Updated Friday January 20, 2006

2004 GENERAL ASSEMBLY

EDUCATION BUDGET HIGHLIGHTS

It took more than 100 days for the 2004 General Assembly to complete work on a 2004-2006 budget. The regular, 60-day session was extended by three days before adjourning to a special session that stretched another 52 days. Finally, the impasse was broken when a group of moderate Republican teamed with their Democratic counterparts in the House and a bipartisan Senate to adopt the Tax Reform Compromise Act of 2004 (HB 5018). This package that generates an additional $1.5 billion for the next biennium, largely through increases in the state sales and cigarette taxes, set the stage for budget negotiators to craft a biennial budget that was adopted on May 7^th. 

The approved budget increases state funding to public education an additional $760 million over the introduced budget, thus providing about $1.5 billion over the FY04 budgeted amount. 

* It restores $328.1 million to reverse 1) nearly three-fourths (71%) of the proposed policy change, contained in the introduced budget, that would have deducted certain federal revenues from the Standards of Quality (SOQ) cost calculations ($217.5); and 2) all of the proposed deduction of locally generated revenues ($110.6 million over the biennium).

* HB 5018 (see above) also establishes the Public Education Standards of Quality/Local Real Estate Property Tax Relief Fund to receive half of the revenue generated by the ½ cent sales tax increase (the other half goes to the general fund) This is projected to provide nearly $378 million for the biennium, to be used as follows:

a) About $189 million from the fund is coupled with general funds to provide $326.1 million to fund revisions to the SOQ recommended by the Board of Education (BOE) and contained in HB 1014 and SB 479, namely to provide the following: five elementary school resource teachers per 1,000 students (for three periods of instruction per week in art, music and physical education); daily planning periods for middle and high school teachers (25% funded the first year, 100% the second year to yield a pupil/teacher ratio of 24:1 the first year and 21:1 the second year); and one instructional (second year only) and one support (both years) technology position per 1,000 students. The new staffing levels must be maintained locally beginning in FY06.

b) The remaining $189 million from the fund will be distributed based on the most recent triennial census of school-aged population, consistent with the distribution of the existing one-cent sales tax for public education. This offsets the state’s share of basic aid by about $106 million, so localities realize a 45% gain. Budget language states that these funds will be distributed in order “to relieve the financial pressure that public education programs place on local real estate taxes and shall be taken into account by the governing body of the county, city or town in setting real estate tax rates. 

* It funds a separate Virginia Retirement System (VRS) retirement rate for teachers at 6.03% in FY05 and 6.62% in FY06, and does not adopt the House-suggested position that VRS contributions by the state be capped in future years (note that the governor had proposed pooling retirement contribution rates for teachers and state employees to yield a teacher rate of 6.56% of salary). The retiree health care credit rate is set at .55 percent instead of the .59 included in the introduced budget. Further, budget language stipulates that the joint subcommittee to review the VRS will examine the state’s responsibilities for funding the teacher retirement system beyond the actuarial normal rate and the appropriate share for retirement payments by school divisions.

* It adds $50.6 million to fund 100% of at-risk four-year-olds unserved by Head Start programs. This amendment changes the funding formula for the at-risk four-year-olds program, also known as the Virginia Preschool Initiative, to eliminate the deduction of Title I students (all Head Start children will continue to be deducted) and increase the number of unserved four-year-olds from 60% to 90% the first year and 100% the second year for participating localities. Budget language calls for the establishment of academic standards for the program, which participating school divisions will have to follow in order to receive the funding. 

* Nearly $67 million is added to 1) finish the phase-in of the state recognizing the costs of administrative positions in calculating SOQ costs, first begun in 2002 ($45.6), and 2) eliminate, in FY06, the one month roll-over in the SOQ calculation of fringe benefit costs ($21.3 million).

* It adopts the BOE-recommended SOQ prevention, intervention and remediation methodology using additional lottery profits to fund more than $41 million of the program’s $65 million/year cost. Currently, lottery profits are sent to localities with the requirement that at least 50% be used on non-recurring costs and no more than 50% be used on recurring costs.

