School Funding, Part II: Division Fact Sheets

Since the recession, state spending on K-12 education in Virginia has not kept up with inflation and rising student needs. And many local school divisions are feeling the pinch. 

These updated infographics show key facts and figures in an easy-to-read format on some of Virginia’s school divisions, many of which are grappling with higher poverty and increasing enrollment at a time when state funding isn’t going as far as it once did. 

That has left many of these schools leaning more and more on their local governments for funding at a time when local governments are struggling too. In fact, the budget agreement that sailed through the General Assembly earlier this month cut $60 million in support for localities over the next two years.  

Virginia’s future prosperity relies on important investments in our workforce.  And that starts with giving every child access to a good education. 

That means that lawmakers looking for a way to create growth and opportunity for Virginians need to look no further than our state’s K-12 schools. 

—Mitchell Cole, Research Assistant

The Lion’s Share

Buried in national income and poverty statistics released last week is this nugget: A small sliver of Virginia households, the highest-income one-fifth, rake in over half of all income in the state — 50 cents of every dollar. And their share has grown in the past few years.

The four in ten Virginia households with incomes under $50,000 bring home just 12 cents for every dollar earned in Virginia, according to the Census Bureau data.

There’s nothing wrong with Virginia’s most highly-educated workers bringing home high incomes, and the trend isn’t confined to the commonwealth. But when a small share of households have the lion’s share of income, it becomes tougher for lower-income families to keep up with the cost of living, much less afford college, buy a home of their own, and save for the other things it takes to build wealth and opportunity.

A large number of Virginia households have very low incomes: While the top fifth of Virginia households brought in an average of $217,000 in 2013, the bottom fifth brought in an average of just $14,000, according to the Census estimates. (Both these income numbers are likely to be somewhat understated, since the survey does not collect data on earnings above $1.1 million or on capital gains — a significant source of income for high earners — or the value of non-cash transfers, such as food assistance, for low-income households.)

For Virginia to have a strong economy with a prosperous future, everyone needs an opportunity to find useful work that pays a fair wage. The Census figures are a sobering reminder that, at a time when many hard-working Virginia families struggle to make ends meet, more and more of Virginia’s income pie is being served to a relatively few households.

—Laura Goren, Policy Analyst

Losing Our Edge

Virginia is stuck in neutral.

Median household income in Virginia remained virtually unchanged in 2013, according to new data released today by the Census Bureau, while the median household income in the country as a whole rose slightly. And the share of Virginians who are living in poverty remained at 11.7 percent, well above pre-recession levels. Child poverty also remains stuck at high levels in Virginia, while it’s starting to fall from recessionary highs in the country as a whole.

There are some good economic signs in Virginia. The number of very high-income households and families — those earning over $200,000 — rose in 2013,  after adjusting for inflation, and now account for over one in 10 Virginia families. Virginia also continues to be a very attractive place for highly educated professionals to live and work, offering many high-paying opportunities for those with the right skills, experience, and connections. We remain among the top 10 states in terms of median household income and among the 10 with the lowest poverty rates.

But even positive trends like a growing number of high-income families create challenges. Lawmakers must ensure that the state has the resources and political will to  continue improving the high-quality schools, infrastructure, and environment that draw these highly educated professionals to Virginia from the rest of the country. At the same time, they can’t ignore other Virginians who need access to  education and other resources to thrive in today’s economy.

We need ladders of opportunity for today’s workers, a high-quality education for tomorrow’s workers, and thriving communities to keep and attract the most highly educated and highly compensated families. Maintaining those things takes money and investment.

But as a recent report by Standard & Poor’s points out, maintaining adequate state revenue can be a challenge in an era when income is increasingly concentrated in the hands of very well-off households. High-income households generally pay a lower share of their income toward state and local taxes than do lower-income households. So if a greater share of a state’s income is going to the highest-income households, that means less revenue to maintain the infrastructure we all rely upon.

One way to break this trend is through the state income tax, which does a better job than other state and local taxes of keeping up when a larger share of income is concentrated in the hands of fewer Virginians, and is also generally a fairer source of revenue because, unlike other state and local taxes, people who have the ability to pay more pay a higher rate. In Virginia, however, the top income tax bracket kicks in at just $17,000, which means most Virginians, regardless of their income, pay the same marginal rate. Adopting a new top income tax bracket could help make the overall state and local tax system fairer while also helping Virginia maintain state revenue during these challenging times.

