COMMONWEALTH OF VIRGINIA
DEPARTMENT OF EDUCATION
P. O. BOX 2120
RICHMOND, VIRGINIA 23218-2120
SUPTS. MEMO. NO. 1
March 5, 1999

REGULATORY

TO: Division Superintendents
FROM: Paul D. Stapleton
Superintendent of Public Instruction
SUBJECT: Final 1998-2000 Budget Passed by the General Assembly
Pursuant to Section 22.1-93, Code of Virginia, the
Department of Education is providing "...estimates to be
used for budgetary purposes relative to the Basic School Aid
Formula..." for the 1998-2000 biennium.  These estimates
represent the state funding projected to be distributed to
school divisions during the current fiscal year (fiscal year
1999) and next fiscal year (fiscal year 2000).

On Saturday, February 27, 1999, the 1999 Session of the
General Assembly adopted the final budget for the 1998-2000
biennium.  Highlights of the General Assembly's actions
include: approval of Governor Gilmore's recommendation for
five new Best Practice Centers bringing the total to eight
statewide; dedication of lottery revenues to public
education; approval of a six percent salary increase
effective January 4, 2000; and, provision of bond proceeds
for the purchase of student information management software
for eligible school divisions.  HB 1450, as passed by the
General Assembly, now goes to Governor Gilmore for action.

Governor Gilmore will have the option of signing the bill as
presented to him, amending parts of the bill, or vetoing
parts of the bill.  He must take this action prior to the
reconvened session where the General Assembly will consider
any amendments or vetoes from Governor Gilmore. 
Consequently, unless signed by Governor Gilmore with no
changes, the budget as adopted by the General Assembly will
not become final until after the reconvened session has
concluded.  The reconvened session is currently scheduled
for April 7, 1999.

The budget proposed by Governor Gilmore in HB 1450 is the
base against which the General Assembly changes have been
made.  All actions described in this memorandum are changes
to Governor Gilmore's introduced budget (HB 1450).  As you
review this information, please refer to Informational
Supts. Memo. 192, dated December 22, 1998, which describes
HB 1450 as introduced.  The information presented in
Informational Supts. Memo. No. 33, dated February 10, 1999,
which describes the actions by both the House of Delegates
and the Senate, is repeated in this memorandum.

For the purposes of this memo, fiscal year 1999 means the
current year that began on July 1, 1998, and ends on June
30, 1999.  Fiscal year 2000 means the year that begins on
July 1, 1999, and ends on June 30, 2000.

Attachments are enclosed to provide detailed information on
changes enacted by the General Assembly.  These attachments
include:

Attachment A   Changes to HB 1450 passed by the General
               Assembly for the 1998-2000 biennium.

Attachment B   Summary of Account Information.

Attachment C   School division specific printout for the
               budget passed by the General Assembly in HB 1450
               for the 1998-2000 biennium.

Attachment D   School division specific printout listing
               the schools eligible for the revised Primary
               Class Size Reduction program.

Attachment C is divided into three groups designated by the
Roman numerals to the left of the accounts.  The first group
(I) lists all of the Standards of Quality accounts.  The
second group (II) lists all of the incentive-based accounts
that require school divisions to apply for the funds and to
meet certain criteria. 

The third group (III) lists all of the categorical accounts
for each school division.

The funds projected for groups I and II are based either on
the most recent data available to the Department of
Education or the Department of Education's projected March
31 Average Daily Membership (ADM) where funding is
enrollment driven.  While the Department has confidence in
the projections of total ADM statewide, projections by
individual locality are subject to change for factors that
are better known at the local level.  You are encouraged to
substitute your own projections of ADM if you believe that
your local projections are more accurate than the
Department's.  The numbers represented for the accounts in
group III are estimates based on the most recent data
available to the Department of Education.

