1. Overview of Virginia K-12 Funding Formulas and Formula Approaches to Recognize Student Need
September 19, 2018

2. Presentation Overview
Provide an overview of the mechanics of state K-12 (Direct Aid) funding formulas, including key inputs used in the formulas
Present formula approaches to recognize student need

3. Presentation Topics
Key Input Variables Used in Direct Aid Funding Formulas
Direct Aid Funding Categories
State and Local Shares of Funding
Formula Approaches to Recognize Student Need
Appendices

4. Key Input Variables Used in Direct Aid Funding Formulas

5. Free Lunch Rates
Division-wide and school-level free lunch rates (FL%) are provided annually through the National School Lunch Program.
Free lunch data are used in five Direct Aid formulas targeting at-risk students. Data is updated biennially in the formulas.

6. Direct Aid Programs using FL%
FY19 Appropriation
SOQ PIR (Prevention, Intervention, & Remediation)*
$113.1 million
At-Risk Add-on
$100.3 million
K-3 Class Size Reduction**
$130.6 million
SOL Algebra Readiness
$13.0 million
Virginia Preschool Initiative
$75.3 million
Total
$432.2 million
*SOQ Remedial Education uses a 3-year average of division-level free lunch data.
**K-3 Class Size Reduction uses a 3-year average of school-level free lunch data.

7. Test Scores
Test or assessment scores are used in several Direct Aid formula calculations. Tests include:
Standards of Learning (SOLs)
PALS Diagnostic (K-3)

8. Direct Aid Programs using Test Scores
FY19 Appropriation
SOQ PIR (uses division 3-yr. avg. failure rates for English and math SOL tests)
$113.1 million
Early Reading Specialists (uses 3rd Grade reading SOLs)
$1.8 million
Math/Reading Specialists (uses math or reading SOLs, all grades)
$1.5 million
Early Reading Intervention (uses K-3 PALS)
$22.6 million
Project Graduation (uses HS math, reading/writing, science, and history SOLs)
$1.4 million
Total
$140.4 million

9. Enrollment
Direct Aid funds are distributed based upon two different enrollment counts:
Sept. 30th Fall Membership (FM)
March 31 Average Daily Membership (ADM)
Most state funding distributed using ADM; provided in division-level allocations.

10. Large Direct Aid Programs using FM
FY19 Appropriation
English as a Second Language (SOQ)*
$62.2 million
Early Reading Intervention
$22.6 million
K-3 Class Size Reduction
$130.6 million
SOL Algebra Readiness
$13.0 million
Virginia Preschool Initiative**
$75.3 million
Total
$303.7 million
*English language learner counts from Fall SRC.
**VPI slots are computed based on a fall membership projection of kindergarten.

11. Large Direct Aid Programs using ADM
FY19 Appropriation
Standards of Quality (all accounts)*
$4.7 billion
At-Risk Add-on
$100.3 million
Supplemental Lottery Per Pupil Allocation Funding
$234.7 million
Total
$5.0 billion
*These Standards of Quality accounts include: Basic Aid; Textbooks; Career & Technical Education; Gifted Education; Special Education; Prevention, Intervention, and Remediation (PIR); VRS Retirement; Social Security; and Group Life.

12. Direct Aid Funding Categories

13. Direct Aid Budget
State funding (GF & NGF) is appropriated in the Direct Aid budget in four major “service areas”:
Standards of Quality ($6.2 billion)
Incentive Programs ($158.1 million)
Categorical Programs ($58.9 million)
Lottery Proceeds Fund ($592.5 million)

14. Standards of Quality
FY19 funding for the Standards of Quality is provided through the following accounts, mostly on a per pupil basis:
Basic Aid ($3.3 billion)
Special Education ($397.7 million)
Career and Technical Education ($58.4 million)
Prevention, Intervention, & Remediation (PIR) ($113.1 million)
Gifted Education ($35.4 million)
English as a Second Language ($62.2 million)
Fringe Benefits for funded instructional pos. ($657.4 million)
Sales Tax ($1.4 billion)
Remedial Summer School ($24.9 million)
Textbooks ($70.3 million)
Early Reading Intervention and Algebra Readiness (are SOQ but Lottery-funded)

