Study Finds Virginia Underfunds K-12 Schools, Recommends Spending Billions More

JLARC lays out $3.5 billion overhaul of state funding formula

Virginia’s complicated formula for funding K-12 schools needs an overhaul in order for the state to adequately fund public education, according to the results of a major legislative study presented Monday.

Analysts with the General Assembly’s Joint Legislative Audit and Review Commission told lawmakers the 18-month review showed the state allocates “far less than needed to sufficiently fund Virginia’s school system.” The formula that determines how much money each local school division gets from the state, officials found, “needs to be significantly improved and modernized.”

“In brief, we found that Virginia school divisions receive less funding per student than divisions in other states,” JLARC Chief Legislative Analyst Mark Gribbin said as he presented the results of a lengthy study the General Assembly requested in 2021.

Virginia’s school divisions receive 14% less funding from the state than the 50-state average, JLARC found, equal to about $1,900 less per student. It also spends 4% less than the more localized average for the South Atlantic region as defined by the U.S. Census. The review concluded Virginia spends comparatively more on K-12 schools than neighboring North Carolina and Tennessee, but less than Kentucky, Maryland and West Virginia.

Much of Virginia’s lagging status can be attributed to the state’s complicated Standards of Quality funding formula, which JLARC found routinely underestimates how much funding schools actually need to fulfill the government’s responsibility to provide every Virginia child with a quality education. In fiscal year 2021, for example, the SOQ formula indicated Virginia schools needed $10.7 billion in state and local funds. To fund their operations that year, schools actually spent $17.3 billion.

Sen. Janet Howell, D-Fairfax, who chairs JLARC, called the 163-page school spending report a “very important study,” going on to reference an election season in which Republicans are pushing for tax cuts and Democrats are calling for bigger increases in school funding.

“I would advise all candidates, not just for the General Assembly but also for school boards and county boards, to read this study and be informed about it and grapple with the implications,” Howell said at Monday’s meeting.

Sen. Jeremy McPike, D-Prince William, said the problem has been “pretty apparent” for anyone who has sent their children into classrooms that might have 30 students for each teacher.

“This report is not surprising to this parent,” McPike said.

The SOQ formula estimated school divisions needed 113,500 full-time instructional, support and administrative staffers in fiscal year 2021, according to the report. In reality, divisions employed 171,400 people to perform those duties.

“If we just funded at SOQ level, it would be a catastrophe,” an unnamed school administrator told JLARC.

Commission staff made several recommendations for how Virginia could overhaul its school funding benchmarks to be more in line with national averages. Though analysts stressed they were not suggesting all the changes could be made at once, the proposals collectively add up to about $3.5 billion in new spending.

House Appropriations Chairman Barry Knight, R-Virginia Beach, who serves on JLARC and is currently trying to negotiate a budget bill with Howell, said the new report doesn’t appear to take into account roughly $3.2 billion in new funding allocations to Virginia schools “over the last couple of years.”

“We’re both in concurrence that we want to put hundreds of millions of more dollars in there that may get us a whole lot closer to getting whole,” Knight said of Howell.

But he cautioned that money isn’t the only driver of educational success. The city of Richmond, he noted, spends significantly more per pupil than neighboring Henrico County, which generally has higher-rated schools than Richmond but less entrenched poverty.

“Sometimes throwing money doesn’t always solve the problem,” Knight said, adding that Virginia school divisions still have about $1.5 billion in federal pandemic aid that they need to spend before September of 2024.

Gov. Glenn Youngkin’s administration struck a similar tone in an official response attached to the JLARC report.

Secretary of Education Aimee Rogstad Guidera and Superintendent of Public Instruction Lisa Coons wrote that the report shows the complexity of an “indecipherable state funding formula” that should be “more student focused and outcome driven.” The new report, Youngkin’s education team continued, does little to connect spending to “the educational needs of students” and fails to account for recent spending increases that produced “the largest education budget” in Virginia’s history.

“Nevertheless, the report makes it clear that without reforms, increased investments in K-12 spending likely will not translate to improved student outcomes,” the Youngkin administration wrote, referring back to its proposals to change the state’s school accreditation system, boost expectations for standardized tests, improve math and reading performance and provide more career and technical education opportunities.

Specific flaws in the funding formula identified by JLARC include underestimating salary costs by underweighting salaries in the largest school divisions (many of which are located in high-cost Northern Virginia); not effectively taking into account how many higher-needs students a school division has due to poverty, special education needs and immigrant students learning English; failing to account for steep labor cost differences in different parts of the state; and overlooking the difficulties faced by very small, mostly rural school divisions that can’t achieve the same “economies of scale” as their larger counterparts.

The report found the local composite index portion of the formula, which measures a city or county’s ability to pay for its own schools by assessing the local tax base, is a “reasonable measure” but prone to dramatic swings based on local trends. For example, Richmond recently saw a $5 million drop in its state school funding due to big increases in local property tax assessments. Analysts recommended changing the LCI to look at a three-year average, which would smooth out year-to-year fluctuations.

In the near term, JLARC recommended that the state make about $1 billion in changes to boost funding for schools. The biggest near-term changes include better tracking students living in poverty and funding schools accordingly ($250 million), ending cost-saving measures instituted during the Great Recession such as capping support positions ($515 million), and changing how the state calculates salaries by using division averages instead of a formula that underweights higher salaries at the biggest school divisions ($190 million).

Another $2.5 billion in long-term recommendations include changing the formula to reflect actual staffing levels ($1.86 billion), better aligning the funding formula with local labor costs ($595 million) and providing extra funding to small school divisions with fewer than 2,000 students ($80 million).

Of the roughly $20.1 billion that currently funds Virginia’s K-12 public schools, approximately 39% comes from the state, 52% comes from localities and 9% comes from the federal government, according to JLARC’s presentation. Commission staffers repeatedly noted that regional differences can skew the statewide numbers, emphasizing that Fairfax County alone accounts for $2.5 billion of the local funding.

Virginia could simplify its school funding system, the report found, by switching to a student-based formula like the ones most other states use instead of a staffing-based formula.

“A well-designed student-based funding model would be more accurate, more transparent and easier to maintain over time than Virginia’s current staffing-based formula,” the report said.

Senate Minority Leader Tommy Norment, R-James City, asked what would happen if Virginia made major new investments in schools only to see those schools have fewer and fewer children to educate due to declining birth rates.

“There is no way, no way that divisions are going to cut back substantially once those numbers of declining students appear,” Norment said. “What do we do about that from a formula basis?”

Gribbin, the JLARC analyst, said every funding formula takes into account how many students a particular division serves.

“That would theoretically track up or down depending on what happens to the number of students,” he said.

Even as legislators signaled agreement the state could allocate significantly more money to public schools, both parties siezed on the report to fire partisan shots.

“It is our children who are suffering because extremists in the Virginia GOP would rather fund corporate giveaways than their education,” said House Minority Leader Don Scott, D-Portsmouth. “It is well past time the Republicans got serious about protecting and supporting our children and worked with us to make sure that our students have access to the best teachers, the best resources, and the best education possible.”

In a statement, Youngkin said his proposed budget included about $427 million in new funding for schools and called the report “a wake-up call” for “those who haven’t been listening to parents.”

“Today’s JLARC report lays plain that the previous two administrations failed to provide adequate funding in K-12 education and more importantly, never sought to reform the system to ensure that funding supports students and teachers in the classroom,” Youngkin said.