* The budget continues the school construction grants program ($27.5 million each year), but also diverts $268 million ($132 million the first year and $136 million the second year) in Literary Fund dollars to support teacher retirement. The Literary Fund provides low interest loans to school divisions for facility construction and renovation, but has seen its balances routinely raided in order to pay state costs for teacher retirement. The Fund once again will support an interest rate subsidy amount (reduced from $10 million to $5 million each year) for school construction loans. 

*The budget continues the Standards of Learning (SOL) Web-based Technology Initiative by providing nearly $60 million each year in Virginia Public School Authority (VPSA) notes for the purchase of hardware and software that will increase schools’ capability for web-based instruction, remediation and testing of the SOL. Grants are maintained at $26,000/school and $50,000/division. Debt service on the equipment notes will be paid from the Literary Fund.

* The budget continues the policy of funding non-personal technology costs through VPSA notes, saving the state $110 million in general funds.

* It provides an additional $19.7 million to increase from 10 to 17 the number of instructional positions per 1,000 students for whom English is a second language. This standard will become an SOQ staffing requirement in FY05.

* It includes funding of $2.9 million for National Board Certification Award payments of $5,000 for the first year of the award and $2,500 annually thereafter for the remaining nine years provided for the life of the certificate, for teachers earning national board certification. By FY06, the Department of Education (DOE) estimates that 160 teachers will be eligible for the initial bonus and 547 will be eligible for the continuing bonus, for a total of 707 teachers.

* The state saves $6 million each year by funding the K-3 class size reduction initiative based on per pupil amount that is the lower (rather than the current “higher”) of the division or statewide average amount.

* It eliminates $20.2 million contained in the introduced budget for the student achievement block grant. This grant, established in 2003, was composed of funding from the dropout prevention, school health incentive and technology assistants programs and was targeted for K-3 class size reduction, early reading intervention, at-risk four-year olds, SOL remediation or dropout prevention programs.

* The budget includes $50,000 the first year to assist students enrolled in the public schools of Virginia between 1954 and 1964, in jurisdictions in which schools were closed to avoid desegregation.

* It includes nearly $1 million the first year to continue school efficiency review pilot programs, which are designed to recommend cost-saving measures to school divisions. Language is included to stipulate that if two years after recommendations have been made and the school division has not certified that at least half the recommendations and savings have been implemented, the school division must reimburse the state for 25% of the review’s cost.

* An additional $400,000 for Jobs for Virginia Graduates is included in the budget. This is a school-to-graduation-to-work program, which places career specialists in schools in 15 communities as a partner with the local school divisions.

* The budget includes $6.3 million for increased costs for the SOL testing program and $3.7 million for the DOE to continue implementing on-line testing. Additional funding of $2.8 million each year is included for Project Graduation (regional academies and on-line tutorials for students who need help preparing for SOL tests).

* It provides $10.1 million for initiatives to improve student achievement and teacher quality in compliance with the No Child Left Behind (NCLB) Act. Initiatives include a mentoring program for teachers working in schools at risk of not meeting adequate yearly progress, a middle school math teacher initiative in at-risk schools, turnaround specialists to enhance leadership in schools that fail to improve student achievement, virtual Advanced Placement courses and GED tests. About $1 million of the funds will be targeted for competitive grants of $100,000 each for school divisions partnering with an institution of higher learning or other entity for a defined leadership development training program whose standards will be defined by the BOE. Budget language requires the DOE to continue to work with school divisions to estimate the cost impacts of the NCLB Act.     

* About $4.4 million is added to the DOE budget for development and implementation of a statewide student information system. NCLB requires states to report an increased amount of student-level information.

* A language amendment caps, at the end of the biennium, the amount of matching federal funds retained by the Department of Medical Assistance Services for administrative costs associated with the billing of school health services for Medicaid-eligible special education students who receive school health services.

* It includes $500,000 over the biennium for the Wolf Trap Institute for Early Learning through the Arts to deliver services to at-risk pre-school children by improving emergent literacy skills, enhancing academic and social development and increasing school readiness.

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