15. SOQ Funding Process – General Concept
Staffing Standards – Required Positions
State Share (55% on avg.)
Specific Data Inputs (ex. funded salaries)
Per Pupil Cost of Required Positions Calculation
Total Program Cost
LCI
Base Year Enrollment
Actual Enrollment
Local Share (45% on avg.)

16. Example SOQ Program: PIR
Staffing Standards:
Sliding scale pupil:teacher ratios from 10:1 to 18:1 based on SOL failure rates; 1.0 additional instruction hour per day
State Share (55% on avg.)
Inputs:
Free Lunch
SOL Scores
Fall Memb.
Salaries
Per Pupil Cost of Required Positions Calculation
Total Program Cost
LCI
Base Year March 31 ADM
Actual March 31 ADM
Local Share (45% on avg.)

17. Historical State Funding
SOQ Program – Basic Aid
Basic Aid Details
Purpose
To support the cost of basic school division operations
Requirements to Receive Funds
Mandatory – must meet staffing standards
Unique Inputs
staffing standards, support positions (salaries and benefits), sales tax, support costs, inflation rates
Other Inputs
funded salaries, base year ADM, cost of competing adj. (COCA) for No. Va.
St./Local Match
Required – based on LCI
Historical State Funding
Year
Funding
FY20*
$3.3 billion*
FY19*
FY18
$3.2 billion
FY17
FY16
$3.1 billion
*Based on Chapter 2 budget.

18. SOQ Program – Special Education
Special Education Details
Purpose
To provide the state share of the cost of required special education instructors
Requirements to Receive Funds
Mandatory – must meet staffing standards
Unique Inputs
December 1 spec. ed. child count, case load standards
Other Inputs
Funded salaries, Base Year ADM, COCA
St./Local Match
Required – based on LCI
Historical State Funding
Year
Funding
FY20*
$398.5 million*
FY19*
$397.7 million*
FY18
$382.4 million
FY17
$382.3 million
FY16
$368.1 million
*Based on Chapter 2 budget.

19. Incentive Programs
Incentive Programs are voluntary but require additional conditions to receive state funding; some local matches.
FY19 Incentive Programs and state funding:
Compensation Supplement ($0.0 million – funded in FY20)
Governor’s School ($17.8 million)
At-Risk Add-on ($100.3 million)
Math/Reading Instructional Specialists ($1.8 million)
Early Reading Specialists Initiative ($1.4 million)
Small School Division Enrollment Loss ($6.1 million – FY19 only)
Spec. Ed. Regional Tuition – GF portion ($28.0 million)
Other programs ($2.6 million)

20. Incentive Program – Compensation Supplement
Compensation Supplement Details
Purpose
To provide the state share of a salary increase for funded SOQ instructional and support positions
Requirements
Certification that the compensation supplement is provided to required staff
Unique Inputs
Salary increase rate & eff. date of raise, funded positions
Other Inputs
ADM
Match
Formula match not required in Chapter 2 budget
Historical State Funding
Year
Funding
FY20*
$130.3 million*
FY19*
$0.0 million*
FY18
$31.7 million
FY17
$0.0 million
FY16
$51.8 million
*Based on Chapter 2 budget.

