State funding formula has the deck stacked against Rapp schools
If current trends continue, in five years it could be more economically viable for children to be educated outside the county
If current trends continue, in five years it could be more economically viable for children to be educated outside the county.
By state mandate, Rappahannock County is responsible for providing 79.996% of the funding for its public education budget. Only eight school divisions in the commonwealth pay a greater percentage; Arlington, Alexandria, Bath, Fairfax City, Falls Church, Goochland, Highland and Surry counties all pay an even 80% of their education expenses.
That’s because on paper, Rappahannock ranks among the top 10 wealthiest school divisions in Virginia, according to the Department of Education. That ranking is derived from a formula called the “Composite Index of Local Ability to Pay,” more commonly known as the Local Composite Index, or LCI.
Gary Aichele, Chair of the Headwaters Foundation, explained that while a high LCI score in some districts (like Fairfax and Arlington) does indeed correspond with a high ability to pay, Rappahannock’s high score has a “devastating” effect on its schools.
“There are unique circumstances in Rappahannock and at least two other counties where it results in enormous inequities,” Aichele said.
Unique circumstances?
A school division’s LCI is calculated using three indicators to determine the locality’s wealth: taxable retail sales, adjusted gross income and the true value of real property.
“What the formula is doing here is identifying the taxable base generally speaking,” said Edward Lanza, budget director for the Virginia Department of Education.
“If you've got high real estate values, you have a higher capacity to collect real estate taxes. If you've got higher income, you've got a greater capacity to generate taxes from your income. And then with the taxable sales obviously that's your ability to generate sales tax revenue. So technically and conceptually it’s very basic because it's looking at some of the major sources,” Lanza said.
Rappahannock’s LCI is .7996, .0004 points away from the state maximum. The high LCI is mainly driven by two factors: the value of real property in the county, which has only increased during the pandemic, and adjusted gross income.
The value of real property is the most important indicator because it is weighted to account for 50% of the LCI score. In Rappahannock County, the “true value” of real estate is close to $2.2 billion, but the value of taxable real estate in the county is more like $1.6 billion. It’s worth noting that close to a third of the county is taxed at a lower rate because it is under conservation easement or in a land-use program, and another portion of the county is administered by the Shenandoah National Park and is therefore exempt from county taxation.
Put simply, the state formula overestimates the county’s ability to collect revenue from real estate tax.
The other major piece of the puzzle is adjusted gross income, weighted to account for 40% of the LCI score. In 2017 (the “look-back” tax year that the DOE is using to calculate the LCI for the upcoming fiscal year) Rappahannock residents generated a gross income of $265,100,920.
But much of that wealth is concentrated in the pockets of a few dozen county residents. According to the most recent data available from the Economic Policy Institute, Rappahannock County ranks in the 17th percentile for income inequality when compared with all U.S. counties. That means the difference between what the top 1% of county residents earn and what the bottom 99% earn is among the highest in the country. And what’s more, Rappahannock County Public Schools estimates that 13-16% of Rappahannock families live below the federal poverty line.
Labor economist Mark Price, coauthor of the EPI study, said that he and his colleagues estimated that there were roughly 4,453 families in Rappahannock in 2015. That means 45 county residents earning at least ten times the county’s median household income held 15.7% of the county’s wealth between them. Perhaps even more starkly, the top 5% of earners hold more than a third of the county’s wealth.
When asked whether the General Assembly has considered changing the indicators for calculating each school division’s LCI, Lanza said that the idea comes up every biennium and every biennium it is snuffed out.
“The way the composite index works is if somebody gains, everybody else loses,” Lanza said. From the state’s perspective, he explained, the LCI is merely a calculation of how to divide the state’s finite money. If Rappahannock’s LCI goes down and the state has to pick up more of the county’s education expenses, the consequence is that there would be less state funding available for other school districts who depend on it.
“One of the bills I see every other year is an adjustment to the true value of property so it is a land-use calculation. That does come up every other year and is defeated every other year [because] imagine that you're a division that can't take advantage of a land-use program. If that's the case and that variable were to change, you stand to be significantly worse off in the calculation because of the relationship change,” Lanza said.
