By Olympia Meola and Holly Prestidge
Media General News Service

Richmond-area school districts could lose millions of dollars in state education funding after Gov. Bob McDonnell announced today that he will support updating the formula that determines how much state money each school system receives.

It’s a departure from the proposed budget left to him by outgoing Gov. Timothy M. Kaine who proposed freezing the formula, called the local composite index, for one year.

The proposed freeze triggered a hue and cry from some Northern Virginia localities which would have lost about $128.3 million in state funding, according to McDonnell’s office.

But Northern Virginia’s gain is the Richmond area’s loss. Local school divisions, already grappling with big budget deficits, have been holding their collective breath on whether the composite index would change for the 2010-11 school year.

Richmond city and Chesterfield County would be hit the hardest if the index is updated.

Facing more than a $17 million shortfall already, Richmond would add $9 million in lost state revenue. Chesterfield would lose an additional $4 million in state funds, pushing its budget deficit from $42 million to $46 million.

Hanover County would lose $900,000 in state funding, while Henrico County would lose $450,000.

The index is the formula that the Virginia Department of Education uses to determine how much funding to give to each of the state’s 134 school divisions. It’s an ability-to-pay system, based on each locality’s daily average attendance and overall student enrollment, real estate values and retail sales tax.

In other words, the higher the index, the more wealthy the locality and therefore, the less state money the school division receives. The newest index is based on data from 2007.
The index has been adjusted every two years to account for fluctuations in local economic conditions.

McDonnell said in a news release that for nearly 40 years, the index has offered an impartial means by which to determine state and local responsibility for education funding.

“The application of this index has always been done in an objective manner, using the most recent fiscal data to most fairly apportion state resources,” he said.

He added that for many school districts, particularly in Northern Virginia, the update of the index has meant less state funding than what school districts in localities experiencing lesser rates of economic growth receive.

“Ensuring that we have a fair formula that is implemented without regard to temporary or political considerations is the best means by which to appropriate education funding in the commonwealth,” McDonnell said. “Every time the index is readjusted some school systems gain funding, while others receive less. This has occurred for nearly 40 years, and local officials understand the routine and objective biennial implementation of the index.”

The governor proposed several ways to cover the $29 million that the change in the formula will cost the state in fiscal year 2011.

He will recommend that the General Assembly transfer $13 million from Literary Fund balances, $8 million through the use of available balances in the Health Insurance Fund to reduce state health insurance premiums, $5.2 million from Real ID savings and $3 million in additional non-general fund balances.

McDonnell’s announcement today is part of the governor’s ongoing budget recommendations to the legislature, which is working on filling a $4 billion budget shortfall.