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

PDS/dst

Attachments

c:  Local Governing Bodies

------------------------------------------------------------

Changes Proposed to the 1998-2000 Biennial Budget by the
1999 General Assembly


Revised Sales Tax Estimate

Senate - Sales tax estimates are revised upward by $4.5
million in fiscal year 1999 and $500,000 in fiscal year
2000.  The revised estimate for fiscal year 1999 is $668.4
million and the revised estimate for fiscal year 2000 is
$700.9 million.  

House - The sales tax estimate for fiscal year 1999 is the
same as that proposed by the Senate (an increase of $4.5
million for a total of $668.4 million).  The revised
estimate for fiscal year 2000 is $698,423,000, a reduction
of $1,977,000.

Final Action (Conference Report) - Sales tax estimates are
revised upward by $4.5 million in fiscal year 1999 and
$132,997 in fiscal year 2000.  The revised estimate for
fiscal year 1999 is $668.4 million and the revised estimate
for fiscal year 2000 is $700.5 million.

Note:  The individualized sheet for your school division,
included with this memo, reflects these changes along with
the corresponding offset changes to Basic Aid and Enrollment
Loss.


Inflation Adjustment

Senate - Reduces funds by $11.8 million in fiscal year 1999
and $12.0 million in fiscal year 2000 to adjust for actual
inflation as of the fourth quarter of 1998.

House - Reduces funds by $2.8 million in fiscal year 1999
and $12.0 million in fiscal year 2000 to adjust for actual
inflation as of the fourth quarter of 1998.  This action is
similar to the Senate's action except that in fiscal year
1999, the House only adjusts inflation for the last three
months of the year.

Final Action (Conference Report) - Adopts Senate proposal to
reduce funds by $11.8 million in fiscal year 1999 and $12.0
million in fiscal year 2000 to adjust for actual inflation
as of the fourth quarter of 1998.

NOTE:  These inflation adjustments mean that each school
division's basic aid per pupil amounts will be decreased in
both years of the biennium.  Likewise, any other account
that uses basic aid to determine its funding will be reduced
including: salary supplements, at-risk payments, enrollment
loss, and textbooks.  Fiscal year 1999 payments will be
adjusted with final average daily membership changes on the
May and June EDI payments.


Eliminate "Harper" Payments

Senate - No action.

House - Reduces funding by $13.8 million in fiscal year 2000
due to the elimination of the Harper Settlement payments in
fiscal year 2000.  Language has been included directing the
Virginia Retirement System to reduce the rates charged to
local school divisions in fiscal year 2000 to reflect this
change.

Final Action (Conference Report) - Adopts House proposal to
reduce funding by $13.8 million in fiscal year 2000 due to
the elimination of the Harper Settlement payments in fiscal
year 2000.  Language has been included authorizing the
Virginia Retirement System (VRS) to reduce the rates charged
to local school divisions in fiscal year 2000 to reflect
this change.  If adopted by the VRS Board, the actual
retirement rates to be paid to VRS by school divisions will
be reduced by 0.48 percent.  As a result of this reduction,
the employer share of the retirement rate will be 9.04
percent in fiscal year 2000.  The employee share of 5.00
percent is not affected by this proposed change.

NOTE:  Although state payments are proposed to be reduced
and it is the intent of the General Assembly that the rates
be reduced, the rate reduction is still subject to adoption
by the VRS Board of Trustees.


Teacher Salary Increase

Senate - Provides an additional $19.4 million to increase
teacher salaries from 2.25% to 4.00% effective January 1,
2000.

House - Provides an additional $52.2 million to increase
teacher salaries from 2.25% effective January 1, 2000, to
6.00% effective December 1, 1999.

Final Action (Conference Report) - Provides an additional
$39.8 million to increase teacher salaries from 2.25%
effective January 1, 2000, to 6.00% effective January 4,
2000.  School divisions are eligible to receive these funds
if they provide an equivalent increase.  The following table
lists different effective dates and their corresponding
equivalent increases:

July 1, 1999             2.95%
August 1, 1999           3.22%
September 1, 1999        3.54%
January 1, 2000          5.90%

If you need an equivalent increase for a starting date other
than what is listed above, please contact Kent Dickey at
(804) 225-2025.


