Virginia Beach School Board approves city revenue sharing policy, with a caveat

The Virginia Beach School Board voted unanimously Tuesday to approve its revenue sharing policy with the city, with one condition.

The new formula increases the school’s overall percentage of local tax revenues to 34.11 percent from 32.37 percent as a part of the discretionary local match, which is the money the city provides on top of the money it is required to pay by state law. This formula was updated to include additional funding the city gave last year to offset a tax rate reduction and to help the schools provide their employees with a pay raise.

Farrell Hanzaker, the school district’s chief financial officer, said at a school board workshop that the updated policy simplifies the calculations for the revenue sharing formula.

However, some board members were concerned with some of the policy’s wording, particularly section 3.1.3.2.

That clause reads:

“School dedication component: In FY 2013 Operating Budget, the City Council increased the real estate tax rate by four cents and dedicated it to the Schools’ Operating Budget. This dedication amount will be added to the Discretionary Local Match. This dedication shall exist until such time as the State restores funding for education to the average level provided from FY 2006 to FY 2012 of $350 million. The City Council has directed the City Manager to recommend, as a part of the City’s Proposed Operating Budget, reductions in whole or in part to the four cents real estate dedication in an amount roughly equal to the Increased State funding above $350 million (per annum) as reflected by a decrease in the local composite index below the current FY 2013 level of 0.4110.”

Hanzaker said if and when the state’s funding rose above $350 million, that would mean the schools would lose that real estate tax revenue, which is estimated at about $20 million.

School Board Vice Chairwoman Beverly Anderson and Chairman Dan Edwards said they did not fully realize the impact of that section until recently. Edwards said the wording was initially added because they assumed state funding would rebound much more quickly than it has and lessen the need for local funding.

“We were so excited of the fact that we had the money, we sorta lost track of the fine print,” Edwards said.

Anderson, however, believed the language was unclear the whole time.

“Even though there are people that may be aware of that, the everyday person that’s on the street was not made aware of the fact that that money would go away,” she said. “The public was sold as this was four cents that was dedicated to the schools.”

She added, “I was very involved at that time. I went to every budget hearing — I never heard anything about this language.”

She would like to see the money from the four cents on the real estate tax rate — if and when state funding gets up to that level — go to some of the district’s unmet needs, such as replacing its school buses, addressing all-day kindergarten and fixing older schools.

Hanzaker said state funding would have to rise by about 40 percent to reach that $350 million threshold, and he doesn’t anticipate that happening anytime soon..

Still, Hanzaker said, the school district would like to negotiate for the language to be taken out.

Anderson and Edwards agreed and said they would like to see it removed during the biennial review of the schools’ revenue sharing formula with the City Council.

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