Virginia school finance reform: a comparison of the Virginia public elementary and secondary school finance program from 1973-1981 in regard to fiscal equity

The purpose of this study was to determine the extent to which fiscal equity has been advanced, if any, for the Commonwealth of Virginia since the current state aid funding system was implemented for the 1974-75 school year. This purpose was accomplished by examining three years of data to investigate whether any significant progress had been made toward a more equitable distribution of state and local revenues. Fiscal equity was defined in terms of two criteria: Per-Pupil Revenue Disparity and Fiscal Effort Neutrality. In addition, the standard of Fiscal Capacity Variance was used. Eight fiscal equity measures were applied to the data for the school years 1973-74, 1974-75 and 1980-81 to address the different discal equity criteria.

The criterion of Per-Pupil revenue Disparity examined the variance in per-pupil revenue dispersion among the school divisions. The coefficient of variation, McLoone Index, Federal Range Ration and Gini Index were the fiscal equity measures used to address this criterion. Findings indicate that revenue disparities per pupil increased during the era of reform legislation in Virginia. The movement away from fiscal equity in terms of per-pupil revenue disparities, as shown by three of the four discal equity measures, other ancillary data, and comparison with similar state studies, demonstrates that if the intent of the Virginia school finance reform was to provide greater fiscal equity, it was not successful.

The criterion of Fiscal Effort Neutrality was used to determine whether the pupils in the lowest discal capacity school division were given the same opportunity for identical per-pupil revenues for an equal amount of fiscal effort as the pupils in the highest fiscal capacity school division. The Federal Wealth Neutrality Standard was used to satisfy this criterion. Overall, the analysis indicates that fiscal equity as measured by the Federal Wealth Neutrality Test remained relatively constant over the three years. Virginia’s 68 percent of wealth neutral funds is considerably short of the required 85 percent to pass the test.

The Fiscal Capacity Variance standard assessed whether a relationship existed between per-pupil revenues and school division fiscal capacity and wealth. Correlations, Elasticity coefficients, and a modified Gini Index were used to examine the relationship. Findings indicate that the link between per-pupil revenues and wealth has decreased marginally since enactment of the new funding formula. Yet the relationship between per-pupil revenues and fiscal capacity has increased, indicating movement away from the goal of fiscal equity.