21. Incentive Program – At-Risk Add-on
At-Risk Add-on Details
Purpose
An additional state payment in support of educationally at-risk students
Requirements to Receive Funding
Certification of available local match, permitted uses of funds
Unique Inputs
Min./Max. per pupil add-on percentages (on sliding scale), free lunch rates
Other Inputs
Basic Aid per pupil amounts for % add-on
St./Local Match
Required – based on LCI
Historical State Funding
Year
Funding
FY20*
$107.1 million*
FY19*
$100.3 million*
FY18
$100.0 million
FY17
$98.0 million
FY16
$89.1 million
Historical Add-on Ranges
Year
Min./Max.
FY20*
1.0%/14.0%*
FY19*
1.0%/13.0%*
FY18
1.0%/13.0%
FY17
FY16
1.0%/12.0%
*Based on Chapter 2 budget.

22. Categorical Programs
Categorical Programs target particular needs of specific students; typically no local match.
FY19 Categorical Programs and state funding:
State Operated Programs ($35.6 million)
School Lunch Program State Match ($5.8 million)
Virtual Virginia ($5.4 million)
Homebound ($5.0 million)
Adult Education ($1.1 million)
Adult Literacy ($2.5 million)
Other programs ($3.5 million)

23. Lottery Programs
For FY19, 20 programs are funded by the Lottery Proceeds Fund, including two SOQ programs (Early Reading Intervention & Algebra Readiness)
Several programs have a local match
FY19 Lottery Programs and state funding:
Supplemental Lottery Per Pupil Allocation ($234.7 million)
K-3 Class Size Reduction ($130.6 million)
Virginia Preschool Initiative ($75.3 million)
Spec. Ed. Regional Tuition – Lottery Portion ($67.6 million)
Other programs ($84.3 million)

24. Lottery Program – Supplemental Lottery Per Pupil Allocation
Supplemental Lottery PPA Details
Purpose
To provide additional state funding support for both operational and capital expenditures
Requirements
None – flexible use
Unique Inputs
Funded Per Pupil Amount (in Approp. Act)
Other Inputs
ADM, LCI for state share of funding
Local Match
Not required
Historical State Funding
Year
Funding
FY20*
$239.4 million*
FY19*
$234.7 million*
FY18
$191.3 million
FY17
$36.6 million
FY16
$0.0 million
*Based on Chapter 2 budget.

25. Lottery Program – K-3 Class Size Reduction
K-3 Class Size Reduction Details
Purpose
To provide state funding for the incremental cost of reducing ratios/indv. class caps in grades K-3 for schools with qualifying levels of educationally at-risk students
Requirements
Certification of available local match, required K-3 ratios/indv. class caps met
Unique Inputs
School-level free lunch rates, 14:1 to 19:1 ratios/indv. class size caps
Other Inputs
Fall membership
St./Local Match
Required – based on LCI
Historical State Funding
Year
Funding
FY20*
$130.4 million*
FY19*
$130.6 million*
FY18
$121.7 million
FY17
$123.3 million
FY16
$112.2 million
*Based on Chapter 2 budget.

26. Lottery Program – Virginia Preschool Initiative
Virginia Preschool Initiative Details
Purpose
To provide the state share of funding for at-risk, unserved four-year-olds in quality preschool programs
Requirements
Certification of available local match & program stnds., VPI data collection
Unique Inputs
Free lunch rates, Head Start students, projected kindergarten enrollment
Other Inputs
None
St./Local Match
Required – based on LCI ( max. local share)
Historical State Funding
Year
Funding
FY20*
$75.7 million*
FY19*
$75.3 million*
FY18
$69.2 million
FY17
$69.4 million
FY16
$68.7 million
Historical VPI Per Pupil Amt.
Year
Per Pupil Funding
FY20*
$6,326*
FY19*
FY18
$6,125
FY17
FY16
$6,000
*Based on Chapter 2 budget.

