The 2002 General Assembly: EDUCATION BUDGET HIGHLIGHTS

OVERVIEW

The approved biennial budget appropriates approximately $4.5 billion in state funds for education in both FY03 and FY04. It restores half of the funding for the School Construction Grants Program ($27.5 million each year) that was proposed for elimination in the introduced budget. Each school division will receive a lump sum grant of $100,000, with the remaining funds distributed on a prorata basis using prior year average daily membership weighted for the composite index. Budget language allows the Secretary of Education to authorize use of part of the state’s tax-exempt private activity bond authority available under federal law, in order to establish demonstration projects that leverage private sector involvement and financing of public school construction and renovation.

While no teacher salary increases are included in the first year of the 2002-2004 budget, the spending plan provides $101.4 million in a reserve account to be used for second-year pay increases for state employees, faculty, state-supported local employees and school teachers. Legislators are expected to address the second-year salary issue during the 2003 session. An additional $2.4 million is provided for awarding first-time grants and continuing bonuses for teachers who are certified by the National Board of Professional Teaching Standards. Also, an additional $9.9 million in lottery proceeds in FY03 and $10.0 million in FY04 is anticipated, 60% of which pays for a portion of the state share of basic aid costs, with the remaining 40% distributed to school divisions.

JLARC RECOMMENDATIONS

The budget begins to fund two of the recommendations contained in the JLARC report on elementary and secondary education funding. Specifically, an additional $24.8 million in FY03 and $50 million in FY04 is added to basic aid for eliminating the practice of deducting locally generated costs from the Standards of Quality (SOQ) cost calculations, with 50% of the revenues deducted in FY03 and none deducted in FY04. The spending plan also begins to phase-in recognition of the costs of administrative positions (school board services, executive administration, information, personnel, planning, fiscal, purchasing, copying/printing, and data processing services) in calculating SOQ costs; funding of $4.1 million is provided in FY03 (5.8% of the state share) and $54.2 million in FY04 (72%). Language in the budget also implements another JLARC recommendation by requiring the Department of Education (DOE) to determine if localities are meeting required local effort provisions.

REDUCTIONS

To find dollars for these and other actions, a number of program reductions and captured savings were utilized. Eliminated were the additional teachers program ($57 million over the biennium), the school building maintenance supplement ($19.3 million over the two years), and a handful of programs funded at the local or regional level (totaling $2.4 million). Also, the Standards of Learning (SOL) Teacher Training Program ($35 million), the SOL Materials Program ($12.8 million), the elementary and middle school truancy program ($4.3 million) and the Reading Recovery Program ($283,000) were discontinued (however, staff development funding through the SOQ increased from $306 to $490/instructional position). In addition, categorical funding for Project Discovery, the At-Risk and Dropout Prevention programs were reduced by 7% the first year and 8% the second year. New grants slated to be awarded in 2003 and totaling $3 million for School Community Health Centers were eliminated. Funding of nearly $2.5 million for the Virginia Guaranteed Assistance Program and $650,000 for the Jobs for Virginia Graduates program was eliminated, as was federal funding totaling about $11.4 million for School-to-Work grants (that program is expiring in FY04).

The lottery hold harmless program ($29.7 million) was eliminated, and approximately $36 million in costs were shifted from the state to localities for the retired teacher health insurance credit program. Also, $176 million was diverted from the Literary Fund in the next biennium; when added to the $110 million diverted in FY02, results in more than a quarter billion dollars being used for teacher retirement rather than for low interest school construction loans. Interest rate subsidies in the next biennium will allow current projects on the Literary Fund’s waiting list to be funded in the next two years; however any new projects seeking funds will not receive funds. Several technical changes are made that capture savings or unspent balances, including savings garnered by reducing funding to the Virginia Retirement System (VRS) to reflect a group life premium holiday in both years of the budget, and by updating inflation factors ($66.8 million) used in determining SOQ funding.

FEDERAL FUNDING

The budget also is buffered by the addition of new federal dollars, namely as a result of the recently approved reauthorization of the Elementary and Secondary Education Act (dubbed the “No Child Left Behind” Act). This includes additional first-year funding of $16.9 million for “Reading First” grants, $52.1 million for teaching quality grants, and $7.9 million to begin complying with new federal testing requirements. Also, an additional $27.4 million in federal special education dollars is expected in FY03. Reductions in federal funding include more than $2.8 million due to expiration of Technology Literacy Challenge grants and $8.7 million that is dropped due to expiration of the Goals 2000 program.

DEPARTMENT OF EDUCATION

This summer, the DOE will lose its six of its eight regional “best practices” centers that were established several years ago to assist local school divisions with SOL implementation; centers serving southside and southwest Virginia will remain. The Web-based SOL testing program is delayed for one year, to 2004, at a state savings of nearly $3.5 million. As a result school divisions will have an additional year to prepare for high school level on-line testing. Citing improvements in school scores on the Standards of Learning (SOL) tests, the budget removes just over $750,000 is taken from the Standards of Accreditation (SOA) Academic Review Teams. Over $1.7 million is included for developing Standards of Learning (SOL) history tests (separate tests in grades five through eight and for changing tests to correspond to revised SOLs in history).

A group life insurance premium holiday is enacted for both years of the next biennium, saving money for both the state and local school divisions. Language omitted from the introduced budget is restored to provide flexibility in the use of SOQ and SOL remediation funds. Budget language eliminates the Literacy Passport Test, passage of which has been a student graduation requirement, in July 2003. Budget language also directs the DOE to work with the Department of Medical Assistance Services to expand the services covered under the special education billing program so as to generate additional Medicaid funds for local school divisions. The Department of Education is charged with developing recommendations for a school food allergy program, including provisions for educational materials on food allergy awareness.

E-mail Response

Questions or More Information? Please contact CEPI if you have any questions or need additional information about the 2002 General Assembly. A final summary of legislative action from the 2002 General Assembly is posted on this Web site.

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