“Because the index works in a way of winners and losers, a radical change in a factor like that would be a huge advantage to the school divisions that could take advantage of it and a huge detriment to the schools that cannot take advantage of it.”
And what about enrollment?
At the beginning of the month, when the Rappahannock County Board of Supervisors met with the School Board to begin budget negotiations for the next fiscal year, Hampton District Supervisor Keir Whitson asked a question he called “the elephant in the room.”
“I know it’s never an easy answer but it’s a question that I constantly hear from constituents,” Whitson said. “How is it that student enrollment continues to decline yet our funding of the school system continues to increase?”
“Costs go up,” said RCPS Superintendent Shannon Grimsley.
County Administrator Garrey Curry added, “When the state doesn’t step up, there’s only one other place for the money to come from and that’s the local [government].”
Enrollment has indeed declined steadily over the past five years. During the 2016-2017 school year, RCPS had 928 K-12 students. By 2021, that number has decreased to roughly 765, according to the superintendent. And with fewer students, RCPS receives less money from the state. This year, RCPS is facing a potential loss of $117,063 in state funding.
But a decline in enrollment doesn’t translate into an equivalent decrease in costs. “The buses still have to roll, the lights have to be on, the heat has to be running, the facilities still have to operate. … And if you took 100 students away, it’s not like you can get rid of a second grade teacher — the math doesn’t work out that way,” said School Board Chair Wes Mills.
“Every time [enrollment] drops, it exacerbates the LCI problem and then you’re left with state mandated services that there just isn’t money to provide,” Aichele said.
“It’s like you’re watching the water level rising in your cellar and once it hits the fuse box, you’re done. The water has been rising because each year it’s harder to find ways to be creative, to stretch a dollar more.”
And RCPS already does find creative ways to stretch a dollar by doing things like hiring teachers who are certified to teach multiple disciplines and reaching out to local nonprofits for grants. Plus, Rappahannock County Public Schools spend $1,472 less per pupil than the state average and still offer unique and successful programs.
Nevertheless, receiving only 20% of the school division’s budget from the state means that Rappahannock Public Schools can’t keep up with the rest of the state when it comes to big expenditures like staff raises.
The General Assembly’s 2022 K-12 education budget includes a provision for 2-5% raises for all school staff across the commonwealth. According to Dr. Grimsley, giving all staff at Rappahannock County Public Schools a 1% raise would cost about $150,000 per year. But because of its high LCI, Rappahannock County would only see 20% of the funding required to give all of its staff raises — the county would have to cover the rest.
“Teachers certainly deserve it, but the cost to adjust to that level [is] very high with very little state aid,” Grimsley wrote in an email to the News.
“This makes remaining competitive such a challenge since other districts who have low LCIs receive much more funding to make this happen. Rappahannock County could opt out and not receive the funding, however, we lose ground with surrounding districts, and therefore continue having a recruitment/retention debacle.”
So what?
“We are talking about the arc of change,” Aichele said on Monday. “Overall population is declining. If you break the population decline into pieces, it’s not declining equally. … We know the decline in the younger population is greater than the decline in the elder population. We know the overall population is declining.
“So if you continue those lines, it is not inconceivable in 10 years that Rappahannock might [have a population of] 6,000 or 5,500 and of those, a disproportionate share will be above 45.”
If current trends continue, Aichele estimates that within five years it could become more economically viable for Rappahannock’s children to go to schools outside the county. And solving the school funding problem will not be easy.
“It’s a complicated mix of issues,” Aichele said. “Public schools function on students. Students need to live somewhere. Students need to have a family that can afford housing and have a job … without a public school system in your county, that is the last straw … you have just hollowed out demographically the center of the county.”
SUPERVISOR KEIR WHITSON
“I know it’s never an easy answer but it’s a question that I constantly hear from constituents: How is it that student enrollment continues to decline yet our funding of the school system continues to increase?”