SD20 - Funding the Standards of Quality Part 1: Assessing SOQ Costs

  • Published: 1986
  • Author: Joint Legislative Audit and Review Commission
  • Enabling Authority: Senate Joint Resolution 35 (Regular Session, 1982)

Executive Summary:
Since 1971, the State Constitution has required the Board of Education to prescribe standards of educational quality for local school divisions. The legislature may revise these Standards of Quality (SOQ) and enact them into law. The Standards of Quality represent the minimum requirements for a high quality program in all school divisions across the Commonwealth.

Study Overview

The Standards of Quality establish the "foundation" program for public education. They do not, however, prescribe or limit the staffing, programs, expenditures, or other requirements which may be necessary or appropriate for the entire system of public instruction.

In order for the General Assembly to carry out its constitutional responsibilities, it must have an accurate estimate of the cost to provide for the programs required by the standards. The assessment of SOQ costs for this study shows that the total costs are $5.16 billion for FY 1987 and FY 1988.

The estimate of SOQ costs is the minimum necessary to provide for the programs required by the standards. That is, the estimate reflects the cost of providing the "foundation" program only. Most school divisions provide educational programs beyond those required by the SOQ, expenditures for these activities are not included in the calculation of SOQ costs. Thus, the JLARC staff estimate should not be viewed as a recommendation on how much the General Assembly should appropriate for direct aid to public education.

Using the existing structure for the apportionment of costs between the State and the local governments, the State share of the total cost of $5.16 billion is $3.33 billion, and the local share is $1.83 billion. To achieve full funding of the State share as it is currently defined, an increase of at least $161.4 million in general fund appropriations is necessary in the 1986-88 biennium.

The SOQ cost estimates of the study were made within the constraints of the current framework for defining and funding the standards. The study dealt with existing standards, and did not address the question of what the standards "should" be. The study adopted the current legislative definition of SOQ costs as operating costs, and not capital outlay or debt service costs. In addition, the study did not deal with issues of equity or distribution. Unique circumstances such as higher cost of living were minimized in the calculation because the "foundation" costs represent a base. These issues will be systematically reviewed in the second phase of the study. The current requirement that a major portion of the funding for school divisions be based on a single "per pupil" amount was not modified.

The JLARC staff methodology for estimating SOQ costs involved two major parts. First, because quantified standards exist for instructional staffing requirements, the standards were applied to school enrollment data to calculate positions necessary in each school division. Second, in areas where quantified standards were not available, an approach was developed to identify the "prevailing costs" across school divisions for providing programs to meet the Standards of Quality.

JLARC staff used the school divisions to calculate SOQ costs because of the purpose and the existing framework for the standards. The Constitution, statutes, and Board of Education mandates are all clear on the point that while the Standards of Quality apply statewide, they are to be implemented by each of the 135 divisions operating schools in Virginia. For example, the Constitution states that "Standards of Quality for the several school divisions" shall he determined and prescribed. In all 12 of the areas covered by the Standards of Quality, the standards state that "each school division" shall meet certain requirements. The Code also states that the Board of Education shall have the authority to "seek school division compliance" with the standards.

Analysis of Instructional Positions

The Standards of Quality include quantified standards defining minimum staffing levels for instructional personnel. In the past, the number of positions required by the standards was calculated by dividing statewide pupil enrollment by quantified standards. Based on this approach, the number of instructional positions funded in the Appropriation Act is sufficient to provide for the requirements of the various instructional staffing standards.

However, a limitation of the statewide calculation is that all classrooms cannot be filled to the maximum size permitted by the standards. Due to the configuration of schools and the distribution of the school-age population, it is not always feasible to provide for classes with pupil to teacher ratios exactly as specified by the standards. In many instances, pupil to teacher ratios lower than those required by the standards result from circumstances difficult to control by the school divisions. A statewide analysis is insensitive to these local circumstances.

The JLARC study approach used to calculate required instructional positions, therefore, applied the standards to pupil membership data by grade for each of 1,695 schools in Virginia. The purpose of this analysis was to test the relationship between the number of instructional positions required in the Appropriation Act, and the number of instructional positions that are effectively required by the cumulative impact of all other standards.

The result of this analysis was that the personnel standards, excluding those in the Appropriation Act, require 55.4 positions per 1,000 pupils for basic, special, and vocational education. Thus, the 57 positions per 1,000 pupils currently funded by the legislature for basic, special, and vocational education are clearly sufficient to provide for the cumulative impact of the standards. Because the school divisions must meet the higher staffing requirements of the Appropriation Act, JLARC staff used 57 positions per 1,000 pupils in calculating the cost of basic, special, and vocational education.

