Highlights 

• The General Assembly directed Virginia's Joint Legislative Audit and Review Commission (JLARC) to study the cost of education in Virginia and assess the costs of the Standards of Quality.
• The JLARC study outlined both the inadequacy of state funding and the flaws in current state funding formulas.
• Virginia school divisions receive less K-12 funding per student than the 50-state average, the regional average and three of Virginia’s five bordering states.

Background

Standards of Quality (SOQ) Funding

In a recent CNBC Report on America’s Top States for Business in 2023, Virginia ranked second in the nation. More importantly, Virginia ranked number one for K-12 and post-secondary education. In the report, CNBC recognizes that a state’s education system “is its main source of talent and an engine of innovation.” While Virginia is the number one state for business, the same cannot be said for state education funding, unfortunately. In July 2023, results were released from a study that was requested by the Virginia General Assembly in 2021 to understand the costs of education in Virginia and the Standards of Quality (SOQ) funding formula.

The SOQ funding formula helps the General Assembly “establish and maintain a high quality public school system” by making sure there are enough staff members for each school division in the state. It estimates the cost of K-12 staff for each division, and then divides that cost between the state and local governments using what is known as the Local Composite Index (LCI).

*The LCI is used to determine a school division’s ability to pay for the local required share of education costs for the Standards of Quality and is calculated every two years. The LCI  considers property value, adjusted gross income, taxable retail sales, and the student and total population in each school division. (*Source: Virginia Municipal League)

The study revealed that Virginia school divisions receive less money per student compared to the national average, the average of nearby states, and three of Virginia's neighboring states. On average, school divisions in other states get 14% more funding per student than in Virginia, even after considering the differences in labor costs between states. This means that school divisions in other states get about $1,900 more per student than school divisions in Virginia. The study points out that localities (like Fairfax County) go above and beyond in local funding to make up for state funding shortfalls.

The study also found that Virginia's school divisions get less funding than what three funding benchmark models suggest is necessary to provide a quality education. The study cites that the benchmark models are the result of a JLARC analysis of prior cost students, research literature, expert interviews, educator work groups and staff modeling of funding needs. Somewhere between 73% and 89% of the state's school divisions receive funding that falls below these benchmarks, depending on the model and assumptions used.

Particularly troubling is that state funding for higher-needs students is below several benchmarks. 

These are only a few of the items covered by the comprehensive study, which was completed by Virginia’s Joint Legislative Audit and Review Commission (JLARC). It covers a wide variety of education funding topics, details areas where there are state funding shortfalls, and provides an extensive set of recommendations to improve and strengthen the SOQ formula and to bring state funding for K-12 education more in line with actual local costs and with national and regional averages. There is much work to be done around education funding and I will continue to advocate for each and every one of our students!

Talking Points

• Virginia school divisions receive less K-12 funding per student than the 50-state average and the regional average, which equates to approximately $1,900 per student in state underfunding of Virginia’s students. Many of Virginia’s neighboring states spend more per pupil, including West Virginia, Kentucky, and Maryland.
• The state Standards of Quality formula yields substantially less funding than actual division spending and benchmarks.
• The current SOQs dramatically underestimate the actual costs of public education, as evidenced by the fact that the SOQ formula provided $6.6 billion less than what was spent by local school divisions in FY 2021.
• The SOQ formula systematically underestimates school division costs, and still uses Great Recession-era cost reduction measures. These measures include the support positions ratio cap, which has artificially lowered the state’s funding contributions for critical educational support positions by hundreds of millions of dollars annually since its adoption in 2009. 
• The formula does not adequately account for local labor costs. As a result, the formula includes additional factors, such as the Cost of Competing Adjustment (COCA), as an acknowledgment of the formula’s failure to account for the cost of living. These factors are too small to appropriately counteract the inadequacy of the funding formula in recognizing the competitive salaries required in high-cost-of-living regions to attract and retain high-quality personnel.
• Over the last 10 years, per pupil state funding for special education students has declined by 16%.
• The formula does not adequately account for higher-needs students, and the methodology for at-risk students undercounts students in poverty.
• Virginia is one of nine states that use a staffing-based education funding model. Most states use a student-based K-12 funding formula.
• JLARC provided a series of Near- and Long-Term Recommendations to address the funding shortfalls they identified intended to address problems with existing funding formulas.
• In addition, they identified some policy options to go beyond current formulas, including moving Virginia toward a student-based K-12 funding formula.

Some of the JLARC recommendations include:

• Replacing the cost of competing adjustment with a newer, more accurate method (Labor Market Cost Index) (Long Term Recommendation 12). JLARC estimated additional state revenue to FCPS of $187.4M.
• Discontinuing Great Recession-era cost reductions (including eliminating support cap) (Near Term Recommendation 4). JLARC estimated additional state revenue to FCPS of $44.6M.
• Changes to student-based calculations for special education and English Learner funding (Policy Option 5). JLARC estimated additional state revenue to FCPS of $35.4M.

Ongoing Study

• The biennial budget establishes a Joint Subcommittee on Elementary and Secondary Education Funding (made up of five Senators from the Senate Finance Committee and five House members from House Appropriations) to provide on-going direction and oversight of Standards of Quality funding cost policies and to make recommendations to their respective committees.
• The Joint Subcommittee has been asked to review the recommendations and policy options offered in the Joint Legislative Audit and Review Commission's July 2023 report, “Virginia's K-12 Funding Formula."
• In that review, the Joint Subcommittee will determine the appropriateness of implementing each recommendation or policy option, propose appropriate amendments to each recommendation or policy option, and develop a long-range plan for the phased implementation of its recommendations.
• The vast majority of JLARC-related legislation introduced during the 2024 Regular Session is being “tabled” for this Session, with the content of the legislation being referred to the Joint Subcommittee for longer term consideration.
• The exceptions to this (so far) are proposals to address Policy Recommendation 5 (additional per pupil funding for English Learners and special education students) and to address Short Term Recommendations 9 and 10 (related to the state’s At-Risk Add-On Program, focused on funding for students in poverty).