HD3 - Review of State Aid to Public Libraries


Executive Summary:
Item 20 I. of the 2000 Appropriation Act directs the Joint Legislative Audit and Review Commission to review the formula used to distribute State aid to public libraries in Virginia. Specifically, the Appropriation Act language directs JLARC staff to review the equity of the State aid formula, including an analysis of the population and expenditure caps used in the current formula, as well as the ability of local governments to fund library services and other aspects of library service. This review finds the current State aid formula to be largely effective in achieving its objectives. Recommendations are made to refine the formula and to restore funding in several areas.

Public Libraries in Virginia

Virginia has a well-established public library system. Through a combination of regional, county, city, and town libraries, every citizen of the Commonwealth has access to public library services. State aid to support local and regional libraries began with an appropriation by the General Assembly in 1942 in the amount of $50,000. In Fiscal Year 2001, State aid awarded to public libraries had increased, through a series of legislative initiatives, to $20.4 million.

The State aid formula in its current form seeks to improve services, bolster the maintenance and development of proper standards, and encourage the formation of regional libraries to provide more economical units of service and a wider range of library services. State Grants-in-Aid (State aid) are awarded to eligible libraries based on Section 42.1-48 of the Code of Virginia. The formula used to distribute State aid to public libraries is based on three components: local expenditures (or effort), square miles served, and population.

State Aid Encourages the Maintenance of Standards and Local Support

The State aid formula provides a valuable source of funding for public libraries and accounts for approximately 10 percent of library budgets. The State's requirements for aid serve to establish standards for Virginia's public libraries, and keep the State's library systems in step with accepted standards of library practice nationally. The State aid formula appears to work well in its current form, and provides a consistent source of funding for recurring operational expenses.

The State aid formula also encourages local governments to play a significant role in funding local library services. The State requirements have encouraged localities to maintain and increase expenditures over time. As shown in the figure on page iii, over the past three decades local money has comprised the bulk of library funding.

The Main Components of the Formula Should Be Kept and Updated

The three drivers of the current State aid formula - population, square mileage, and local expenditures - should be maintained. These three drivers effectively address State goals and local needs. For example, the population element addresses the needs of serving people. The square mileage element assists in serving large geographic areas that may be sparsely populated. The local expenditure component of the formula serves as a leveraging tool to encourage local governments to maintain public library funding. In addition, the regional bonus available under the current State aid formula encourages local libraries to join together to achieve greater efficiencies and economies of scale.

Some components of the current State aid formula appear to need updating. The population cap should be removed in order to ensure equitable treatment for large, rapidly-growing localities. In addition, the cap on local expenditures should be modified to include some type of inflationary measure, such as the Consumer Price Index (CPI). However, to ensure that no library system is harmed as a result of these changes, additional State funding may be needed.

The Population Cap Should Be Removed from the Formula

The current population cap contains the same maximum limit (600,000 persons) that was instituted in 1970 and has not been adjusted since. Virginia's statewide population has grown 52 percent since 1970. Adjusting the population cap to account for population growth since 1970 would increase the cost of State aid by approximately $94,000. Complete elimination of the cap would increase the cost of State aid by approximately $109,000. At present, only one library system - Fairfax County Public library - would benefit from the elimination of the cap. In order to hold other libraries harmless while removing the population cap, some additional funding will be needed.

Recommendation (1). The General Assembly may wish to consider removing the population cap contained in the current funding formula. However, in order to ensure that other libraries are held harmless by this change, some additional funding would need to be appropriated.

The Local Expenditures Cap Should Be Adjusted for Inflation

The State aid formula requires that local expenditures on public libraries be equal to or greater than the amount expended the prior year. In addition, local expenditures must be at least 50 percent of the statewide median for local operating expenditures per capita. These requirements have served as leveraging tools used by public libraries to encourage their local governments to fund library services.

The local expenditures cap was last increased in 1990. Currently, 31 of the 90 library systems are affected by the local expenditures cap. JLARC staff examined several options that would better help the cap account for the increasing costs of library services, including indexing the cap to the Consumer Price Index (CPI), or the complete elimination of the local expenditures cap. JLARC staff found that the elimination of the cap would nearly triple the cost of State aid to more than $60 million per year. Since the cap currently impacts only 31 libraries, the majority of libraries would not realize a benefit from a removal of the cap. Without the addition of substantially more money to State aid, nearly two-thirds of libraries would experience reduced funding were the cap removed.

Another option is to index the local expenditures cap to an inflationary index such as the CPI. From 1990 to 2000, the average annual rate of inflation was 3.0 percent. Compounding this rate over ten years would yield a new cap amount of $335,979. This option would raise the overall cost of State aid by $2,666,848 per year. The increasing costs of library services could be recognized by tying the cap to an index such as the CPI, which would better account for some inflationary pressures and serve growing libraries.

Recommendation (2). The General Assembly may wish to consider adjusting the local expenditures component of the formula for inflation. In future years, the local expenditures cap could then be tied to the Consumer Price Index (CPI). In addition, the Library of Virginia should complete a periodic review of the local expenditures component of the State aid formula, conducted at least every ten years.

Local Ability to Fund Library Services Could Be Addressed

JLARC staff found that the State aid formula does not recognize a locality's ability to fund public library services, and that a component could be implemented to assist economically distressed areas. However, in order to ensure that no library loses State aid, funding of this nature should be addressed through a separate stream of funding, rather than by a modification of the current formula.