With sufficient political will, Virginian lawmakers may be able to adjust Virginia’s income tax system to help the state maintain adequate revenue to invest in our future without further burdening those households already struggling to keep up.

—Laura Goren, Policy Analyst

A River (of Money) Runs Through It

Turns out it’s not just state government that relies on federal money to deliver essential services to Virginians: federal resources bolster the budgets of every one of Virginia’s 134 localities, too. From Wise County to Arlington; Accomack to Winchester; and everywhere in between.

Throughout the ongoing debate over closing the coverage gap, a key talking point for opponents has centered on distrust of the federal government and its ability to hold up its end of the bargain in funding almost all the costs of providing people with health insurance.

Well, if lawmakers question Virginia’s reliance on federal funds going to the state, then federal funds flowing to the localities in their districts should be of concern, too.

After all, it’s a lot of money.

Knowing that more than 21 percent of the state’s revenue comes from Washington, we decided to take a closer look at how much federal funding supports Virginia localities. That info is found in an annual report from the Auditor of Public Accounts that pulls together revenue and spending data for the commonwealth’s localities. It shows that over $1.9 billion in federal resources a year go to Virginia localities to help cover the cost of education, health care, and other essential public services.

Click on the image below to view tables that sum how much goes to the localities associated with each Virginia House and Senate district.

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The fact is, Virginia relies on federal support for core services that people rely on at every level of government. So if lawmakers — or anyone else — were really concerned that the federal government can’t be relied upon to provide needed funding for closing the coverage gap, you’d think they’d also be busy shoring up education and all the other areas where federal funding helps cover the costs. But they aren’t. And why would they? The money is safe — just like the money Washington would spend to make sure more Virginians have medical care.

So who’s kidding who?

As lawmakers head back to Richmond Thursday for a special legislative session to debate expanding Medicaid in Virginia, it’s time to put the excuses aside and make the right decision on closing the coverage gap.

The deal before them is full federal funding of all the costs through 2016 and no less than 90 percent after that.

Too good to be true? Nope.

Too good to turn down? You bet.

—Sara Okos, Policy Director

Poised to Fall Behind

New data out today show that nearly 1 million Virginia residents went without health coverage in 2013, according to the Census Bureau. Though our uninsured rate is below the national average, Virginia is a populous state. That’s why only 12 other states are home to more uninsured people. 

And while a lot has changed for the better since 2013 in many states, Virginia’s lawmakers have been avoiding the obvious tool that would help us move the needle on coverage — expanding Medicaid with federal dollars.

Many states, for example, have decided to close their coverage gaps and lower the number of uninsured in their states, by expanding Medicaid and using federal funding to cover people with incomes below 138 percent of the federal poverty line. A study from earlier this summer found that states that closed their coverage gaps have nearly 38 percent fewer people without coverage than before. 

But Virginia’s lawmakers stood — and continue to stand — in the way of that improvement. In states like Virginia that have refused to close the gap, the decline was only 9 percent.

In a special session later this week, lawmakers have another chance to change course and get this policy decision right. The fact is Medicaid works: it works to get people coverage, it works to improve health outcomes, it works to help Virginia close the budget gap. And the offer on the table from the federal government is sound.

The right choice for Virginia’s lawmakers is clear. Other states are moving ahead and expanding coverage. Virginia’s continued refusal will simply leave us falling behind. 

­–Mitchell Cole, Research Assistant

 

 

Better Together

Among the many hurdles that low-income Virginians face, two stand out: wages are stagnant, and they pay a higher share of their income on taxes than better off households. But there are also two ways to relieve those hardships, and help Virginia’s economy at the same time.

Today, the paychecks of Virginia’s lowest-earning workers buy less than they did in 1979, after adjusting for inflation. This makes it very hard for some working families to afford the basic necessities like decent housing, childcare, and transportation that help them get to work and raise healthy children.

On top of that, Virginia’s lowest-income households pay more than their share of the cost of the state and local services from which we all benefit. Virginia’s lowest-income households devote 9 percent of their income to state and local taxes, while the highest-income households only pay 5 percent.

