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Local school divisions short $201 million in aid because of state error - Richmond Times-Dispatch

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In December 2021 then-Gov. Ralph Northam says he will propose eliminating the state's portion of the sales tax on groceries.

Local school divisions in Virginia just learned they will receive $201 million less in state aid than they expected — including $58 million less for the current K-12 school year that is almost three-quarters done.

The Virginia Department of Education has acknowledged the mistake in calculating state basic aid for K-12 school divisions after the General Assembly adopted a two-year budget and Gov. Glenn Youngkin signed it last June. The error failed to reflect a provision to hold localities harmless from the elimination of state’s portion of the sales tax on groceries as part of a tax cut package pushed by Youngkin and his predecessor, Gov. Ralph Northam.

State Superintendent Jillian Balow notified school division superintendents by email on Friday, promising to provide corrected estimates of basic aid for this fiscal year and the next one after the House of Delegates and Senate adopt competing budget revisions on Feb. 9.

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“It was human error on our part,” said Charles Pyle, spokesman for the Department of Education. “We regret that it was not identified until December.”

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For big school divisions, the shortfalls are sizable for the two fiscal years — almost $18 million for Fairfax County, the state’s largest; $10.8 million for Chesterfield County; $8.1 million for Henrico County; $3.2 million for Richmond; and $2.6 million for Hanover County.

But the effects could be disproportionately damaging to small and rural school divisions that rely more on state aid for K-12 schools than urban and suburban divisions, which bear a higher share of the cost because of their ability to pay.

“There’s a little bit of panic right now,” said Bristol School Superintendent Keith Perrigan, who also is an officer at the Virginia Association of School Superintendents and president of the Coalition of Small and Rural Schools in Virginia.

Perrigan doesn’t blame the state for the mistake, but he wants to be sure that local school divisions are part of discussions on how to fix the error and help localities with school budgets that were based on the wrong numbers.

“There’s a solution and we’d like to be at the table to come up with that solution, rather than just bemoaning the problem,” he said.

House Appropriations Chairman Barry Knight, R-Virginia Beach, said he was blindsided by the new basic aid numbers on Monday.

“I didn’t know anything about it at all until this afternoon,” Knight said. “I’m not very happy. They did not bother to tell Appropriations that the numbers had changed.”

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“We need to have some open communication here,” he said. “Now it’s on me, what do we do?”

Petersburg is an urban member of the coalition because it is small and poor, so it relies more on state aid to pay for schools than bigger divisions do.

Preliminary estimates show that Petersburg would get $853,486 less in state aid, including about $246,000 less for this school year, which is already well into its third quarter.

Bristol, the division that Perrigan leads in the far southwestern corner of the state, would receive $140,488 less in this fiscal year, which ends on June 30, and $347,000 less in the next one, which begins on July 1. It has a low score on the Local Composite Index, which measures a locality’s ability to pay, so it relies more on state funds to meet the Standards of Quality for public education.

“We have already adopted [budgets based on] what we thought we were going to get from the state and localities,” he said. “Now, we are rounding second [base] and headed to third, and finding out that the number is going to be different.”

School divisions also have begun developing their budgets for next school year, while relying on estimates of the state aid they will receive.

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Pyle, at the Department of Education, said, “We know that it’s going to be inconvenient.”

He said the mistake, while “regrettable,” did not affect “what the school divisions actually received” from the state during the current year.

“This is not money that school divisions received that they’re going to have to give back,” Pyle said.

Balow, the state superintendent, said the mistake was made when the department inadvertently failed to recognize the effect of a “hold harmless” payment made to local school divisions to offset money they receive directly from the state’s portion of the sales tax on groceries.

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The General Assembly included the hold-harmless provision when it eliminated the state portion of the grocery tax, effective Jan. 1. The decision reduced sales tax revenues by $107.3 million in this fiscal year and $265.1 million next year.

As a result, the calculation tool used by the state inflated estimates of basic aid for localities. Balow provided school division superintendents with new formulas to apply to the revised calculation tool released on Dec. 16, the day after Youngkin proposed his new budget.

“We’re not as concerned about the mistake as how do we find a solution to it?” Perrigan said.

Michael Martz (804) 649-6964

mmartz@timesdispatch.com

@mmartzrtd on Twitter

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