Distribution of Lottery Funds

Senate - Distributes the lottery funds based on the state
share of $198.80 per pupil in fiscal year 1999 and $195.00
per pupil in fiscal year 2000.  An additional $14.9 million
in fiscal year 1999 and $14.8 million in fiscal year 2000 is
included to provide a hold harmless provision for school
divisions that would have received more funds under the
distributions proposed by Governor Gilmore in the introduced
budget.  School divisions must match these funds based on
their composite index.  These funds may be used for any
school purpose.  Companion legislation (SB 1225) provides
that division superintendents must certify the public
education purpose for which these funds will be used.

House - Removes the lottery funds as proposed by Governor
Gilmore in the introduced budget from both years of the
biennium ($245.8 million).  These funds are combined with
the School Construction Grant funds in fiscal year 2000
($55.0 million) to create a capital improvements program
totaling $300.8 million in fiscal year 2000.  Every school
division would receive the same funding as they would have
received from these distributions in the introduced budget
proposed by Governor Gilmore.  An additional $125,164 is
included to provide a hold harmless for any school division
that would receive more funds from a distribution based on
the state share of $300 per pupil.  Companion legislation
(HB 2513) for this proposal stipulates that local
governments must maintain their spending for school
operating programs in order to receive these funds.  NOTE: 
HB 2513 originally dedicated approximately $9.4 million of
lottery revenue to capital projects in higher education. 
This provision was amended on the House floor on February 9,
1999.  This portion of lottery revenue was dedicated back to
public education.  The individual sheets reflect the amounts
school divisions will receive based on the original proposal
of $300.8 million for public education.  The remaining $9.4
million has not yet been distributed.  These funds will be
distributed by subsequent House action that is likely to
occur on February 11, 1999.

Final Action (Conference Report) - Adopts the Senate version
for distributing the revenues.  This distribution removes
the lottery revenues from the computation of Basic Aid
payments and allocates funds to school divisions based on
the state share of $198.80 per pupil in fiscal year 1999 and
$195.00 per pupil in fiscal year 2000.  An additional $14.9
million in fiscal year 1999 and $14.8 million in fiscal year
2000 is included to provide a hold harmless provision for
school divisions that would have received more funds under
the distributions proposed by Governor Gilmore in the
introduced budget.  Local governing bodies must appropriate
sufficient local funds to:

1. match these funds based on the composite index, and

2. maintain the same level of local financial support
   provided in FY 1996.

These funds must be used solely for educational purposes. 
No more than 50% can be used for recurring costs (operating
costs, such as teacher salaries).  No less than 50% can be
used for non-recurring costs defined as school construction,
additions, infrastructure, site acquisition, renovations,
technology, and other expenditures related to modernizing
classroom equipment, and debt service payments on school
projects completed during the past ten years.

Unexpended funds from the current fiscal year (FY 1999)
shall be carried over by the locality to be appropriated to
the school division in the second year of the biennium (FY
2000).


School Construction

Senate - Adds language expanding the use of school
construction funds for infrastructure improvements to
include but not be limited to, building and site utilities,
school access roadways, and drainage systems.

House - Removes the construction funds currently
appropriated in fiscal year 2000 ($55.0 million) for the
School Construction Grants program and combines them with
the lottery funds contained in Governor Gilmore's introduced
budget ($245.8 million) to create a capital improvements
program totaling $300.8 million in fiscal year 2000. 
Language is added requiring local governing bodies to
carryover any unspent school construction funds at the close
of fiscal year 1999 to fiscal year 2000 to be used for the
same purpose.  NOTE:  HB 2513 originally dedicated
approximately $9.4 million of lottery revenue to capital
projects in higher education.  This provision was amended on
the House floor on February 9, 1999.  This portion of
lottery revenue was dedicated back to public education.  The
individual sheets reflect the amounts school divisions will
receive based on the original proposal of $300.8 million for
public education.  The remaining $9.4 million has not yet
been distributed.  These funds will be distributed by
subsequent House action that is likely to occur on February
11, 1999.