In addition to the 57 positions required by the Appropriation Act, the study estimated that an additional 1.2 positions per 1,000 pupils are required for remedial education, that 1.1 positions per 1,000 pupils are required for gifted and talented education, and that 0.3 positions per 1,000 pupils are required for special education aides. The total instructional staffing used for the cost estimate was 59.5 positions per 1,000 pupils in average daily membership.

Analysis of Prevailing Costs

In contrast to instructional staffing requirements} quantified standards are not available for instructional salaries or costs for support services such as administration, health, transportation, and maintenance. In order to calculate the total costs of the SOQ, it is necessary to identify the costs of complying with these unquantified standards.

In lieu of quantified standards upon which to base estimates of costs, the Department of Education has used a statewide average to estimate SOQ costs. The General Assembly has never funded fully the amount of this estimate, however, and has raised questions about what cost is reasonable to use as a foundation for school division expenditure levels.

One approach which could be used would be to estimate a "minimum reasonable" cost, or the lowest cost level at which a significant number of divisions have been able to provide programs which meet the SOQ. This approach was rejected for use in this study because objective criteria for determining the point that represents a "minimum reasonable" cost cannot be developed.

Instead, the study approach was to define SOQ costs as "prevailing costs," or the expenditure levels around which most school divisions tend to cluster. This approach avoids the problem of defining the point which represents a "reasonable minimum," by basing SOQ cost estimates on the expenditure levels which most divisions find necessary to meet the standards.

Once the concept of prevailing costs was developed, it was necessary to select a statistic which would accurately represent the central location (or amount) around which the expenditure levels clustered. The mean and the median are two of the most common statistics used to represent central tendency. However, depending on the attributes of the data, these are not always the most appropriate statistics.

Because school expenditure data tends to be skewed, JLARC staff tested the use of 15 different statistics for representing the central tendency of different types of distributions. A linear weighted average with a weight of five for the median value was selected as the result of testing the different statistics with a variety of different cost distributions.

The linear weighted average includes all values in the calculation, yet weights central values more than extreme values. It was considered the best statistic for calculating prevailing costs for the distributions reviewed, because it was influenced by all the data, but was not unduly influenced by the extremes.

For most instructional salary and support cost distributions, the result of applying the linear weighted average was a cost calculation less than the statewide average, but greater than the costs incurred by the median, or middle-cost, school division. The impact of using prevailing division costs, rather than statewide average costs, accounts for most of the difference between the JLARC and Department of Education estimates of the costs of fully funding the Standards of Quality.

Fully Funding the State Share

Based on the JLARC estimate of total SOQ costs of $5,162,803,388, the State share is $3,330,931,638 and the local share is $1,831,871,750 for the 1986-1988 biennium. The State thus provides 64.5 percent of the funds necessary to provide for the Standards of Quality.

JLARC's total SOQ cost estimate, when applied under the current distribution framework, leads to the following conclusions about full funding of the State share:

• $472.0 million in additional State funds from all sources will be required for the 1986-1988 biennium when compared to total funding for the prior biennium.

• $273.4 million in additional State funds from all sources will be required in the 1986-1988 biennium when compared to the budget target (FY 1986 funding times two). Of this amount, $161.4 million in additional State general funds will be required for the 1986-1988 biennium.

The $161.4 million substitutes for the $419 million in additional funds necessary to achieve full funding estimated by the Department of Education. A complete summary of SOQ costs and State and local shares for each program is included in Chapter VII of the report.

Recommendation (1): In order to fully fund the State's share of the foundation program required by the Standards of Quality, the General Assembly should increase general fund appropriations for SOQ programs by an amount not less than $161,428,898 for the 1986-1988 biennium.

While providing an estimate of SOQ costs for the 1986-88 biennium was an important objective for this study, an additional objective was to produce a methodology that could be used to estimate SOQ costs on an annual basis.

Recommendation (2): The Department of Education should use the methodology described in this report to estimate future SOQ costs. The Department should ensure that the most recent financial and statistical data is used to update the estimates each year. Financial and statistical data of the Annual School Report should be validated by the Department. School divisions should be required to cross-check and verify the financial and statistical data they submit to ensure that it is accurate.