REGULATORY

  School Construction
  On Friday, April 24, 1998, the General Assembly passed
  legislation (Senate Bill 4005) which included a formula for
  distributing the school construction funds that were
  approved by the General Assembly during the regular 1998
  Legislative Session.  This bill has been enrolled and
  communicated to the Governor.

  The formula adopted by the General Assembly is the same as
  that proposed by Governor Gilmore and included in Executive
  Order Number Six which was sent to you in Informational
  Superintendent's Memo 58 on April 17, 1998.  The one
  significant change from Governor Gilmore's proposal is that
  the General Assembly added a required local match based on
  each locality's composite index.

  In summary, the formula distributes $55 million in each year
  of the 1998-2000 biennium.  The methodology first
  distributes $200,000 to each school division in each fiscal
  year as a floor.  The balance of each year's appropriation
  is then distributed on the basis of the composite index and
  Average Daily Membership of each school division.

  As stated earlier, a local match is required to receive
  these state funds.  The amount of the match will be based on
  the composite index and calculated by multiplying each
  locality's index by its grant amount.

  School divisions may use these funds for, "school
  construction, additions, infrastructure, site acquisition
  for public school buildings, and renovations, including the
  costs of retrofitting or enlarging public school buildings;
  further, if a school division has completed any such
  projects during the previous ten years, the grants may be
  used for debt service payments or a portion thereof."  The
  required match also must be used for these purposes.

  The legislation further states that, "The amount of each
  grant awarded to a qualifying school division in any fiscal
  year shall not exceed 100 percent of the school division's
  aggregate annual expenditures..." for the purposes stated in
  the previous paragraph.  This means that if a school
  division does not have annual expenditures equal to the
  grant amount plus the required match, the grant amount must
  be reduced to meet the intent of this language.

  Please be aware that this formula including the match is
  only a temporary formula that will be in place for fiscal
  year 1999 and fiscal year 2000.  The legislation passed by
  the General Assembly specifically states that, "All funds
  appropriated for financial assistance for the purposes of
  this chapter for subsequent fiscal years shall be
  apportioned and distributed among the school divisions of
  the Commonwealth in accordance with eligibility and needs
  criteria to be established by the 2000 Session of the
  General Assembly.  In developing such eligibility and needs
  criteria, the 2000 Session of the General Assembly shall
  consider the recommendations of the Commission on State
  Funding of Public School Construction."

  The legislation passed by the General Assembly requires the
  Board of Education to issue guidelines for administration of
  the program.  These guidelines will include the procedures
  for distribution of the grants in accordance with this
  legislation, including the process that school divisions
  will have to follow to qualify for receiving these grant
  funds.  These guidelines will be distributed to you after
  they have been adopted by the Board of Education.

  Finally, Senate Bill 4005 also created the Commission on
  State Funding of Public School Construction to study the
  issues and criteria that should be considered in
  establishing a permanent funding methodology for school
  construction.  The Commission's findings and recommendations
  must be submitted to the 2000 Session of the General
  Assembly.  Attachment A includes the language creating the
  Commission.


  Other Budgetary Action
  The General Assembly also amended the budget passed in March
  for the 1998-2000 biennium. Inflation factors were updated
  to reflect the first quarter of 1998 projections which
  reduced the Basic Aid and Salary Supplement per pupil
  amounts that were provided to you in Regulatory
  Superintendent's Memo 1, dated March 19, 1998.  The changes
  to Basic Aid also impact your entitlements for At-Risk
  Payments and Enrollment Loss since the funding for these
  programs is derived from the Basic Aid per pupil amount.

  Attachment B provides a spreadsheet that shows only the
  changes resulting from the actions taken during the Special
  Session.  This information includes the amount of your
  construction grant for each year as well as your required
  local match.  Attachment C contains your revised entitlement
  sheet showing all accounts including the revisions described
  above.

  If you have any questions, please contact Daniel S.
  Timberlake, Assistant Superintendent for Finance, at (804)
  225-2025 or June Eanes, Budget Director, at (804) 225-2060.

  PDS/dst

  Attachment:  A hard copy of this memo and its attachment
                 will be sent to the superintendent's office

                                                   Attachment A


  Commission on State Funding of Public School Construction

   1. That the Commission on State Funding of Public School
  Construction is hereby established. The Commission shall be
  composed of 12 members, which shall include 7 legislative
  members and 5 nonlegislative citizen members as follows: the
  Co-Chairmen of the House Committee on Appropriations, or
  their respective designees, the Co-Chairmen of the House
  Committee on Finance, or their respective designees; the Co-Chairs
  of the Senate Committee on Finance, or their
  respective designees, one additional member of the Senate to
  be appointed by the Senate Committee on Privileges and
  Elections; and five citizen members, who may or may not be
  employees of the Commonwealth, to be appointed by the
  Governor.

   2. The Commission shall recommend to the General Assembly
  (i) a statewide method for assessing and quantifying the
  public school construction and renovation needs of local
  governments and (ii) specific eligibility and needs criteria
  to govern the disbursement and apportionment of funds to
  local school divisions under the Virginia Public School
  Construction Grants Program. The eligibility and needs
  criteria shall include, but need not be limited to,
  provisions which address the following: (i) factors to be
  applied to all localities to measure actual need; (ii)
  factors to be applied to all localities to measure local
  effort to meet actual need; (iii) factors to be applied to
  all localities to measure local ability to pay for actual
  need; (iv) factors to be applied to all localities to
  recognize local innovations and activities to improve the
  quality of and options for education, including, but not
  limited to, efforts to reduce class sizes; (v) appropriate
  combinations of funding resources for the eligible projects,
  including grant funds, local funds, Literary Fund loans, and
  bonds or other funding through the Virginia Public School
  Authority, and moneys obtained from any other public or
  private funding sources; (vi) restrictions on the use of
  grant funds, if any; (vii) requirements for the availability
  and pledge of local matching funds; and (viii) procedures
  for determining priority for awarding grants to qualifying
  school divisions. 

   3. The Senate Committee on Finance, the House Committee on
  Appropriations, and the Division of Legislative Services
  shall provide staff support for the Commission. All agencies
  of the Commonwealth shall provide assistance to the
  Commission, upon request.

   4. The Commission shall complete its work in time to
  submit its findings and recommendations to the Governor and
  the 2000 Session of the General Assembly.