Final Action (Conference Report) - Adds language expanding
the use of school construction funds for infrastructure
improvements to include but not be limited to, building and
site utilities, school access roadways, and drainage
systems.  Language also is added to require local governing
bodies to carry over any unspent school construction funds
at the close of fiscal year 1999 to fiscal year 2000 to be
used for the same purpose.


Standards of Learning Test Scoring

Senate - Provides $1.5 million in fiscal year 1999 and $1.8
million in fiscal year 2000 to reduce the amount of time
required by the testing vendor to score the tests.  The time
for scoring will be reduced from 21 work days to 14 calendar
days.  This action will permit testing to be moved closer to
the end of the course thereby providing more instructional
time.

House - Same as Senate.

Final Action (Conference Report) - Adopts the Senate and
House proposal to provide $1.5 million in fiscal year 1999
and $1.8 million in fiscal year 2000 to reduce the amount of
time required by the testing vendor to score the tests.  The
time for scoring will be reduced from 21 work days to 14
calendar days.  This action will permit testing to be moved
closer to the end of the course thereby providing more
instructional time.


Administrative and Student Information Management Software

Senate - Provides language authorizing the issuance of
Virginia Public School Authority bonds for the purpose of
replacing outdated systems such as the "Columbia" system. 
These bond proceeds will be available only to school
divisions who are eligible because their current systems are
not sufficient to meet the data requirements of the
Standards of Accreditation.

House - Same as Senate.

Final Action (Conference Report) - Adopts the Senate and
House proposal to authorize the issuance of Virginia Public
School Authority bonds for the purpose of replacing outdated
systems such as the "Columbia" system.  These bond proceeds
will be available only to eligible school divisions.  An
eligible school division is defined as one that has been
identified as having a student management and information
system that is not sufficient to meet the data requirements
of the Standards of Accreditation.

The bonds would be issued in the spring of 2000, with the
proceeds available to school divisions after the issuance of
the bonds.  Eligible school divisions will receive $10,000
per school and $25,000 per division.  In total, $14 million
will be available.

NOTE:  Guidance will be provided to school divisions related
to eligibility and reimbursement requirements no later than
May 1, 1999.  For now, school divisions need to be aware
that expenditures incurred prior to the enactment of the
appropriation act (date signed into law) likely will not be
eligible for reimbursement.  Further, school divisions
wishing to reimburse themselves from these bond proceeds for
expenditures occurring after the date of enactment will be
required to adopt reimbursement resolutions.


New SOL Remediation Teachers

Senate - Eliminates funds.

House - Distributes the $8 million proposed by Governor
Gilmore in fiscal year 2000 for 400 new teachers based on
the 400 elementary schools (one teacher per school) with the
lowest composite pass rates on the Standards of Learning
tests.  The House maintains the Governor's methodology of
providing a flat grant of $20,000 for each teacher.

Final Action (Conference Report) - Adopts the Senate
proposal to eliminate the new funding proposed by Governor
Gilmore for 400 new teachers.


GED Programs

Senate - Provides an additional $2.4 million in fiscal year
2000 to expand general education development (GED)
preparatory programs and testing.  Language has been
included stating that GED students shall be counted in
Average Daily Membership (ADM).  Two positions are added to
the Department of Education to support the expanded program.

House - Provides an additional $1.3 million in fiscal year
2000 to expand general education development (GED)
preparatory programs and testing.  This provision includes
language that states GED students may be counted in Average
Daily Membership (ADM).  The House amendment estimates that
the inclusion of these students will increase statewide ADM
by 492 students in fiscal year 2000.  NOTE: This estimated
impact accounts for the difference in ADM projections
contained in the House and Senate versions of your
individual sheets.  One position is added to the Department
of Education to support the expanded program.

