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Virginia Local Ability-to-Pay Calculation and State Contributions to Public Schools — Some Surprises

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sherlockj
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by James C. Sherlock

Some things are very important that the average citizen knows little to nothing about.

For example, a complex state computation, the Composite Index of Local Ability to Pay, determines how much state money per student goes to your school district to maintain an overall state ratio of 55% state and 45% local.

The lower your district composite index of ability to pay, the more money per student your district gets.

You will find some big surprises in the list of school division indexes, or at least I did.

My home division of Virginia Beach did not make the top 20 highest indexes, while the City of Richmond did. Fredericksburg is a top-20 division. Stafford County is in the lower middle group. Bath County has the third highest index out of 133.

The composite is a rules-based calculation of an index based on:

  • true value of property,
  • adjusted gross income (including and excluding non-residents);
  • taxable retail sales,
  • Average Daily (Student) Membership (ADM); and
  • total population.

All of those factors are listed for each of 133 school divisions.

The lowest index, thus the lowest ability to pay and the highest per-student reimbursement is Lee County at .1692. Lee County receives almost 5 times as much money per student from the state as the highest index school divisions.

The index is capped at .8. Those localities get the lowest reimbursement per student. Those with the maximum composite index are Alexandria, Arlington, Bath County, Fairfax City, Falls Church, Goochland County, Highland County and Surry County.

I have color coded the locality names on the spreadsheet by top 20 highest composite index, upper middle, lower middle and bottom 30.

You will find one political note at the bottom.

” The actual composite index to be used for Bedford Co. in the 2020-2022 biennium is .3132 pursuant to the appropriation act and Section 15.2-1302, Code of Virginia.”

That is a huge drop from what would have been calculated, resulting in a lot more money to Bedford schools.

The applicable state law is § 15.2-1302. Certain Commonwealth distributions to localities. It appears to be part of the effort to encourage consolidations.

  • It preserves the higher of two state payments calculations for 20 years in the event of a consolidation that transforms two entities into one, as in the case of Bedford.
  • In the case of the semi-consolidation of Martinsville and Henry County in which Martinsville sheds its constitutional officers and independent school division, the preservation period is 15 years. Those two entities have composite indexes that are almost identically low, both in the bottom seven, so there will be no real advantage in that consolidation for state contributions to any program.

Every state has its own way of doing things. I guess the drafters of the federal Constitution figured that out well before we did.

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25 responses to “Virginia Local Ability-to-Pay Calculation and State Contributions to Public Schools — Some Surprises”

  1. James A. Bacon Avatar
    James A. Bacon

    Two interesting numbers in the attached spreadsheet:

    * Total value of all taxable property in Virginia — $1.26 trillion.

    * Total adjusted gross income — $276 billion.

    I would love to track those numbers over time, broken down by locality, to show where the wealth creation is occurring.

    1. James C. Sherlock Avatar
      James C. Sherlock

      The historical numbers are available. go to https://www.doe.virginia.gov/school_finance/budget/compositeindex_local_abilitypay/2000-2002/00-02composite_index.xls if you want twenty year old numbers.

      They are somewhat different lists.

      You will find, for example, that it was Bedford city that the combined city/county can thank for its legacy index, not the county.

  2. energyNOW_Fan Avatar
    energyNOW_Fan

    “Every state has its own way of doing things. I guess the drafters of the federal Constitution figured that out well before we did.”

    that was my question, how do other states do this? Let’s say our neighbors, Md. and NC

    In Virginia it feels like a money grab from NoVA, but that is just how it seems. Not sure the reality.

    1. James C. Sherlock Avatar
      James C. Sherlock

      If this is a money grab by Northern Virginia, they cannot multiply. Perhaps a K-3 math instruction issue years ago.

    2. Matt Hurt Avatar
      Matt Hurt

      That money is being redistributed for the second time (from NOVA to the less wealthy parts of the state). The first time it was collected from all 50 states and deposited in the DC area. Don’t know whether that’s fair or not, but if we move the nation’s capitol to Omaha, I bet most of that money goes with it.

      1. LarrytheG Avatar
        LarrytheG

        surely you have a “more” complete opinion being a school administrator, no?

        1. Matt Hurt Avatar
          Matt Hurt

          Yes sir.

