The Absolute Primer on How Public Schools are Funded

February 26th, 2010 by Kim Lenz

As news of Gov. Bob McDonnell’s proposed cuts to education spread, concerned parents and citizens started e-mail campaigns to preserve education funding in the Historic Triangle.

Some wanted to contact the area’s delegates; others wanted to make their priorities known to the local school boards. Many had questions about how school is funded in the first place and who has the authority to make cuts; essentially, who could stop this from happening?

WYDaily decided to tackle some of the basic questions about how public schools are funded and who makes the decisions.

How does the federal government contribute?
In Virginia, schools are financed through a combination of federal, state and local funds. Businesses and private individuals also contribute to schools.

The federal government gives grant money to schools to finance various programs, including funds for special education, at-risk programming, school meals, preschools, technology initiatives and more. Much of the funding was authorized by the No Child Left Behind (NCLB) statute of 2001.

In Williamsburg-James City County schools, for example, the federal government was projected to give $3.2 million in grant funding in 2010. Some of that funding included Title I funds, which are allocated to schools with high populations of students receiving free and reduced lunch. James River Elementary, the division’s only magnet school, receives Title I funds.

How does the state finance schools?

State funds are appropriated for public education by the General Assembly. The GA finances schools primarily through the general fund, but also through retail sales and use tax revenues, state lottery proceeds and other revenue sources. In Fiscal Year 2010, the state allocated $5.3 billion for public education. The state’s total FY 2010 budget was $37.9 billion.

What are the “Standards of Quality”?

The Virginia Board of Education determines the Standards of Quality (SOQ), the minimum amount of programming school divisions must provide. The General Assembly revises the SOQ, determines how much it will cost to meet the standards and figures out how the state and localities will fund the SOQ. State funding must be matched by localities, but localities are free to spend more money on programs than required.

The SOQ determines the minimum amount of staff school divisions should employ. More than 80 percent of SOQ funding is for salaries and benefits.

To determine the cost of maintaining the SOQ, the state looks at the amount of required instructional personnel (salary and benefits), the recognized support positions and the non-personal support costs. “Non-personal” refers to costs beyond salary and benefits, such as supplies and utilities. A division’s SOQ funding is determined on a per-pupil basis and the costs are calculated according to the March 31 Annual Daily Membership, which figures how many students were actually attending a school on that date.

The SOQ is updated every two years to account for changes in the student population, staffing standards, salary changes, fringe benefit rates, support costs, inflation, federal revenues, sales tax revenues and local composite index scores.

The complex calculation to determine funding goes something like this: the cost components (Staffing standards, number of students, etc.) are added together, then the federal revenues are subtracted. Once the total SOQ costs are known, the per-pupil amounts for each division are figured out, then multiplied by the projected enrollment. That determines the total cost to maintain the SOQ.

As budget outlooks have grown bleak, some administrators have called for some of the standards to be relaxed. The WJCC school board’s legislative agenda asked the state to either fund all of the standards required in the SOQ or remove some of the requirements.

How much do cities and counties contribute?

Once the total cost to maintain the SOQ is determined, the state uses the Local Composite Index score to figure how much of the burden can be carried by the locality. The LCI is calculated using three factors: the true value of real property (weighted 50 percent), adjusted gross income (weighted 40 percent) and taxable retail sales (weighted 10 percent).

The composite index score has already been calculated for the 2010-2012 biennium; former Gov. Tim Kaine proposed freezing the numbers at their previous amounts, but McDonnell proposed moving forward with the new composite index numbers.

Any locality with a higher composite index after the change will receive less state funding. For that reason, Hampton Roads schools were hopeful the new governor and GA would follow Kaine’s lead. But freezing the planned change would have cost Northern Virginia schools more than $100 million, a reason McDonnell cited for his decision.

What are the LCI scores in the Triangle?

For 2010-2012, Williamsburg’s true value of property is about $1.9 billion; its adjusted gross income (including nonresidents) is $404.8 million; its taxable retail sales revenue is about $417.6 million. When the March 31 annual daily membership was recorded, 758 students from Williamsburg attended schools. Those numbers were used to compile the composite index, which came out to .8000.

Williamsburg’s relatively high composite index score is the same as Alexandria’s and compared to the rest of the Historic Triangle, Williamsburg is the locality with the most ability to pay for its education. But when the March 31 ADM was counted, the city contributed fewer than 800 students to the 10,111 student population in WJCC.

For James City County, the true value of property is about $11.5 billion; the adjusted gross income (including nonresidents) is about $2.3 billion; the taxable retail sales revenue is $843.4 million. On March 31, James City County families sent 9,353 students to school. James City County’s composite index was calculated to be .5668. In the previous biennium, the composite index was .5286.

Finally, in York County, the true value of property is about $9.3 billion; the adjusted gross income (including nonresidents) is about $1.8 billion; the taxable retail sales revenue is $865.8 million. Its March 31 Annual Daily Membership was 12,745. Its composite index for the biennium is .3727.

The communities in the Historic Triangle have lower real estate taxes than the rest of the Peninsula. Williamsburg has the lowest real estate tax rate, at $.54 per every $100 of a home’s assessed value. James City County’s real estate tax rate is $.77/$100 of assessed value and York County’s is $.6575/$100. Newport News has the highest real estate tax rate on the Peninsula, at $1.10 per $100 of the assessed value.

So how is all of that information translated in dollars? In 2009, Williamsburg contributed $7, 024,365 (or 6.1 percent) to WJCC schools. In the same year, James City County contributed $74,844,700 (or 65 percent) to WJCC schools. In total, local funds accounted for 71 percent of WJCC’s operating budget in FY 2009-2010.