One option in Virginia has to alleviate this burden on our families is to strengthen Virginia’s Earned Income Credit (EIC). The EIC is a credit low-income working families can claim at tax time to reduce what they owe in state income taxes, which helps them keep more of their hard-earned money. About 114,000 Virginians do. And that’s good. But, if the value of their credit is greater than what they owe in income tax, they don’t get the difference in a refund. If the credit was refundable, families could use it to offset other taxes they pay, like the sales tax or gas tax, that eat up more of their monthly budgets than higher income households.

Raising the minimum wage is another way lawmakers can boost the purchasing power of the lowest-wage workers. And that’s good for the economy because low-income workers spend most of their budget on goods and services at businesses in the community.

A  new report makes the case that a refundable tax credit and a higher minimum wage are better when used together  because  each helps families and workers in different ways and has unique  strengths that become more powerful  when used together.

The EIC, for example, carries the largest benefit for workers with children and reaches families who make up to three-times the poverty line. Workers younger than 25 who don’t have children and seniors older than 64 cannot use the credit at all. The minimum wage, on the other hand, assists the lowest-earning workers with no restrictions on age or family status.

Similarly, increasing the minimum wage would provide consistent support throughout the year, helping workers every month to pay the rent, buy food, and fill up the car. This would complement a refundable EIC, which would provide families with a one-time cash infusion each year around tax time to help pay for a needed car repair or a utility bill.

Virginia is facing a lot of hurdles. The state economy is stagnating and state revenues are down, despite the national economy’s growth. Infusing cash into our local economies by boosting the income of Virginia’s lowest-earning families must be a piece of the solution. Increasing the minimum wage and making the EIC refundable at the same time is an effective strategy for strengthening working families and the economy.

— Jeffrey Connor-Naylor, Program Director

Let’s Get Virginia to Work

Labor Day is a time to celebrate the contributions workers make to our economy and society, and to be thankful for the sacrifices made by previous generations who won the more humane conditions under which we labor today. The 8-hour work day, for example, and protections against children working full-time.

But this Labor Day there also are reasons not to celebrate. Too many Virginians who want to work still can’t find jobs. And too many who are working can’t make ends meet because the pay for Virginians without a college degree is lower than a generation ago.

While the number of jobs in Virginia as a whole has finally returned to pre-recession levels, we’re still far below the number of jobs needed to keep up with the growth of Virginia’s working-age population. The statewide numbers also obscure the regional disparities across Virginia. For example, there are still 56,000 fewer jobs in the “rest of Virginia” — everywhere outside of Northern Virginia — than before the recession began. That’s a 2 percent drop.

Lynchburg has 8,100 fewer jobs than in 2007; Danville has 2,500 fewer.

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For the 60 percent of Virginia workers without a bachelor’s degree, being able to find and keep a job too often doesn’t equate to earning enough to support a family at a decent standard of living. Virginia workers without a bachelor’s degree earn less than similarly-educated workers did 25 years ago, after adjusting for inflation. And the gap between the wages of college-educated workers and other workers has grown sharply.

So, on a holiday created to honor the social and economic achievements of American workers, more needs to be done to rekindle the old idea that anyone willing to put in the effort can find a decent-paying job and support a family in a middle-class lifestyle.

True, that old idea was never equally available to all Virginia workers: Black men as well as women of all races have long faced a job market that pays far less than what it takes to build a middle-class life. But now median wages for all workers without a bachelor’s degree are falling, especially compared to the tremendous gains seen by Virginia workers with at least a bachelor’s degree.

This Labor Day, it’s worth considering how we can work together to make sure all Virginians can find the good jobs they need to support their families and invest in their children’s future.

—Laura Goren, Policy Analyst

Sneak Peek: Education Funding in the Commonwealth of Virginia

School funding per pupil is down 16 percent compared to 2009, after adjusting for inflation.

The state now covers just 41 percent of the cost for teacher salaries, building maintenance, and other school operations.

The average Virginia locality puts in 82 percent more money toward the core education costs included in the state’s standards of quality formula than is required by that funding formula.

How can all this be, when that formula is used by the state each year to calculate its share of school funding costs? Because state legislators have made a series of tweaks to reduce required state spending on K-12 education, while also reducing funding for key needs like school construction, leaving Virginia’s localities to make up the difference.

