on several factors including funding a minimum of 51 instructional staff for every 1,000 students for basic positions and six positions per 1,000 students in the areas of special education and career and technical education.

Another component within SOQ funding is that of prevailing cost, which recognizes operating costs within localities. These prevailing costs are a reflection of what most school divisions spend and not actual expenditures. These costs are not quantified within the SOQ and are applied to salaries, support staffing per pupil and non-personal support costs per pupil. Although well beyond the scope of this article, it is important to realize that the funding of each specific SOQ category is determined through a series of calculations which attempt to take into account the vast differences that exist between the different localities of Virginia.

After a total cost has been determined, the cost is then converted to a per pupil amount. This amount is multiplied by the Average Daily Membership (ADM) of students attending public schools in each division. From this total cost, each school division is given a portion of the state’s sales tax, which is distributed based on school age population.

One of the more interesting facets of educational funding within Virginia is the aforementioned required local expenditure. The state divides the total cost of education between itself at 55 percent and leaves the remaining 45 percent responsibility to the localities as a whole. The means to determine the specific amount for which each locality is accountable is determined by the composite index.

Most SOQ funding is determined by the composite index of local ability to pay. The composite index uses real property value, adjusted gross income and taxable retail sales of the locality, though each is weighted differently. In addition, each piece of the composite index is weighted on a per capita and per pupil basis. These values also take statewide values into consideration. The goal is to, as equitably as possible, divide the locality requirements based on a localities’ ability to pay, so that the average for all of the localities in the state of Virginia equals 45 percent of the total cost of funding. Local percentage of costs can range from a maximum of 80 percent to below 20 percent.

Because of the different composite indices for localities, there is a vast difference between state per pupil funding from district to district. For example, Lee County (with a composite index of .1552) has a state SOQ per pupil of $7,978, while Goochland County (with a composite index of .8000) has a state SOQ per pupil of $2,235. That doesn’t mean that Goochland County necessarily only spends a quarter of the money on students that Lee County does; it only indicates that Goochland County has higher property, gross income and taxable sales than Lee County does and is therefore in a better position to fund locally.

In recent news, local counties have lamented the budgetary shortfalls arising from the bad economy and the proposed adjustment to the composite index. Virginia adjusts the composite index every two years. Former Governor Tim Kaine proposed that the index be frozen at previous levels, while current Governor Bob McDonnell has supported updating the index levels. While the proposed changes will benefit some Virginia districts, local counties will be adversely affected. McDonnell defends his decision by stating that, in previous years, certain Virginia districts received far less funding, while districts with lesser economic growth benefited. Therefore, he argues, the local composite index should be applied objectively and fairly as it always has been.

The proposed 2010-2012 as well as the current Local Composite Indexes of counties within Region 2000 are as follows:

2008-2010     2010-2012

Amherst=           .2642             .2664

Appomattox=     .2436             .2732

Bedford=            .3494             .4076

Campbell=          .2340             .2491

Lynchburg=        .3327             .3643

In an economic climate where it is already a stretch for localities to meet local funding requirements, the increased shortfall from the revised local composite index could be devastating. Different school districts will approach the current budget crisis in varied ways. Next month’s article will look at the budgeting strategies of the counties in our local area.