It isn’t a formal proposal just yet, but it could move that direction at the September Legislative Advocacy Conference of the Virginia School Board Association (VBSA). Under the radar, school board members are questioning whether the Virginia Constitution allows the legislature to grant tax authority to school districts.
In a number of conversations that began during the McDonnell administration’s efforts to strangle the budget in order to boast fiscal austerity and have intensified as the effects have manifest, school board members across the Virginia have floated concepts of revenue generation to meet shortfalls that are starving maintenance and operational funding. Because there is no standard for engineering studies and no requirement to maintain a maintenance reserve, there is no practical measure of unfunded liabilities. In the short run, that masks the accumulating real deficit.
One school board member asked if I believed the Virginia legislature has the authority under the state constitution to grant tax authority to school districts. In Virginia, local jurisdictions generally generate revenue through sales and property taxes. In other states, localities and school districts levy income taxes that are used to augment federal and state funding. Article VII, Section 2 of the Virginia Constitution can be interpreted as limiting the General Assembly’s authority to include school districts in the class of local governments. When addressing boundaries it only specifically mentions counties, cities, and towns. We’ve already had a court case regarding “regional governments.” However the concept of a regional government authorized by the vote of the encompassed counties, cities, and/or towns remains an option. In most cases, school districts align with a single county, city, or town, making this less difficult to accomplish than the broader regional authorities associated with the failed transportation authority.
Also there is nothing to prohibit the legislature from granting existing local jurisdictions the authority to levy an income tax that could be used to augment state funding that is falling behind the real requirements. A special local sales tax with revenues specifically benefiting the corresponding school district is also an option. Barring the General Assembly coming to terms with funding requirements and associated revenue shortfalls, these may be the only answers to the coming financial crisis in many school districts. The practical problem is that board and council members in many local jurisdictions suffer the same illusion of fiscal responsibility that infects the General Assembly.
What is very fortunate is that the state constitution has prohibited the General Assembly from covering revenue shortfalls with lottery proceeds. Those proceeds are designed to enhance the education funding floor described as “the cost of maintaining an educational program meeting the standards of quality prescribed pursuant to Section 2 of Article VIII of this Constitution without the use of distributions from the Fund.” Otherwise that source of funding would have already been raided. Yet, that prohibition may only be another illusion.
Bottom line: School Districts will soon be unable to meet the bottom line without a dedicated revenue stream.