The state of education in the commonwealth is something that matters to all Virginians. The better our schools and the more our children learn, the better our economy will be in the long run.

This updated infographic (pdf) has a few key figures about K-12 education in Virginia, including school funding issues and a brief look at the needs and performance of Virginia students.

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Over the next several months, we will be releasing a series of similar school division-specific infographics to provide a look at how Virginia’s schools and students are faring on a local basis.

Meanwhile, Virginians who care about the quality of their local schools should be asking their state legislators, local elected officials and school boards some tough questions about how we can all bring to the table the resources that Virginia’s kids need.

—Laura Goren, Policy Analyst

Opportunity’s Broken Ladder

To climb the ladder of success in the working world, you need enough rungs to get you from the bottom to the top. Yet if we look at where job growth in Virginia has been strongest, it’s at the upper and lower ends of the wage scale, while the jobs in the middle have gone missing.

That makes it harder for people to climb out of low-wage jobs, since the next rungs on the ladder are missing.

Middle-wage occupations — those that have median wages between $14.51 and $24.09 per hour — lost over 87,000 jobs between 2007 and 2010. But they have regained just over 18,000 jobs between 2010 and 2013. The lowest-paying occupations also suffered significant job loss during the recession, and while they’ve recovered a larger share of these jobs, they’re still below pre-recession levels, too. Only Virginia’s highest-wage occupations, which grew in employment even during the recession, have seen net growth in jobs since 2007.

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Collapsing job opportunities in the middle create major challenges for Virginia’s middle class families. Jobs in high-wage occupations may not be easily accessible to workers displaced from the middle, since they may not have the skills or education required for those jobs. Instead, these workers may be forced into lower-paying jobs. And without opportunities to get a foothold in the middle, workers at the bottom can’t very well work their way to the top.

Creating more and better middle wage jobs is essential to building a stronger economy where Virginia’s businesses, communities, and families can thrive, and the ladder to success offers hard-working people a real chance at climbing up.

—Laura Goren, Policy Analyst

Of Pensions and 401(k)s

Before policymakers rush to reduce pensions for new employees or shift retirement plans from pensions to 401(k)-type accounts, they should take a crash course in “pensionomics.”

Replacing steady retirement income (a pension) with income susceptible to market downturns (a 401(k)) may create significant economic consequences, according to a report issued by the National Institute on Retirement Security.

That’s because traditional pensions have fewer costs than 401(k)-type plans and because spending by retirees with traditional pensions provides a steady, economically efficient boost to the economy even during economic downturns because the dollar amount of the benefit stays the same. In contrast, balances in 401(k)-type accounts can fluctuate with market conditions and may cause retiree spending to dip during economic downturns when the steadying impact of retiree spending may be most needed.

And pensions are an important part of supporting Virginia’s economy. Each dollar a pension retiree spends supports $1.18 in economic activity. Pension spending by state and local government retirees generates 40,838 Virginia jobs, which pay a total of $2 billion in wages and salaries. This doesn’t even include the large number of federal government and private pension benefits received by Virginia retirees.  

What’s more, state and local pension payments made to Virginia residents produced $927 million in tax revenue. This tax revenue is invested in our schools, roads, and communities.

Traditional pensions are also a highly cost-effective retirement solution because the retirement fund receives regular contributions over the course of a person’s career, providing many years of investment earnings. Finance 101 says that accumulation of investment earnings over a span of decades can be substantial. That means investment earnings make up the bulk of pension fund payments, not tax dollars. And for the small amount taxpayers do invest, there’s a big economic return. For every $1 invested over 30 years, they receive $3.30 in economic output.  

So why the interest by some policymakers in scaling back or ending traditional pensions for public employees? Because 401(k)-type plans shift the risk of underfunding the plan or lower-than-expected investment returns off of states and localities and onto their employees. But they do so at a high cost. Researchers have found pensions can deliver the same amount of retirement benefits at about half the cost of a 401(k) plan.

The Great Recession showed just how vulnerable our communities are to economic downturns. Now imagine if the thousands of state and local government retirees – teachers, police officers, and firefighters – also had their income subject to Wall Street’s nosedive. Surely the impact to Virginia’s economy would have been even worse. Let’s preserve the pension system that for decades has been providing stability to our retired workers and communities.

—Emily Uselton, Research Intern