Final Action (Conference Report) - Adopts the Senate
proposal to provide an additional $2.4 million in fiscal
year 2000 as start-up funding to expand general education
development (GED) preparatory programs and testing at the
high school level pursuant to SB 962 and HB 2384.  Language
has been included stating that GED students shall be counted
in Average Daily Membership (ADM).  Two positions are added
to the Department of Education to support the expanded
program and to evaluate the on-going cost of these programs.


Governor's School Programs

Senate - Provides an additional $54,233 in fiscal year 1999
and $160,150 in fiscal year 2000 to fund enrollment at the
Commonwealth Governor's school.  An additional $266,947 is
provided in fiscal year 2000 for the increased cost of the
summer programs.

House - Provides an additional $54,233 in fiscal year 1999
and $160,150 in fiscal year 2000 to fund enrollment at the
Commonwealth Governor's school.  An additional $200,000 is
provided in fiscal year 2000 for the purchase of technology
equipment at the Appomatox Governor's school.  An additional
$50,000 is provided in fiscal year 2000 to study the
feasibility of establishing a Governor's School program on
student leadership.

Final Action (Conference Report) - Provides an additional
$54,233 in fiscal year 1999 and $160,150 in fiscal year 2000
to fund enrollment at the Commonwealth Governor's school. 
An additional $100,000 is provided in fiscal year 1999 to
increase the amount of planning funds for the Appomatox
Governor's school.  An additional $50,000 is provided in
fiscal year 2000 to study the feasibility of establishing a
Governor's School program on student leadership.  Language
is included to permit school divisions to carry forward any
unspent planning grant funds for a Governor's School at the
close of fiscal year 1999 to fiscal year 2000.


Early Intervention Reading Program

Senate - Language is added to require that school divisions
must agree to assess students at the end of the school year
after they have received intervention services as a
condition for receiving state funds.

House - Same as Senate.

Final Action (Conference Report) - Adopts the Senate and
House proposal to include language requiring school
divisions to agree to assess students at the end of the
school year after they have received intervention services
as a condition for receiving state funds for this program.


Standards of Learning (SOL) Remediation Program

Senate - No action

House - Adds language requiring local governing bodies to
carryover any unspent SOL Remediation funds at the close of
fiscal year 1999 to fiscal year 2000 to be used for the same
purpose.  Language also is added to permit these funds to be
used for students who may require remediation to perform
adequately on the Standards of Learning tests.

Final Action (Conference Report) - Adopts the House proposal
to add language requiring local governing bodies to carry
over any unspent SOL Remediation funds at the close of
fiscal year 1999 to fiscal year 2000 to be used for the same
purpose.  Language also is added to permit these funds to be
used for students who may require remediation to perform
adequately on the Standards of Learning tests.


School Health Incentive Fund

Senate - No action

House - Adds language to restrict the use of these incentive
funds to nursing services only.

Final Action (Conference Report) - Adopts the House proposal
to add language restricting the use of these incentive funds
to nursing services only.


Cost of Competing Adjustments

Senate - No action.

House - Adds language directing the Joint Legislative Audit
and Review Commission to study the need for including the
school divisions of Clarke, Fauquier, Frederick, Stafford,
and Winchester in the cost of competing methodology used for
Planning District Eight.  The findings are to be reported to
the 2000 Session of the General Assembly.

Final Action (Conference Report) - No action taken.


Other Budget Actions

Senate - Provides additional funding in fiscal year 2000
(unless otherwise noted) for: Advancement Via Individual
Determination - Petersburg ($75,000), Advancement Via
Individual Determination - Staunton ($29,193), Project ECOLE
($50,000), VGAP - Fredericksburg ($95,000), New Century
Consortium ($75,000), Southwest Virginia Public Education
Consortium William King Outreach ($10,000 in fiscal year
1999 and $115,000 in fiscal year 2000), Lightspan Program in
Alleghany Highlands ($25,000), and Jobs for Virginia
Graduates ($350,000).

