Terms Relating to School Finance


Direct Aid – Direct aid to public education – funding appropriated for the operation of the Commonwealth’s public schools – is generally divided among categorical payments, funding for school employee benefits, funding of the Standards of Quality, incentive-based programs, allotment of sales tax and lottery revenues, and specific appropriations for programs such as Governor’s Schools and adult literacy initiatives. Both state and federal funds are appropriated in direct aid. All lottery proceeds are earmarked for public education.

State Funding Formula – Through the commonwealth’s direct aid to public education budget, Virginia provides funding for 136 public school divisions that serve approximately 1.1 million students. General fund support for direct aid to public education totals approximately $8.0 billion over the 2000-2002 biennium, which equals approximately 32 percent of the state’s general fund budget.

The three types of education programs funded in Virginia are:

  1. Standards of Quality (SOQ)
  2. Incentive-Based Programs
  3. Categorical Programs

SOQ funding is prescribed by statute and includes basic aid, special education, vocational education, remedial education, gifted education, and related fringe benefits for each of these programs. It also includes the one-cent state sales tax dedicated to public education.

Incentive-based programs provide additional education funding that goes beyond the levels required to meet the Standards of Quality. The programs are voluntary but, in order to receive state funds, school divisions must certify that they will offer the program and provide a local match of funds for the program. Incentive-based programs include the following: at-risk, primary class size reduction, at-risk four-year-olds, early reading intervention, maintenance supplements, and distribution of lottery profits.

Categorical funding also provides for additional education programs that go beyond the Standards of Quality. These programs focus on particular needs of special populations or fulfill particular state obligations. State or federal statutes and regulations mandate much of this funding. Examples of categorical funding include alternative education, funding for limited-English proficient students, school nutrition, adult education, and various regional programs such as Project discovery.

Average Daily Membership (ADM) – The average daily membership for grades K-12 is the enrollment figure used to distribute state per pupil funding. It includes students with disabilities ages 5-21, and students for whom English is a second language who entered school for the first time after reaching their 12th birthday, and who have not reached their 22nd birthday. Preschool and post-graduate students are not included in ADM.

Composite Index – Article VIII, s. 2 of the Constitution of Virginia authorizes the General Assembly to determine the cost of education as prescribed by the Standards of Quality and to apportion those costs between the state and local governments. Local governments are required to pay their respective shares of this prescribed cost from local taxes and other sources of local revenue. The composite index of local ability-to-pay is the measure used to determine the state and local shares of education costs, and it is based on local sources of revenue.

The composite index is expressed as a ratio, indicating the local percentage share of the cost of education programs. For example, if a given locality has a composite index of 0.5000, then it would pay 50 percent of the costs and the state would pay 50 percent of the costs for the applicable program. If a locality’s index is 0.3000, then it must pay 30 percent of the cost of education and the state will pay 70 percent.

Linear Weighted Average – The linear weighted average is a calculation that approximates what most school divisions spend to operate their schools. The formula incorporates the costs for every school division, but is not unduly influenced by divisions with unusually high or low expenditures. The formula weights division costs at the median at five and the most extreme costs (high and low) at one. It is used to establish the funded cost of many components of the Standards of Quality, such as instructional salaries.

Literary Fund – The Literary Fund is established in the Constitution of Virginia (Article VIII, s.”8″) as a permanent and perpetual school fund. The Literary Fund provides low-interest loans to school divisions for capital expenditures, such as construction of new buildings, or remodeling of existing buildings.

Written by 

Director of Technology