LCPS Superintendent Edgar Hatrick has proposed spending $764 million in fiscal year 2011 for school operations alone.  It is an increase of $32 million over the FY 2010 adopted operating budget and will require $25 million more in local funding.

A Budget Loudoun Taxpayers Cannot Afford

It is expected that a $1.41 tax rate will be needed to support that amount of spending.  The current rate is $1.245 and with residential property assessments falling 2.89% in 2010, $1.41 would represent a 10% tax hike for the average Loudoun homeowner!  That will be a tough sell to recession-weary residents who have watched their home values fall for 4 straight years now and who already have the highest property tax burden in Virginia, as well as the entire south region, according to Forbes magazine.      

Even with such a large tax increase, $37,515,762 of FY 11 revenue will come from one-time sources that will disappear next year.  The use of these one-time funds is serving to prop up spending beyond the county's means and just delays necessary spending cuts until FY 12.

    

More Full Time Positions

The budget includes hiring 140.7 full time employees.  One of the reasons the school budget has soared since FY00 is the increased staffing levels.  Back then, there were only 127.3 school employees per 1,000 students.  In FY11, the staffing ratio will be 139.5 employees per 1,000 students.  That may not appear to be a big increase, but if the FY11 staffing ratio was 127.3, LCPS would need 776 less employees.

This increase in staffing levels has happened during a time when most businesses are downsizing and lowering staffing levels.  Has the School Board ever explained why they need so many more employees or how it will improve the quality education?

Higher Benefits Costs

The VRS employer retirement contribution will rise from 9.89% of salary to 11.5%.  Employees are required to pay an additional 5%, but LCPS generously pays that for them.  In all, LCPS contributes a whopping 16.5% of employee salaries to the VRS retirement plan - considered to be among the most generous offered by states.

In comparison, defined benefit pension plans such as the VRS plan have all but disappeared in the private sector.  Many employers do offer a 401k plan, but not all of them offer a company contribution.  For those that do, the average cost is only 3% of payroll – 13.5% less than what LCPS pays.  With the FY 11 budget calling for $476M in salaries, it will cost taxpayers $54.7 million for the employer contribution and $23.8 million for the LCPS-paid employee contribution.

The budget appears not to include any reduction in health insurance costs, but it is a major expense that needs to be trimmed to keep the budget under control.

Will Education Quality Suffer With Any Budget Reductions?

Advocates for more school spending claim that any reductions to this budget proposal could adversely affect the quality of education.  It is important to remember that LCPS received very generous funding increases last decade during the housing bubble tax revenue bonanza.  In fact, spending on a per-pupil basis increased from $6,890 in FY00 to a proposed $11,683 in FY11.  Only $9,459 would be needed in FY11 to have kept pace with inflation over those years.  There is still plenty of wasteful and inappropriate spending that needs to be cut that would not affect the quality of the school system.   

In Prince William County, the Superintendent has proposed a $762 million operating budget, but they are expected to have 16,000 more students than Loudoun.

Note that the per-pupil spending numbers previously cited were calculated using a Washington Area Boards of Education formula and do not include all costs associated with public schools, but they are valid for historical comparison purposes.  For an analysis on what LCPS actually spends, see our  piece What Loudoun Really Spends on Public Schools on the subject.

The county general operating fund - which is the largest fund and is used to account for most county operating expenditure - ended the year with an unreserved fund balance of $145.5 million.  The school board operating fund - used to account for public schools expenditure and the local transfer of revenue from the county general operating fund - ended the year with a $49.5 million fund balance.  None the money in either fund is earmarked for any future expenditure, encumbrances, liabilities, capital projects… nothing.  The money is often referred to as the “rainy day fund”.

This is quite a reserve considering the dismal economic climate of the past few years and shows that the county fiscal picture is not quite as bad as it has been painted.  The amount represents 20% of the total operating and debt service expenditures for the year.  The question taxpayers should be asking their elected officials is why isn’t some of this reserve being applied to lowering the tax rate?  According to the Board of Supervisors Fiscal Policy, the county is only required to maintain a reserve equal to 10% of the net operating revenues of the general and school fund in order to provide funding in the event of an emergency and to help maintain County’s AAA bond rating; but that leaves about $95 million extra that could be refunded to the taxpayers.

According to the most recent American Community Survey, Loudoun County had the highest median household income in the nation in 2008 at $111,925.  Many have used that statistic to label Loudoun as the "wealthiest" or "richest" county in the nation.  Loudoun taxpayers hear it over and over from advocates of more government spending, including some county bureaucrats and politicians, as a justification for raising taxes.  All those rich folks can afford to pay up, right?

Not so fast.  A closer look shows that median household income is skewed by Loudoun's unique demographics and that the average household is not rich, as the statistic might suggest to some.  Other income statistics, such as per-capita income, show Loudoun ($44,533) ranking behind both Fairfax ($49,990) and Arlington ($58,282) Counties just in northern Virginia.

The number one factor skewing the household income median upward is the large percentage of married couples, as shown by filing status in state tax return data.  Most of these households have double incomes out of necessity.  The relatively small percentage of low-income households in the county also skews the median upward.  Many people who work here in Loudoun earn much less than the median income and find it hard to afford housing.   Many choose to commute in from nearby areas with a lower cost of living, such as Winchester, Martinsburg and Frederick, where they can afford a single family house for what a condo or townhouse would cost in Loudoun.  Because mostly younger people were attracted to Loudoun during the high-growth years, the county has a low percentage of senior citizens, who tend to have lower incomes.

Any measure of wealth or affordability would have to take expenses into consideration.  Income statistics do not speak to expenses.  A large income means little if basic living expenses are high and Loudoun is a very expensive place to live!

Higher income often means a higher tax bracket.  Many families try to keep afloat financially with another income, but most of a second household income is typically eaten up in income taxes and expenses, such as childcare and commuting costs.  Loudoun has the second highest real property tax rate in the state and the average homeowner tax bill is the highest in northern Virginia.

The county is home to a high percentage of young families, who tend to be saddled with major expenses.  These young folks tend not to have a lot of accumulated wealth and have had to take on high mortgage debt to buy their homes.  The housing bust - the average home assessment dropped from a high of $526,111 in 2006 to $395,480 in 2009 - has left as many as 40% of Loudoun homeowners with mortgage balances greater than their house values.  Many college graduates are still paying off student loans.  Commuting costs are high in an outer county, especially the only one that is not linked to the Beltway by a toll-free expressway.  Loudoun commuters using the Dulles Toll Road and Dulles Greenway will soon be paying up to $3,125 in tolls a year.

In addition to basic living expenses, families are trying to save money for their retirement and their kids college education.  The cost of college continues to rise because the state has been reducing aid to state-funded colleges in an effort to balance its budget.  Paying higher taxes for more public schools spending leaves less money for savings.

Probably no statistic is more telling than the foreclosure rate.  If Loudoun really is the richest county in the country, then why are so many folks losing their homes?  Loudoun has approximately 105,000 housing units, but there have been nearly 5,000 residential foreclosures in the past few years.

The tax burden on Loudoun homeowners is too high already and needs to be lowered.  The average Loudoun taxpayer cannot afford higher taxes in 2010.  Email your Supervisors at This e-mail address is being protected from spambots. You need JavaScript enabled to view it and ask them not to raise taxes in 2010.