New Funding Formula Could Cost County Schools $590,000

January 27, 2010

The budget crunch for Franklin County schools could have been even worse in the next fiscal year than the projected $6 million shortfall if former Gov. Tim Kaine had not recommended a one-year delay in new figures for the state school funding formula.

However, the General Assembly and Gov. Bob McDonnell could still reject Kaine’s recommendation.

If they veto Kaine’s proposal, Franklin County schools stand to lose an additional $590,000 in state school funds in the next fiscal year, according to the Virginia Department of Education. This would be in addition to the $6 million shortfall that county schools are already facing.

Franklin County schools could lose $590,000 in additional state school funds because of a state constitutional requirement that poorer localities receive a higher percentage of state school funds than affluent localities.

Franklin County could receive less state money because its financial ability to pay for schools has improved during recent years. As a result, the county would pay a higher percentage of school costs because it is more affluent, based on the state school funding formula.

Years ago, the Virginia Supreme Court ruled that the state must use a funding formula to help direct more state school funds to localities that have less financial ability to educate children.

The court did not say which funding formula must be used — only that some redistribution of state school funds must occur.

State officials developed a funding formula, known as the Local Composite Index (LCI), which determines what percentage a school system must pay of the costs for the state-mandated Standards of Quality (SOQs).

The LCI is calculated through a complicated formula that seeks to determine which school systems can afford to pay more of their own SOQs and which school systems have less financial ability to pay.

The LCI determines the percentage of SOQ positions that must be funded locally, based on the locality’s ability to pay.

In determining a locality’s financial ability to pay, the formula considers several financial variables.

To calculate the LCI for a locality, 50 percent of the true value of real estate, 40 percent of the gross income and 10 percent of the sales tax collections of each locality are totaled and then weighted two-thirds by enrollment and one-third by population.

This calculation produced a LCI of .4012 for Franklin County for the 2010-2012 biennium. This means that the county has to pay 40 percent of the costs for the SOQs during the next two years.

Under the funding formula, the LCI has a cap of .8000, meaning localities can be required to pay no more than 80 percent of the costs for the SOQs. But there is no minimum for poorer localities.

Less than 30 out of 136 school systems in Virginia are required to pay more tha n 50 percent of the costs for the SOQs (e.g. have a LCI above .5000).

The LCI is recalculated every two years because the real estate values, retail sales and income figures can change.

Of 136 localities in state, only 10 have an LCI of .8000 and must pay 80 percent of the costs of the SOQs. They are Arlington, Bath County, Goochland County, Lancaster County, Rappahannock County, Alexandria, Falls Church, Williamsburg and Fairfax City.

At the lower end, several localities in Central and Western Virginia have LCIs of less than .2500 and pay less than 20 percent of the costs of the SOQs. These localities include Lee County ( LCI .1692); Scott County (LCI . 1821); Wise County (LCI .1885); Dickenson County (LCI .1940); Martinsville (LCI .2263); Henry County (LCI .2315); and Patrick County (LCI .2439).