RD487 - Annual Report to the General Assembly on the Updates to the Standards of Quality – November 15, 2016

Executive Summary:
In accordance with Item 139, Paragraph B.14, Chapter 780, 2016 Acts of Assembly, enclosed is an update on the Standards of Quality (SQQ) expenditures based upon the most current data available.

Because this session will amend the current budget and does not involve the re-benchmarking process, changes in the SQQ costs are limited and primarily include only technical updates. At this time, changes to the sales tax revenues dedicated to public education are preliminary estimates based on the Department of Taxation's May 2016 Standard Forecast (the current interim reforecast announced in August 2016) for the Education Sales Tax Distribution and reflect estimated net general fund savings of $12.0 million in FY 2017 and $17 .8 million in FY 2018 after adjusting for the required increase in state Basic Aid payments. Final changes will not be available until after the Governor's Advisory Council on Revenue Estimates convenes on November 28, 2016.

Changes to the estimated revenues from the Lottery Proceeds Fund are available at this time. The Virginia Lottery Board estimates a net income projection of $566,791,709 in FY 2017 and $546,495,789 in FY 2018. These estimates will increase the Lottery Proceeds Fund by an additional $5,264,539 in FY 2017 and $5,264,539 in FY 2018 beyond what is appropriated in the current Appropriation Act. In addition, $33,190,435 of additional revenue from FY 2016 also will be available in FY 2017.

The final impact of updates to the fall membership and average daily membership enrollment counts are not available at this time. However, based on preliminary findings, average daily membership projections are approximately 2,612 students lower in FY 2017 and 3,694 students lower in FY 2018 than the projections used in Chapter 780. Based on these lower enrollment figures, the Department of Education (DOE) estimates preliminary state savings of $14.9 million in FY 2017 and $20.8 million in FY 2018; however, the actual magnitude of any savings from the lower enrollment figures cannot be determined until analysis of the school division enrollment data and its related impact on projections is completed by the DOE.

Some of the changes discussed above were reflected in the Governor's FY 2017 Savings Plan, released in October 2016, to address the revenue shortfall. Specifically, the Governor's 2017 Savings Plan reflects additional general fund Direct Aid savings of $115.8 million in FY 2017 and $85.3 million in FY 2018 in response to revenue shortfalls based on the latest revenue forecast. The savings result from the withdrawal of the salary increase, Lottery balances, and expected additional Literary Fund revenue.

Please contact me should you have questions concerning this information.


/s/ Daniel S. Timberlake