          I think the first point of discussion should be whether to pay the piper now, or pay piper later. It seems that an investment in our students to make sure they are on par to compete with their cohort across the state is a rather insignificant sum compared to keeping these folks on the welfare rolls or keeping them in prison.

          I also don’t think this is a case that simply throwing money at it will guarantee desired outcomes. How to best educate our students is a multifaceted problem, and there are no simple fixes.

          One of the first steps (of many) to effectively address this issue is to study the data to determine what types of K-12 programs yield the best outcomes for our young people. We have made stabs at this in the past, trying to track post secondary educational outcomes in our universities and community colleges, but this data lags so much that it would be hard to control for the different variables at play. Similarly, to what degree does a two or four year (or more) degree correlate with desired outcomes for our young people. From what I understand, there are tons of highly indebted folks out there engaged in labor in which they’re significantly overqualified (on paper at least).

          When I worked for Wise County Schools, we tried to work with the Employment Commission to study employment trends and needs in our region, realizing that we had to include areas outside the county. This data for Southwest was extremely limited, probably due to the lack of employment opportunities in our area. The outcome of that study is that the workforce capacity of our region far outpaces the availability of meaningful employment. I think that’s why many of our families train their kids to successfully navigate the welfare system.

          For this part of the state, as well as others that are equally deficient in employment opportunities, I think there are a couple of strategies that could be employed to help provide our young people with better outcomes. The first I would sum up as build it and they will come. The second option is to work with students for job opportunities outside the region (or the state), and support them in that transition.

          The build it and they would come option has to do with specifically preparing interested students (who think they would like to stay close to home after school) with foundational technology skills to address the multitudes of shortfalls that we hear of in that labor market. Our part of the state has demonstrated that we can help students succeed in areas in which we apply our focus. If we could create a workforce ready to be molded in the specifics of whatever tech company would like to locate here (or allow our folks to telecommute), and the cost of doing business in Virginia doesn’t become prohibitive, I think this would help outcomes a bunch.

          The second option would be to prepare our students for the labor market elsewhere, and support them in their move. This brain drain already happens to a large degree in rural areas, and if there’s no incentive for these folks to stay, how is that a bad idea?

          I don’t think these would be the only good ideas, but I think they couldn’t hurt. These options seem to me to be much more aligned to positive, desired outcomes than many other boondoggles in which we’ve invested our attention and treasure. I’m sure there’s plenty of other great ideas out there, and we really need to approach this problem with an open mind. The only thing I’m sure of is that there is no one size fits all solution that will get us to where we wish to be.

          It is much less costly to produce winners through our public educational system than to support losers in our welfare and prison systems. How to produce losers is simple- keep on doing what we’ve been doing. Producing winners is the hard part.

        2. Matt Hurt Avatar
          Matt Hurt

          Yes sir.

          I think the first point of discussion should be whether to pay the piper now, or pay piper later. It seems that an investment in our students to make sure they are on par to compete with their cohort across the state is a rather insignificant sum compared to keeping these folks on the welfare rolls or keeping them in prison.

          I also don’t think this is a case that simply throwing money at it will guarantee desired outcomes. How to best educate our students is a multifaceted problem, and there are no simple fixes.

          One of the first steps (of many) to effectively address this issue is to study the data to determine what types of K-12 programs yield the best outcomes for our young people. We have made stabs at this in the past, trying to track post secondary educational outcomes in our universities and community colleges, but this data lags so much that it would be hard to control for the different variables at play. Similarly, to what degree does a two or four year (or more) degree correlate with desired outcomes for our young people. From what I understand, there are tons of highly indebted folks out there engaged in labor in which they’re significantly overqualified (on paper at least).

          When I worked for Wise County Schools, we tried to work with the Employment Commission to study employment trends and needs in our region, realizing that we had to include areas outside the county. This data for Southwest was extremely limited, probably due to the lack of employment opportunities in our area. The outcome of that study is that the workforce capacity of our region far outpaces the availability of meaningful employment. I think that’s why many of our families train their kids to successfully navigate the welfare system.

          For this part of the state, as well as others that are equally deficient in employment opportunities, I think there are a couple of strategies that could be employed to help provide our young people with better outcomes. The first I would sum up as build it and they will come. The second option is to work with students for job opportunities outside the region (or the state), and support them in that transition.

