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INDEPENDENCE — The bad news for Grayson County's upcoming budget season got worse last Monday afternoon when Gov. Bob McDonnell announced he will undo a proposed freeze of the Local Composite Index, a formula that determines how much a locality can afford to spend on education.
In December, Grayson Public Schools' Finance Director Julie Bear told the school board that the school system's composite index had risen nearly 22 percent, which means the state calculated that Grayson should be able to pay more towards the school system's budget than it has previously.
One month later, former Gov. Tim Kaine's proposed budget included freezing the increase on the composite index across the state for an additional year.
Bear explained that last year, the composite index was .2607, meaning Grayson had to contribute roughly 26 cents for each dollar the state provided.
For the upcoming budget year, that number increased to .3178, which would mean a reduction of $812,527 in state funds from the school budget.
This doesn't mean the school system would be forced to cut that much from its budget. Instead, Grayson County would become responsible for funding that much more to the school system.
Grayson Superintendent Dr. Elizabeth Thomas told The Gazette that when the Local Composite Index shifts, it keeps the required amount of funding the same, but simply changes who pays it.
In other words, the state says the school system needs that $812,527 to operate, but believes that the locality should be able to provide that much more.
"[The state] has decided that our county is able to pay more for education," Thomas said of the complex formula that heavily weighs on property value.
What appears to have hurt Grayson in the formula is the true value of property. Grayson saw an increase of 48.99 percent, while the state average was only an increase of 15.51.
"Property values have increased in Grayson County, therefore the state perceives if the properties are more valuable, the board of supervisors have the ability to tax that property and get more funds for the school system," Thomas explained.
Virginia school systems aren't giving up on the fight, however. Thomas said that in Virginia Beach, a resolution has been created requesting that McDonnell go back to the composite index freeze that Kaine proposed.
The locality is asking other school boards and local governments throughout the state to join them in passing the resolution, which notes that it will actually cost the state $29 million more to change the LCI.
If McDonnell's wishes are held up in the budget, it could leave Grayson County — and 96 other school divisions — scraping the bottom of the barrel for additional revenue in what is expected to already be an extremely tough budget season.
A press release from the governor's office called the freeze "unprecedented" and noted that certain localities in Northern Virginia would lose $128.3 million in state education funding.
"For nearly 40 years, the Local Composite Index has been an impartial means by which to determine state and local responsibility for education in Virginia. 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," McDonnell said.
He continued to say that for many school districts — particularly in Northern Virginia — the biennial update of the index has meant far less funding from the state than that received by school districts in localities experiencing lesser rates of economic growth.
"Accordingly, I will not support the proposed freeze in the budget introduced by the previous administration," he continued. "The Local Composite Index must be applied to all localities, at all times, in the same objective and fair manner by which it has always been utilized."
McDonnell said his decision came after extensive meetings with his finance staff, legislators and local government officials.
"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 continued. "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."
To cover the additional funding, McDonnell will recommend to the General Assembly the transfer of $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 will be found in Real ID savings and an available $3 million will be captured in additional non-general fund balances.