27. State and Local Shares of Funding

28. Local Composite Index of Ability-To-Pay (LCI)
The LCI is a relative measure of local financial resources relative to the state avg. Its calculation is based upon:
True Value of Real Property (weighted 50%)
Adjusted Gross Income (40%)
Taxable Retail Sales (10%)
Calculation weighted by:
Average Daily Membership (67%)
General Population (33%)
Final value is percentage of formula costs that must be funded from local funds (ex. LCI of = 60% local share; 40% state share)

29. Average State Distributions Per Pupil in FY17 (by LCI and ADM)
Top Half
(.3491 and above)
$4,870
$4,991
Bottom Half
(.3481 and below)
$6,867
$6,353
Bottom Half
Top Half
(3,814 and below)
(3,851 and above)
ADM
Source: FY17 Superintendent’s Annual Report, Table 15

30. Average Local Expenditures Per Pupil in FY17 (by LCI and ADM)
Top Half
(.3491 and above)
$7,458
$6,077
Bottom Half
(.3481 and below)
$3,315
$3,287
Bottom Half
Top Half
(3,814 and below)
(3,851 and above)
ADM
Source: FY17 Superintendent’s Annual Report, Table 15

31. Per Pupil Expend. – by LCI Tier & Source
Top Third
(highest local ability)
Middle Third
Bottom Third
(lowest local ability)

32. Formula Approaches to Recognize Student Need

33. Formula Approaches to Recognize Student Need
SOQ Programs:
Increase/establish new Basic standards (& funding) that increase student/ instructional supports and school climate (e.g., counselors).
Increase the staffing standard in the Prevention, Intervention, & Remediation formula (lower the 10:1 to 18:1 ratios; increase the one hour of additional instruction per day).
Increase the 17 per 1,000 staffing standard for ESL instructors.
Provide 100% state share of Remedial Summer School funding (or a higher per pupil amount that funds additional costs) for divisions with high poverty or low student achievement.
Compensation Supplement:
Provide salary increase funding at a higher percentage increase (or higher state share) for divisions with high student poverty, low student achievement, and/or high staff shortages.

34. Formula Approaches to Recognize Student Need
At-risk Add-on:
Increase the maximum % per pupil add-on (e.g., from 14% to 15% in FY20) to increase funding to higher poverty divisions. Incorporate additional inputs in the formula (e.g., achievement gap, absenteeism data, etc.).
Math/Reading Specialists Accounts:
Provide funding based on 100% state share for highest poverty/lowest performing schools as incentive to hire specialists.
Lottery Per Pupil Funding Allocation Account:
Currently uses ADM and LCI to distribute the funds. Incorporate the number of free lunch students with ADM, with each weighted, to distribute the funds.
K-3 Class Size Reduction:
Lower the school staffing ratios below the current 14:1 to 19:1 levels to increase funding.

35. Formula Approaches to Recognize Student Need
LCI:
Apply LCI to additional Direct Aid formulas where it is currently not applied to differentiate levels of funding. Locality resources per the LCI often correlate to student needs in the division. (Decisions whether to distribute the same amount of state funding or increase it to mitigate LCI impact and whether to require a local match).
School Lunch State Match/School Breakfast Incentive Programs:
Funds are currently provided based on a single amount for the number of meals served in each division. Provide a higher amount per meal for high poverty divisions as an incentive to increase meal participation in such divisions.
Mentor Teacher Program:
Divisions receive an equal amount of mentor support per beginning teacher. Provide a higher amount per teacher for high poverty divisions or apply LCI.

36. Formula Approaches to Recognize Student Need
VPI:
Provide a higher per pupil amount or eliminate the Head Start deduct in the formula for high poverty divisions.
Early Reading Intervention/SOL Algebra Readiness:
Lower the pupil:teacher ratios and/or increase the additional instructional hours per week factors in the formulas to increase funding to high poverty divisions.
VPSA Educational Technology Grants:
Funds are currently provided at $50,000 per division/$26,000 per school. Increase these amounts for high poverty divisions/schools or apply the LCI to the funding.
Note: With such approaches listed above, consider the local impacts of increased staffing and required local match. Also consider distributional impacts across divisions.

37. Appendices

38. Composite Index Formula

39. State Funded Salary Increases