Explaining the Local Composite Index

By Dr. Bill Bosher
Posted by Terry Alexander - email

RICHMOND, VA (WWBT) - Most of the state formula is simple common sense. How many students do you have and how much does it cost to educate each of them.

The Composite Index determines how much the state will pay and how much they expect from localities. The first thing that it looks at is the number of children enrolled in the school. The second thing that the state looks at is the assessed value of homes and other local property. This helps the state to figure out how much local leaders can raise in taxes.

The challenge this year is that home values in northern Virginia are plummeting at faster rate than here at home. Finally the state looks at who is working and how much they are making. This helps the state decide how much is available to take out of the pockets of citizens.

Now this is the way that the government proposes to fix this. Governor Kaine has said freeze it and Governor McDonald said "let it thaw." The House and Senate are now working on a plan to unfreeze the formula and let Fairfax get its $61 million. For the next two years, the more than 90 school divisions that have lost will get their money. Both sides win…for now.

You can sum up the problems inherent in this formula with something I call the Robin Hood effect. Northern Virginia home values are falling at a rate faster than those in the Richmond area. Northern Virginia is still richer and bigger. When you apply this to public policy, the rich always give more than they get and the poor benefit.

From the Virginia Department of Education website:

The Local Composite Index determines a school division's ability to pay education costs fundamental to the commonwealth's Standards of Quality (SOQ). The Composite Index is calculated using three indicators of a locality's ability-to-pay:

  • True value of real property (weighted 50 percent)
  • Adjusted gross income (weighted 40 percent)
  • Taxable retail sales (weighted 10 percent)

Each locality's index is adjusted to maintain an overall statewide local share of 45 percent and an overall state share of 55 percent.

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