Did you ever wonder how the state figures out how it allocates its tax dollars among Virginia’s 131 school divisions?
Well, it’s a somewhat complex formula based on the value of real estate, adjusted gross income and taxable retail sales in a given community, with each of those factors weighed differently. This formula is called the Local Composite Index.
Basically, the Local Composite Index is supposed to calculate what a given county can afford to pay on its own through local tax dollars, and how much the state will then kick in. Wealthier towns, counties and cities, the thinking goes, should be able to foot more of the bill on their own for their K-12 education needs.
The state then takes this figure, the LCI, and using the division’s student enrollment (Average Daily Membership or ADM), gives each school division a piece of the state’s educational funding pie, based on Virginia’s Standards of Quality, or SOQ. Yes, it’s quite a complex and confusing bunch of abbreviations, and that’s just scratching the surface.
Rural communities such as Mathews, Middlesex and Lancaster, with expensive waterfront properties, are struggling under the current system. For the 2024-2026 biennium, the LCI in Mathews stands at .5904; Middlesex is .6389, and Lancaster is .8000 (the highest LCI in the state’s accounting formula). What that means is that for every dollar spent on SOQ education needs, Mathews is expected to pay 59 cents through real estate and personal property tax revenues, Middlesex is paying nearly 64 cents and Lancaster pays 80 cents through local taxes.
Other divisions fare somewhat better in the Local Composite Index calculus, with Gloucester’s LCI at .3999 and the Town of West Point’s at .2489, for instance. Gloucester then is expected to pay about 40 cents for every dollar and West Point is expected to pay a quarter through local tax revenues.
It’s much more complex than that. The SOQ establishes minimum staffing standards and funds only that. So, say the state announces it is giving a 5 percent raise for teachers. What that means is the state will give its share (through the formula mentioned above) of that 5 percent for teachers that fall under that minimum standard. If a locality like Mathews wants to give all employees (non-SOQ teachers and support personnel) that 5 percent raise, it’s going to cost the Mathews taxpayers a lot more through local taxes. And if it doesn’t pass along that 5 percent raise to the SOQ-funded positions, the county would then lose the promised state raise money.
The state needs to overhaul its educational funding system. In the meantime, the Virginia Department of Education should consider helping out localities that have been adversely affected through the LCI formula with some kind of supplemental funding.