          The build it and they would come option has to do with specifically preparing interested students (who think they would like to stay close to home after school) with foundational technology skills to address the multitudes of shortfalls that we hear of in that labor market. Our part of the state has demonstrated that we can help students succeed in areas in which we apply our focus. If we could create a workforce ready to be molded in the specifics of whatever tech company would like to locate here (or allow our folks to telecommute), and the cost of doing business in Virginia doesn’t become prohibitive, I think this would help outcomes a bunch.

          The second option would be to prepare our students for the labor market elsewhere, and support them in their move. This brain drain already happens to a large degree in rural areas, and if there’s no incentive for these folks to stay, how is that a bad idea?

          I don’t think these would be the only good ideas, but I think they couldn’t hurt. These options seem to me to be much more aligned to positive, desired outcomes than many other boondoggles in which we’ve invested our attention and treasure. I’m sure there’s plenty of other great ideas out there, and we really need to approach this problem with an open mind. The only thing I’m sure of is that there is no one size fits all solution that will get us to where we wish to be.

          It is much less costly to produce winners through our public educational system than to support losers in our welfare and prison systems. How to produce losers is simple- keep on doing what we’ve been doing. Producing winners is the hard part.

          1. LarrytheG Avatar
            LarrytheG

            Thanks much for your reasonable and rational views! The basic premise – to invest in the kids, realizing we still don’t know all the answers, especially for economically disadvantaged, but keep at it – I could not agree with more.

  3. James Wyatt Whitehead Avatar
    James Wyatt Whitehead

    How old is the local composite index system for funding public schools?

    1. Dick Hall-Sizemore Avatar
      Dick Hall-Sizemore

      Although the on-line documents do not go back far enough to document it, I know that the local composite index was being used in the late 1970s.

      By the way, Bath and Surry counties have the highest composite index number because of the Dominion facilities located in those localities. They drive up the total value of taxable property. I am not sure what is driving the index up for Highland County.

      1. James Wyatt Whitehead Avatar
        James Wyatt Whitehead

        I remember looking up Mecklenburg and Halifax County school budgets. I was amazed to find a hair over 50% of funding coming from the state. It would be very hard to squeeze extra local dollars out of this region.

        It might be a good time to recalculate this formula to help underserved regions. Surely the wealthy in Loudoun and other areas wouldn’t mind. 40 plus years is a long time for an old formula.

        1. Dick Hall-Sizemore Avatar
          Dick Hall-Sizemore

          There have been calls to redo the formula; however, no one is willing to poke this beehive.

          1. James C. Sherlock Avatar
            James C. Sherlock

            I think you are exactly right, Dick. Like redistricting, fair is in the eye of the beholder.

        2. LarrytheG Avatar
          LarrytheG

          Conservative folk in NoVa call this LCI a “wealth transfer”. Go read some of DJ and TMT’s comments – they say that NoVa is subsidizing localities that can afford more and use the LCI to keep their taxes lower.

          The index does not work that way – it actually computes “ability to pay” but the richer localities still resent the concept.

          The equal funding of education for kids is not only an “equity” issue, it’s a Federal requirement:

          see: ” Landmark US Cases Related to Equality of Opportunity in K-12 Education

          https://edeq.stanford.edu/sections/landmark-us-cases-related-equality-opportunity-education

          Prior to these rulings, some localities had horrible schools with very low funding because it’s what the people in that county wanted – lower taxes even if there were other counties with well-funded schools. The courts said – every child in a state has to receive equivalent education resources and that led to such things as the LCI.

          1. DJRippert Avatar
            DJRippert

            *** Conservative folk in NoVa call this LCI a “wealth transfer” ***

            I give up – how is it not a wealth transfer?

            “The index does not work that way – it actually computes “ability to pay” but the richer localities still resent the concept.”

            OK, so you admit it’s a wealth transfer based on some bizarre calculation of “ability to pay” implemented by the Byrd Machine and perpetuated by the Imperial Clown Show in Richmond.

            What makes you think that calculation correctly calculates an “ability to pay”?

            For example, how is the fact that some places in Virginia have much higher costs of living taken into account by the LCI’s “ability to pay” calculation?

            If you were making $30,000 per year in Roanoke would you move to Manhattan to get a $35,000 per year job?

            .

          2. LarrytheG Avatar
            LarrytheG

            Well the Constitution requires equal resources for kids education regardless of where they live

            Is that a “mandated” wealth transfer?