The JLARC staff developed a supplemental or "add-on" approach as an illustrative funding option. The separate "add-on" or supplement to the State aid formula would include two main components: (1) a size of operation proxy, and (2) a factor representing low local revenue capacity. Revenue capacity was chosen as the most suitable measure to determine local ability to fund library services. Using this criterion, the lower a locality's revenue capacity is (compared to the Statewide baseline), the more supplemental funding it would be eligible to receive.

If such an "add-on" program were to be implemented, two policy choices would need to be made. First, libraries eligible for assistance would have to be determined. Second, a total amount of available funding would have to be set.

Recommendation (3). The General Assembly may wish to consider addressing local ability to pay for library services by providing additional resources to fund a supplement or "add-on" to the State aid formula. This supplement would serve to address local ability to fund library services, which was not previously considered by the formula. If the General Assembly chooses to provide a supplement to the State aid formula, it will need to determine how many libraries will receive the supplement and the amount of resources it wishes to contribute toward funding the supplement.

"Infopowering the Commonwealth" - Funding Should Be Restored

In recent years, the role of public libraries has changed dramatically. Although libraries still serve as a home for books and other materials, technology has allowed libraries to expand and enhance services. Library services are no longer limited to the contents of buildings. As a result of these changes, libraries increasingly need funding not only for traditional books and materials, but also to support technological initiatives such as hardware and software installation and upgrades, electronic information resources, staff training, and modernized buildings.

The State's support of technology funding through the "Infopowering the Commonwealth" initiative has enabled libraries to use technology to enhance and expand services. Funding for this program has allowed public libraries across the State to gain access to the same types of electronic information, thereby increasing the availability of library services for all citizens of the Commonwealth.

Infopowering was implemented in FY 2000 as a way to increase public access to electronic sources of information. Through this program, libraries have received funding for Internet connections, a number of new computers, and access to a statewide license for the Electric Library database. The future of the Infopowering plan focuses on expanding the content available over the Internet, particularly in the area of electronic databases. However, the Governor reduced funding for Infopowering as part of his March 12, 2001 budget cuts.

Overall, Infopowering has been a powerful tool in helping to bridge the "digital divide" within the Commonwealth. In addition, the State funds available through Infopowering have enabled libraries to pursue technology initiatives without having to eliminate other services. Restoration of the funding for the Infopowering program would serve as a valuable source of long-term funding for public library technology projects.

Recommendation (4). The General Assembly may wish to consider restoring funding for the five-year, Infopowering the Commonwealth strategic technology plan.

Public Libraries in Virginia Benefit from Collaborative Efforts

Public libraries are engaged in a wide variety of collaborative endeavors, both with other libraries as well as with governmental entities and private sector groups. Although the vast majority of libraries collaborate with each other to share resources and costs, partnerships with local schools and local government agencies are also common. In addition, some library systems are pursuing more formalized collaborative projects with local businesses and organizations. The JLARC staff found that collaboration has generally helped public libraries improve operations and services. Finally, libraries have found that collaboration allows them to access materials and resources beyond the library building, which helps to equalize library services across the Commonwealth. Public libraries are encouraged to continue such efforts.

A Construction Component Should Not Be Included in the Formula

Currently, aid provided through the State aid formula cannot be used for construction. State aid grants are currently used to fund recurring operational expenses, such as books and materials. Most library directors do not support the inclusion of a construction component in the current State aid formula. Library construction expenditures tend to be occasional and non-recurring. In any given year many localities will have no construction or capital debt service expenditures for libraries, whereas all libraries will have operational expenses and materials needs. Consequently, the State aid formula is not an appropriate vehicle for supporting library construction needs.

Recommendation (5). A construction funding component should not be included in the current State aid formula.

Restoration of the Construction Grant Program Is Needed

The mission of public libraries has undergone dramatic change in recent years, particularly with the advent of technology. Library facilities have had to adapt in order to facilitate these changes. However, the costs of capital and construction projects are high, and this is often a challenge for public libraries. Currently, there are few sources of funding for library construction and most of the cost of such projects is borne by localities. The federal program which provided construction support was terminated in 1996.

Although some libraries have found adequate resources to address their facilities needs, there are a number of libraries with limited resources at their disposal that will require substantial renovation or replacement in the near future. Public library directors who responded to the JLARC survey indicated problems with their current facilities. Nearly half of survey respondents noted that some facilities have a "significant deficiency", and 27 percent reported that some facilities are "obviously out-at-date, nonfunctional, or seriously inadequate".

In the past, limited -State funding for construction was provided to local libraries on an ad hoc basis. In 2000, however, the General Assembly approved a $450,000 Library Construction Grant program. This program would have provided a limited form of State assistance for library construction projects. In order to develop a more systematic distribution method as well as objective criteria for the receipt of this funding, the Library of Virginia (LVA) developed a construction grant program. However, the Governor cut funding for this program as part of his March 12, 2001 budget cuts.

Recommendation (6). Consistent with legislative intent in Item 255 C of the 2000 Appropriation Act, the General Assembly may wish to restore funding for the Construction Grant program.

Overall, the Virginia system of public libraries is providing valuable cultural and education resources for citizens of the Commonwealth. The current State aid formula serves as a consistent source of funding for library books and materials. Consideration of the proposed changes would serve to further enhance the State's role in the provision of public library services.