A common theme of the bloggers who frequent Bacon’s Rebellion (including myself) is to decry the inequitous funding formulas the Commonwealth uses to allocate state tax revenues for education, transportation and other purposes. Northern Virginians feel particularly aggrieved that their region sends far more tax revenues to Richmond than it receives in return. One hope they fervently nourish is that one day Northern Virginia legislators will unite with those of another metropolitan region — Hampton Roads is most commonly cited — to overturn the status quo.
A new report published by the College of Business and Public Administration at Old Dominion University provides a useful reality check. This group publishes an annual “State of the Commonwealth” report. This year’s report includes a chapter entitled, “Is Hampton Roads Receiving Its ‘Fair’ Share?” The answer, not surprisingly, is, no, the region isn’t getting its fair share. Who benefits? According to this group’s appraisal, Northern Virginia comes out ahead more often than not.
The ODU profs focus on three major growth areas in state government spending: K-12 and higher education, car tax relief and transportation.
Where Northern Virginians might look at the raw dollars that flow to Richmond and flow back, the Hampton Roads analysts invoke the Composite Index, encoded in the legislation that allocates state aid to education, which measures a municipal government’s “ability to pay” based on relative wealth and taxing capacity. Localities judged to have a greater ability to generate their own tax revenues get less money; those judged to have less capacity receive more state aid. As it turns out, the state falls short of its goal of covering 55 percent of all statewide costs, so everyone, even wealthy Northern Virginia jurisdictions, fall short of the ideal. But Hampton Roads localities, note the ODU authors, fall short by wider margins.
The unweighted average of the composite index for the 10 cities within Hampton Roads is .3358, signifying that these cities should contribute 33.58 percent of the funding for their K-12 public schools. However, their unweighted average contribution is 48.7 percent [a gap of 15.1 percentage points]. …
If there are beneficiaries from the current way state K-12 financial aid is distributed, it is the counties of Northern Virginia (Arlington, Fairfax and Prince William), whose average unweighted gap between the composite index and their actual local funding is only 7.56 percent[age points]. This reflects the fact that the Commonwealth’s current K-12 funding formula is subtly biased in favor of wealthy school districts that have a high ability to pay. …
Every neutral observer to whom we talked about this subject believes that the current funding mechanism is disadvantageous to Hampton Roads.
The ODU analysts concede that the funding formulas for higher education don’t treat Hampton Roads quite so shabbily. Norfolk State University receives the highest level of state appropriations of any one of the state’s 15 universities. William & Mary and Christopher Newport receive support close to the state average. ODU, note the authors disapprovingly, received only 90 percent, second lowest in the state. (George Mason receives the lowest support of any institution — this is one area where the authors do not contend that Northern Virginia comes out ahead.)
As an aside, the ODU analysis does smack of special pleading. The ODU authors don’t make a point of the fact that Hampton Roads is the only region of Virginia that has four state-supported colleges or universities (not counting community colleges). Northern Virginia has only George Mason. Richmond has only Virginia Commonwealth University (two, if you include Virginia State University in Petersburg). If the measure is total state support for higher education per capita, based on the population of the region, I suspect that Hampton Roads would come out looking far better than the other two large metro regions.
Next, the ODU authors turn their attention to car tax relief, in which the state reimburses municipalities for limits placed on their personal property taxes. The ODU authors mince no words:
There is no recognizable connection between any identified social need and the funding stream that has accompanied the car tax cut. Monies that could otherwise have been used for eliminating disparities among school divisions, for meeting the rising costs of Medicaid or for improving our institutions of higher education are now returned to the wealthiest jurisdictions in the state in what, for Virginia, is an unprecedented transfer of wealth. Just seven jurisdictions receive more than half of all the money from the car tax reimbursement program, and those seven local governments generally have the least fiscal strain and the greatest ability to raise their own funds.
Fairfax County, for example, received $220.34 per capita in car tax reimbursements, while Lee County received a paltry $22.17 per capita. As one legislator from Northern Virginia put it, “Thank you very much!”
That analysis is pretty hard to dispute. Finally, the report looks at transportation funding. The chart below, which projects Virginia Department of Transportation allocations by transportation district over the next six years, pretty much says it all.
It’s hard to see how Northern Virginia would complain. Admittedly, the chart would look different if it showed per capita allocations. Such an adjustment would make the allocations look considerably more equitable. But there’s still not much to justify the Northern Virginia perception that the region is getting royally hosed. The real problem, the ODU authors conclude, is not that the funds are allocated by region unfairly, but that there are too few funds to build all the roads that people want.
My advice to my friends in Northern Virginia: Be careful what you wish for. Open up the Pandora’s box of inter-regional transfers of wealth, and you may be surprised what pops out!