            For the opponents of the LCI , not sure if I’ve ever seen specific and precise criticism of the current calculations, much less their proposal for a more fair calculation.

            Is equitable funding of kids education an inherently “socialist” concept? Honest question.

          3. Dick Hall-Sizemore Avatar
            Dick Hall-Sizemore

            It is not true that the state constitution requires “equal resources for kids education regardless of where they live.” It requires only that the Board of Education and General Assembly establish standards of quality (which, in effect, are minimum standards) and that the legislature “determine the manner in which funds are to be provided for the cost of maintaining an educational program meeting the
            prescribed standards of quality, and shall provide for the apportionment of the cost of such program between the Commonwealth and the local units of government comprising such school divisions.”

          4. LarrytheG Avatar
            LarrytheG

            I was under the impression (perhaps wrongly) that SCOTUS essentially mandated that states provide equitable funding on a per child basis no matter where they lived.

            And it appears, in effect, that’s what Virginia is doing with the LCI?

            re: cost of living – if Federal employees receive an adjusted higher salary for cost-of-living – isn’t that reflected in the aggregate totals used in LCI?

            I dunno.. perhaps Dick does.

          5. tmtfairfax Avatar
            tmtfairfax

            It’s not equitable if the LCI formula doesn’t take account of the differences in the price of housing and the real estate taxes generated therefrom. Assume it costs $200,000 for a house of a certain type and quality in X county, that will produce $2000 in taxes based on a 1% of the value effective tax rate. But in Fairfax County, the same house would cost $750,000, the tax would be $7500. But Fairfax County doesn’t have a windfall of $5500. The difference is the difference in the cost of housing such that both counties should be viewed as having the same true value of real estate and tax revenues. $2000 = $7500. Either X county needs to be adjusted up or Fairfax County needs to be adjusted down. Then we have a level playing field.

          6. LarrytheG Avatar
            LarrytheG

            okay so here is the index:

            https://slidetodoc.com/presentation_image_h/a10149bbbfc62829442525e4b913e5bb/image-23.jpg

            Composite Index Formula § The General Assembly establishes the Composite Index formula in the Appropriation Act. § The formula uses three indicators to estimate “ability-to-pay” for each locality: ü True Value of Real Property in the locality (weighted 50%) ü Va. Adjusted Gross Income in the locality (weighted 40%) ü Taxable Retail Sales in the locality (weighted 10%) § To account for varying sizes of localities, each indicator is expressed on a per capita basis (using local population & weighted 33%) and on a per pupil basis (using student enrollment & weighted 67%). § The index value for each locality is the local per capita/per pupil values in the formula as a proportion of the corresponding statewide average values.

            https://slidetodoc.com/overview-of-k12-education-funding-in-virginia-direct-2/

          7. Brian Leeper Avatar
            Brian Leeper

            No, because Manhattan is filled with godless Yankees!

  4. tmtfairfax Avatar
    tmtfairfax

    The big problem remains — the LCI does not address differences in the cost of living between NoVA and RoVA adequately. I have no trouble with the concept of measuring the ability of local governments to support their schools and sending some of my income tax dollars to help poor areas of the state. But equating a $100,000 home in rural Virginia to a $100,000 home in Fairfax County is economically and legally suspect. There also needs to be a greater adjustment for the number of low-income students. Fairfax County Public Schools has more low-income students than most school divisions have students.

  5. DJRippert Avatar
    DJRippert

    Richmond is somewhat interesting with a top 20 rating of .4688. However, that is a long way from the cap. Rappahannock is more interesting with a .7990 LCI index. I think both localities share the same issue – gentrification. In the case of Richmond the issue is pretty straightforward – a small number of very wealthy people gentrify neighborhoods and push up the total real estate value. They also push up the adjusted gross income (unless they are retired, then … maybe not so much). The real estate tax is a flat tax. I suspect that jurisdictions with growing income and wealth disparities lose state funding faster than the real estate taxes grow. This is also the case in Rapapahannock where wealthy people increasingly go to retire. This again increases the wealth disparity and forces the local government to choose between raising real estate taxes for everybody or finding more money for reduced state contribution to schools.

  6. Baconator with extra cheese Avatar
    Baconator with extra cheese

    According to Kenya Gibson, in her Richmond Free Press opinion piece, RVA schools don’t receive equitable funding due to systemic racism and massive resistance.

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