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August 13, 2015

Still Failing on School Funding

More than six years after the end of the recession, Virginia is still short-changing public education by underestimating costs in the formula it uses to determine how much education funding school divisions receive. As lawmakers begin preparing the next two-year budget, they should make it a priority to strengthen the formula and make sure that it reflects the true cost of educating our students.

Most state funding for education in Virginia is allocated using a formula called the Standards of Quality (SOQ). Every two years, the state attempts to estimate how much it costs to operate Virginia’s public schools by plugging new data such as school enrollment into this formula. The state then funds a portion of this total amount, leaving the rest of the costs to the cities and counties.

But while the formula is supposed to reflect the costs school divisions face in providing a high-quality education for their students, only a fraction of their actual costs are included. Changes in the formula in the mid-2000s resulted in modest improvement. But short-sighted policy decisions after the Great Recession more than eliminated these improvements. As a result, the portion of actual school operations costs recognized as SOQ costs (state and local match dollars) by the formula decreased from 73 percent in 2008-2009 to 64 percent in 2012-2013. At the same time, the portion of non-federal education costs paid by the state fell from 48 percent to 44 percent.

These changes include only replacing buses every 15 years, rather than 12, and capping funding for critical support positions such as social workers, truancy and dropout prevention staff, and school psychologists. The state also cut out entire categories of school expenses from the formula, meaning that the state no longer pays its share of these costs, including certain equipment and travel.

These formula changes saved the state a lot of money, but they did so at great cost to localities, which paid to fill some of the gaps, and to students, who suffered when other gaps went unfilled. Not all localities are equally able to make up shortfalls. As a result, struggling communities with the highest rates of children living in poverty have been hit harder than others. This means the quality of a child’s K-12 education in Virginia is becoming more reliant on where that student lives.

More than five years since the official end of the Great Recession, state funding for education has not recovered from the cuts legislators made to deal with budget deficits caused by the economic downturn. For the upcoming school year, per student direct state aid for Virginia’s schools is still down about 14.5 percent after adjusting for inflation from its peak in the 2008-2009 school year. That may not seem like a lot, but to return to these pre-recession funding levels, the state would need to invest about $1 billion more during the next fiscal year.

As Governor McAuliffe and other lawmakers prepare the next two-year budget, they should be sure to invest wisely in our schools. That means reversing many of the the recession-era cuts to the SOQ funding formula, like the cap on support positions. It also means increasing teacher salaries which have continued to slide down the national rankings, and helping schools with construction projects. Until we reverse these recession-era changes to the SOQ formula, Virginia will continue failing on school funding.

Aaron Williams, Research Assistant

The Commonwealth Institute

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