House, Senate Budgets Far Apart on K-12 Funding (VA)

February 21, 2011

Funding for Virginia’s public schools is at the core of competing House and Senate versions of amendments to the state’s two-year, $78 billion budget, with millions of dollars in the balance for area school districts.

In the last three fiscal years, state K-12 funding has been reduced by $900 million, offset in part by the injection of federal stimulus dollars.

But with that well now dry, and $600 million in additional state revenue available this year, the Virginia Senate is looking to begin restoring the cuts.

Gov. Bob McDonnell and the Republican-controlled House of Delegates, however, have different plans for the dollars, instead directing them toward transportation needs and the increasing costs of Medicaid and payments to the Virginia Retirement System.

"In a tough budget, we must set priorities, not just raise taxes and spend more money," McDonnell said in response to questions from the Richmond Times-Dispatch. "The answer is not always found in new spending: It is found in utilizing existing dollars wisely and prudently."

A conference committee of senior legislators has begun work to reconcile differences between the House and Senate budget plans ahead of lawmakers’ scheduled Feb. 26 adjournment.

The annual battle over K-12 funding is nothing new, but with the state’s economic outlook improving, the pressure to increase aid has intensified. And this year, there’s a twist.

Last year, the local composite index — a formula that determines the amount of state funding for localities — was adjusted, as it is every two years. But this time, the results were dramatic.

The adjustment, whi ch relies primarily on real estate values and gross income, showed Northern Virginia localities losing revenue dramatically, requiring a major injection of state dollars. That was because the changes were based on 2007 data.

"Northern Virginia’s housing market tanked before everyone else," said Jim Regimbal, a fiscal consultant for the Virginia Municipal League. "Northern Virginia appeared to have dropped in wealth relative to the rest of the state. But by the time the composite index came out, everyone had gotten hit."

Because of the anomaly, 97 of the state’s 134 school systems stood to lose state aid under the new composite index, and nearly all of those who stood to gain were in Northern Virginia.

To ease the pain for the rest of the state, the legislature crafted a compromise called "hold harmless" funding, which offered a pot of money to the school systems that would be hurt by the adjustment.

For the coming fiscal year that starts July 1, school systems were to receive half of the funds they would have lost under the adjustment — $58 million in total.

This year, McDonnell proposed taking back that second year of "hold harmless" dollars, using most of it as the state’s share to partially offset the soaring cost of Virginia Retirement System teacher pension payments.

For Richmond-area school systems, though, that represents a $9 million loss in revenue — $5.5 million for the city alone.

"This essentially takes funding which has already been allocated for use by schools to make a payment to VRS," said Mary Jo Fields with the Virginia Municipal League.
<br /& gt;
"We no longer care what they call it, but the $5.5 million is a big difference for us," said Kim Bridges, chairwoman of the Richmond School Board. "Without that money restored somehow, we're looking at teacher furloughs, additional program cuts and cuts at the local school level of 5 percent across the board. This will impact a wide variety of services."

McDonnell says it’s about priorities, noting that in the past decade, K-12 funding has grown six times faster than the rate of enrollment.

"For the sake of the future financial security of our public educators, we must take dramatic steps now to inject more funding into the (Virginia Retirement) system," said McDonnell. "The $58 million is best used in shoring up the underfunded retirement system our educators will rely upon in the years ahead."

The House of Delegates agreed, proposing that the funds be used for the same purpose, but it would cut school divisions an $82 million break in the form of a VRS "rate holiday," covering the localities’ portion of teacher pension payments for one year.

"That’s a one-time solution," said Chesterfield County Superintendent of Schools Marcus J. Newsome. "The major concern with the House budget is the cut in basic aid. That would result in long-term negative impact not only for Chesterfield, but for school divisions across the state."

Fields agreed, adding that the House plan eliminates funding for middle school resource teachers and school-bus replacement. "This would affect funding, not only for next year but also for future biennia," she said.

In total, the House amendments w ould spend about the same as the governor’s on overall K-12 funding — $50 million less than proposed in last year’s budget.

* * * * *
The Senate’s plan offers a starkly different approach, restoring $16.6 million of the "hold harmless" funds and an additional $100 million in overall K-12 funding, essentially offsetting the composite index change last year. In total, the Senate would provide about $130 per student more than the House, said Fields.

"It starts to move us back in the right direction, but it does not come close to helping us rebuild from the cuts that we’ve endured," said Newsome.

But like the governor’s proposals, it would increase the local contribution rate for teacher pensions effective immediately, an additional expenditure for local governments.

Fields said the Virginia Municipal League does not object to that increase because "the Senate is not taking money that has already been allocated to schools in order to pay its share of the increase in retirement costs."

For Richmond-area school systems, the difference between the budget plans is significant, with the Senate’s version representing about $20 million in additional funding for Richmond and the counties of Chesterfield, Henrico and Hanover.

In the city alone, the Senate’s plan would offer $5.2 million in additional funding, according to the VML’s estimates. Chesterfield would gain $8.2 million under the Senate’s plan, Henrico $3.8 million and Hanover $1.6 million.

Rob Jones of the Virginia Education Association sees the direct difference to school systems as even larger, noting that the changes to VRS payments don’t represent a dditional dollars for the schools.

Excluding the retirement changes, the VEA’s figures show $25 million that Richmond, Chesterfield, Henrico and Hanover would not see under the House plan.

"We’re still seeing the local school divisions shedding jobs," said Jones. "That can save a lot of jobs and keep classes smaller."

Jones said school systems — still struggling from deep cuts in past years, faced with the prospect of no additional help from the state and with still declining local revenues — are faced with tough choices.

"A lot of what we’re seeing is school divisions saying, ‘Well, we only have to provide one foreign language, so let’s get rid of the French and the German and Latin and we’ll just have Spanish,’?" he said. "The Senate’s plan would at least prevent that continuation of the bloodletting."

But McDonnell said the time has come for the state and its school systems to learn to do more with less, noting that he is committed to not creating new spending demands in future years.

"Virginians are living within their means; we must do the same in Richmond," he said.