House - Provides additional funding for: Achievable Dream -
Newport News ($200,000), Achievable Dream - Hampton
($30,000), Alternative School Grants ($100,000), Advancement
Via Individual Determination - Virginia Beach ($100,000),
English as a Second Language Teachers ($190,000), National
Certification Bonus for Teachers ($140,000), and Mentor
Teacher Program ($600,000).

Final Action (Conference Report) - Provides additional
funding in fiscal year 2000 (unless otherwise noted) for:
Advancement Via Individual Determination - Petersburg
($75,000), Advancement Via Individual Determination -
Staunton ($29,193), Project ECOLE ($50,000), VGAP -
Fredericksburg ($95,000), New Century Consortium ($75,000),
Southwest Virginia Public Education Consortium William King
Outreach ($10,000 in fiscal year 1999 and $115,000 in fiscal
year 2000), Lightspan Program in Alleghany Highlands
($15,000), National Certification Bonus for Teachers
($140,000), English as a Second Language Teachers
($190,000), Expansion of Achievable Dream in Newport News
($200,000), Achievable Dream - Hampton ($30,000),
Advancement Via Individual Determination - Virginia Beach
($100,000), Alternative School Pilot Grants - Newport News,
Norfolk, Gloucester ($60,000), Mentor Teacher Program
($300,000), and Jobs for Virginia Graduates ($344,000).


-------------------------------------------------------

Attachment B

                  SUMMARY OF ACCOUNT INFORMATION

                             Automatically  Must  Requires  New
                               Receiving   Apply/  Local   Rvnue
Account                         Funding   Certify  Match   Codes 

BASIC AID                           X                X      
SALES TAX                           X                       
SALARY SUPPLEMENT                              X     X      
TEXTBOOKS                           X                X      
VOCATIONAL ED - SOQ                 X                X      
GIFTED ED - SOQ                     X                X      
SPECIAL ED - SOQ                    X                X      
REMEDIAL ED - SOQ                   X                X      
RETIREMENT                          X                X      
HARPER SETTLEMENT                   X                       
SOCIAL SECURITY                     X                X      
ENROLLMENT LOSS                     X                       
REMEDIAL SUMMER SCHOOL                         X            
MAINTENANCE                         X                X      
LOTTERY                                        X     X    2402020
LOTTERY HOLD HARMLESS                          X     X    2402510
AT RISK                                        X     X      
PRIMARY CLASS SIZE K-3                         X     X      
AT RISK FOUR YEAR OLDS                         X     X      
EARLY READING INTERVENTION                     X     X      
SOL TEACHING MATERIALS                         X     X      
SOL REMEDIATION                                X     X      
ADDITIONAL TEACHERS                            X            
SOL TEACHER TRAINING                           X            
COMPOSITE INDEX TRANSITION          X                       
DROPOUT PREVENTION                             X     X      
TRUANCY                                        X     X      
HEALTH INCENTIVE FUND                          X     X      
SCHOOL CONSTRUCTION                            X     X      
GED FUNDING                                    X          2402030
TECHNOLOGY                                     X     X      
VOCATIONAL ED - CAT - 
  OCCUPATIONAL PREP                 X                           
              ADULT                 X                       
              EQUIPMENT                        X     X      
SPECIAL ED CAT- HOMEBOUND                      X            
               HOSPITALS                       X     X      
               TUITION                         X            
ADULT EDUCATION                                X            
ENGLISH AS A 2ND LANGUAGE                      X            
READING RECOVERY                               X            
AVID                                           X     X      
FOSTER CARE                                    X            
ALTERNATIVE ED                                 X            
ELECTRONIC CLASSROOM                           X            
SCHOOL FOOD                                    X            
GOVERNOR'S SCH (ACADEMIC & REGIONAL)           X                
VA GUARANTEED ASST PROGRAM                     X