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Nobody Loses in School Funding Battle

May 11, 2010

By Veronica Garabelli and Alli Atayee
Capital News Service

RICHMOND – It’s not often in politics that everybody comes out a winner. But once in a while, it happens.

Such was the case in the fight over a freeze on Virginia’s Local Composite Index, which determines how much local taxpayers should contribute toward public education and how much should come from the state.

The formula, which is recalculated every other year, assigns each school division a score, such as “.7824” or “.5346,” based on the locality’s adjusted gross income, taxable retail sales and property tax base. The lower a school division’s LCI score, the more money it gets from the state, and vice versa.

Because of the plummeting real estate market and other economic factors, the LCI scores for many school divisions across Virginia were about to change for the coming year.

The scores for 31 school divisions, notably in Northern Virginia, dropped. Fairfax’s LCI went from .7650 in 2008-10 to .7126 in 2010-12; Loudoun’s fell from .6708 to .5854 and Prince William’s dipped from .4437 to .4036. That means they would get more money from the state.

But the scores for 97 school divisions rose. The LCI score for Virginia Beach jumped from .3704 in 2008-10 to .4060 in 2010-12. The score for Highland County schools increased from .6774 to .7846. That means they would get less money from the state.

In December, then-Gov. Tim Kaine proposed freezing the LCI scores at their 2008-10 levels. He said he wanted to protect the 97 school divisions that otherwise would suffer decreases in state funding.

After Bob McDonnell became governor in January, legislators and local officials from Northern Virginia urged him to reverse the LCI freeze proposed by Kaine. They said it would be unfair to change the school funding rules at a time when Northern Virginia finally would benefit from the LCI formula.

Officials in other parts of Virginia said the commonwealth should do what benefited the most school divisions.

Dr. James Merrill, superintendent for Virginia Beach City Public Schools, said he understood the predicament Northern Virginia and the rest of the state faced. Virginia Beach would have been one of the big losers in the commonwealth if the LCI had been allowed to fluctuate for 2010-12.

“We all have to represent our own kids in our own communities,” Merrill said. “We are all doing our own jobs. We respected what each other were trying to do, even though we were geographically different.”

On Jan. 22, McDonnell’s office told Capital News Service he was planning on upholding the school funding freeze. In early February, however, he decided to lift the freeze and use the 2010-12 LCI scores.

Merrill said the sudden change of plans meant Virginia Beach had to scramble to urge legislators to keep the LCI freeze.

Kathy O’Hara, Virginia Beach’s assistant superintendent for media and communications, said the school division would lose $15 million if the LCI were allowed to fluctuate for next year.

Virginia Beach had already designed a school budget based on the assumption that the LCI would be frozen – and officials said they had no time to adjust to such a large cut in school funding.

Virginia Beach and 92 other school divisions sent a letter to the governor on Feb. 18 outlining why the LCI should be kept frozen.

“Among those 93 districts negatively affected are some of the most fiscally stressed in the commonwealth of Virginia,” the letter stated. “They include many urban and rural districts with high concentrations of poor and at-risk children.”

McDonnell acknowledged that the LCI formula is not perfect. But he said it shouldn’t be changed simply because, in any one year, some school divisions would lose money while others would gain.

“The Local Composite Index must be applied to all localities, at all times, in the same objective and fair manner by which it has always been utilized,” McDonnell said.

“Ensuring that we have a fair formula that is implemented without regard to temporary or political considerations is the best means by which to appropriate education funding in the commonwealth.”

Ultimately, state legislators and the governor decided to soften the blow for school divisions that would lose state funding under the LCI scores for 2010-12.

Lawmakers agreed not to cut any division’s funding for the coming year. For 2011-12, school divisions would have to absorb only 50 percent of the funding cuts dictated by the LCI changes.

That would give local schools time to fill the budget gap by generating additional local revenue (such as raising property taxes) or cutting spending.

Bill Bosher, former state superintendent of public instruction and former superintendent for Chesterfield and Henrico public schools, said this year’s resolution to the LCI is a short-term one.

“You are not likely to see the formula changed,” said Bosher, now a professor of public policy and education at Virginia Commonwealth University. “You are likely to see it applied – which means everybody now has a couple of years to prepare to work within their means.”

The “hold harmless” strategy being implemented for 2010-11 is better than nothing, said Maury Brown, a spokesman for the Albemarle County Public Schools, near Charlottesville. But it still creates a problem for funding salaries for 2011-12.

“You can’t spend the same way you would spend recurring funding,” Brown said. “Trying to pay for salaries (when) you only have money for one year creates a cliff.”

The LCI score for the Albemarle district rose from .6232 in 2008-10 to .6872 for 2010-12. The district stood to lose more than $5 million if the state did not cushion the impact.

Brown says it’s hard to predict how schools will handle the LCI when it’s recalculated for 2012-14.

“The hope is that in two years, things will begin to correct themselves as the economy begins to improve. But that’s all very speculative.”


Multimedia

School funding overview timeline:

Spreadsheet listing old and new LCI scores for every Virginia school division

Hear Bill Bosher, former state superintendent of public instruction and former superintendent for Chesterfield and Henrico public schools, discuss school funding.


More: Doing the Math on Richmond’s School Funding

This article was published by such CNS clients as the Midlothian Exchange and The Tidewater News.