The state contributed an additional $32.8 million (or 28.5 percent) of the operating budget. The majority of the funding comes from the Standards of Quality fund; 2 percent comes from the Categorical/Incentive fund and the Lottery Fund.

Who makes the decisions at my child’s school?
Education cuts are difficult to make because funds are typically allocated for specific expenditures, meaning schools cannot use allocated funds for anything other than their intended purpose. For example, a school cannot use money earmarked for construction projects to save the jobs of teacher assistants.

Each school division creates a Superintendent’s proposed budget in the first months of the year. The budget includes the expenses required by the Standards of Quality and No Child Left Behind, along with any division-specific programming. The proposed budget is then sent to the school board for review, at which point the school board makes changes as necessary.

Once the school board has approved and edited the superintendent’s budget, it becomes the school board’s budget. That budget is presented to the Board of Supervisors or City Council for final approval.

As the budget moves through the ruling bodies, it changes to reflect the state and federal contributions. Sometimes the state or federal government will realize mid-year that projected revenues will be less than expected; for that reason, schools sometimes are forced to make cuts to their already prepared budgets.

The York County superintendent’s budget is posted here. WJCC’s budget process has been delayed, but the division has set up meetings to discuss the budget. Read more here.

9 Responses to The Absolute Primer on How Public Schools are Funded

  1. Anonymous

    February 26, 2010 at 2:23 pm

    Budget cuts are the only option available to the governor.If the citizens of James City County want more money for schools they should raise their taxes.We are in an economic crisis and everyone must make do with less.It is time we begin thinking outside the box for ways to improve education with less money.Teachers, parents and administrators must sit down and work together to make the system more efficient and effective.The federal government is passing unfunded mandates and has addicted the states to federal funds that they take from us or borrow. Why should Washington be funding public education?Can’t we pay for it ourselves? Can’t we take care of our own children?Let’s step up and take responsibility for educating our children.

  2. Anonymous

    February 26, 2010 at 2:54 pm

    We can not afford to take budget cuts in our schools. We have students now who are falling everyday thru the cracks. Increase the revenue from lottery sales if funding is needed.

  3. Anonymous

    February 26, 2010 at 4:12 pm

    I commend the WYD for this comprehensive treatment of a confusing and bureaucratic process. This is how an everyday news source becomes a great news source. I also agree with keith. If parents want the ability to maintain status quo without the funding, they must do what is required in other areas of the economy… compromise or pay up with increased taxes. Could it be that so many of the parents of school age children in W/JCC are objecting to supporting the public school system while sending their privileged children to private schools?

  4. Anonymous

    February 26, 2010 at 4:42 pm

    According to the WJC School Division Annual Report for 2008-2009 the student population was 10,248. There were an additional 290 children in Pre-K programs such as Head Start and Bright Beginnings. The VDOE gives the number of students enrolled in the School Nutrition Program for 2008-2009 as 10,558. The data from both sources indicate a total student population larger than that cited in the article. Can Ms. Lester also provide some accurate information on where the public school student population statistic she used came from?

  5. Anonymous

    February 26, 2010 at 5:17 pm

    Mr. Ziaman,
    Good catch! The 10,111 population would be the combined annual daily membership numbers for Williamsburg and JCC on March 31, which we have now clarified in the text. According to the VDOE’s school report card on WJCC, the total student population for 2009-2010 was 10,797. That population is reported on Sept. 30. Because the ADM is specifically cited as one of the components that determine funding, I was working off those numbers. You can read more on the school division’s report card here:

  6. Anonymous

    February 26, 2010 at 5:36 pm

    There seems to be plenty of money available to fight wars and bail out banks. There never seems to be enough money to educate our children. Have I missed something along the way? Only 2% of the Virginia Lottery money goes to schools. Please, I beg of you to just directly send money to the education fund. My bets are on our children.

  7. Anonymous

    February 26, 2010 at 6:06 pm

    For over 20 years I taught in Fairfax Co. I saw much waste, much destruction of solid curriculum, huge overhead of administration. One parent said her son had been in so many “pilot programs” he should get a license instead of a diploma.
    Somewhere I read that in the past several years school spending had gone up 30% while enrollment was up 5%, something like that. Probably we can’t get back to basics, because they have been forgotten. But homeschoolers buy my book on diagramming sentences. Heh.

  8. Anonymous

    February 27, 2010 at 5:48 pm

    The Governor has many choices he cam make in the operation of the state with the approval of the Genral Assembly.

    He can offer a budget that raises taxes, but he needs the votes in the General Assembly. So the GA chooses to redistribute the general revenue for the lost local revenue for the car tax back to the wealthiest localities. It is a choice.

    The governor choose to open rest areas rather than placing the funds for road maintainance. The GA supported that.

    The GA choose to freeze children’s health insurance and drop the income level for medicaid eligibility. The Governor supports that.

    There are choices to be made when developing a budget. For tax payers the question is do those the choices that reflect their values for their communities, families and themselves.

    There are choices, there are priorities and there is tough decisions. The Governor has a choices. They do reflect my view of good public policy for the Commonwealth.

  9. Anonymous

    March 11, 2010 at 2:35 pm

    When the lottery was being proposed to the state a major selling point was that the profits would go to the state schools. Some has but the bulk has not. When the time comes the teachers better be the last option for reducing spending. Let us start by eliminating all sports programs. How much money is spent on upkeep of the football and soccer fields? All that space could be used for solar panels to reduce electrical usage. We need our teachers we don’t need our kids playing games. If you want your kids to play games then YOU pay for it. We have to re-examine our priorities if we expect to teach our kids anything. We have to let them know that their education has to take precedence over a game no matter what has been said in the past (about how these games teach teamwork). Look at the state of pro athletics lately.

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