SD25 - Funding the Standards of Quality Part 2: SOQ Costs and Distribution

  • Published: 1988
  • Author: Joint Legislative Audit and Review Commission
  • Enabling Authority: Senate Joint Resolution 35 (Regular Session, 1982)

Executive Summary:
The largest program of State aid to localities in Virginia is financial aid for elementary and secondary education. Most of this aid is provided as assistance to localities to help meet the costs of the Standards of Quality (SOQ). In FY 1988, State appropriations for SOQ costs totalled more than $1.85 billion.

The Standards of Quality are the cornerstone of State requirements and funding for elementary and secondary education in Virginia. The State Constitution requires the Board of Education to prescribe standards of educational quality for local school divisions. The legislature may revise the standards and enact them into law, and is responsible for the apportionment of the costs of the standards between the State and localities. The Standards of Quality represent the minimum requirements for a high quality program in all school divisions across the Commonwealth.

This report is the second in a series on the funding of elementary and secondary education in Virginia. The first report assessed the statewide costs of the SOQ using the existing distribution system. For the current study, the scope of the review was expanded to include distribution issues. SOQ cost data have been updated, some refinements to the cost methodology to promote equity have been proposed, and distribution options have been explored.

This study represents a comprehensive approach to SOQ funding for operating costs. The study does not focus just on the State's basic aid formula, but is a broad-based review of funding for the Standards. Capital outlay and debt service costs, which have not been traditionally regarded as part of the SOQ funding framework, were not- reviewed.

Goals for Funding the Standards of Quality

The funding of any State program is designed to promote certain goals. JLARC staff identified a number .of different broad goals which could be used in varying degrees in funding educational programs. Within the constitutional and statutory framework in Virginia for the SOQ, two of these goals appear to be primary: pupil equity and tax equity.

Pupil Equity. - The goal of pupil equity is ensuring that school divisions have the resources necessary to provide a meaningful foundation program of education. The "meaningful foundation program" is defined by the SOQ, and the key to achieving pupil equity is to calculate accurately and fully the costs in each school division that can be attributed to the Standards.

Tax Equity. - The second goal is tax equity, or the goal of ensuring that the proportion of resources required from local governments to fund an education program does not vary too greatly. Because local tax resources are not evenly distributed throughout the Commonwealth, the SOQ funding structure has included an "equalizing" component which bases State funding on the relative abilities of the localities to raise revenues. Under equalization, the greater a locality's ability to pay, the less State aid it receives; the lower a locality's ability to pay, the more State aid it receives. The key to promoting greater tax. equity is to ensure that local ability to pay is accurately measured and broadly applied.

Issues Related to Pupil and Tax Equity. - JLARC staff conducted eight regional workshops, toured schools, and reviewed education literature to help define the issues related to the goals of pupil and tax. equity. Two broad issues emerged:

• Can SOQ cost calculations and State SOQ aid be more sensitive to local conditions?

• Can Virginia do more through State funding to compensate for disparities in local abilities to pay for education?

In addressing these issues, the JLARC staff analysis resulted in two key findings. First, the basic structure of funding for elementary and secondary education in Virginia, properly applied, is essentially sound. The strengths 'of Virginia's approach include the State and local partnership in funding the SOQ, the recognition of a wide range of costs necessary to provide for the SOQ program, the distribution of significant State funds based on local abilities to pay, and the use of a measure of ability to pay that reflects a broader range of local resources than just real estate tax revenues.

The second fining, however, is that Virginia can do more to promote the goals of pupil and tax equity. Improvements can be made in the methods used to calculate SOQ costs, and the methods used to distribute funds can be better designed to reduce the disparity in funds available for the SOQ program.