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JLARC Meets to Review Reports on Community Services Boards, SOQ Funding Formulas, VRS, and other Items of Importance to Local Governments

On December 12, the Joint Legislative Audit and Review Commission (JLARC) met and received reports from Commission staff on a number of items of interest to local governments. These included an overview of Community services boards, Dual Enrollment program costs and funding, an interim report on SOQ funding formula review, the annual VRS oversight report, and other items.

Community Services Board Behavioral Health Services: JLARC staff’s report does not recommend significant changes to the structure of the Community Services Board (CSB) system, but encourages the state to exercise more oversight of CSB performance, citing a lack of guiding expectations and effective accountability mechanisms. JLARC staff found that CSBs are serving an increasing number of clients with serious mental illness, and that CSBs struggle with recruiting and retaining staff, which hampers their ability to provide services in a timely manner. Uncompetitive salaries are a major factor in CSB workforce challenges, although burdensome administrative requirements are affecting workforce turnover as well. The report examined CSBs’ role in the state’s crisis system, noting that training for CSB staff conducting preadmission screenings could be improved, as could CSBs’ discharge planning efforts. The report also points to the need for additional alternatives to hospitalization, encouraging additional investments in staff for existing residential crisis stabilization units with unused bed capacity, as well as support for the development and operations of additional residential crisis stabilization units.

Key additional recommendations include:

  • Funding a salary increase for direct care staff at CSBs, and directing the Department of Behavioral Health and Developmental Services (DBHDS) to report annually on certain workforce metrics, such as turnover and vacancy rates, across CSBs.
  • Directing DBHDS to review documentation and reporting requirements applicable to CSB direct care staff and to eliminate requirements that are not essential to ensuring that consumers receive effective and timely services, or are duplicative or conflicting.
  • Directing DBHDS to conduct a comprehensive review of the performance contracts with CSBs and to ensure that the contracts measure consumer experiences and outcomes, include relevant benchmarks, and provide clear direction on how DBHDS will monitor performance and enforce compliance.
  • Requiring DBHDS to develop and implement requirements and processes for monitoring CSBs’ performance; requiring DBHDS to monitor compliance and use available enforcement mechanisms as necessary; and requiring DBHDS to report performance information to CSB governing boards, the Behavioral Health Commission, and the State Board of Behavioral Health and Developmental Services.

Dual Enrollment Program Costs and Funding: JLARC staff’s report proposes a significant change to the state’s dual enrollment program by recommending prohibiting community colleges and school divisions from charging tuition and fees for non-career and technical education dual enrollment courses taught on public high school campuses as long as state funds cover dual enrollment expenses. Dual Enrollment is a program that allows high school students to earn college credits for courses taken through the Virginia Community College System while still being enrolled in high school. JLARC staff found that dual enrollment expenses consist primarily of personnel costs and are nearly five times greater for school divisions than community colleges. High school students in the majority of school divisions do not pay for dual enrollment courses. While some school divisions rely on dual enrollment tuition or fees to help offset costs, by eliminating the ability of community colleges to charge tuition or fees, at least 51 school divisions would save average of ~$81K per year in tuition and fees charged by colleges, while community colleges would lose an average of ~$270K per year. The report opined that the General Assembly could provide an additional $6.2 million to replace colleges’ dual enrollment tuition and fee revenue as well as provide funds for grants to divisions that demonstrate need for financial assistance for their dual enrollment programs.

Key additional recommendations or policy options include:

  • Funding to provide annual bonuses to high school teachers statewide who teach dual enrollment courses.
  • Directing the Department of Education to (i) outline the types of alternative credentials and/or expertise that may be considered acceptable by the community colleges’ accrediting body for qualifying high school teachers to teach dual enrollment courses; and (ii) clarify that, on a case-by-case basis, divisions with teachers who may have sufficient alternative qualifications should work with their community college to determine whether these teachers can teach dual enrollment and document their credentials accordingly

K-12 Standards of Quality Funding Formula Status Update: JLARC staff’s update on this study found that for FY 2021, Virginia School Divisions received $20.1 billion in funding, the majority of which (52%) came from local governments, while the state contributed 39% and the federal government provided 9%. This echoes the Virignia Board of Education’s 2022 Annual Report on the Condition and Needs of Public Schools in Virginia, which found that despite significant progress by the legislature, state direct aid per-pupil has decreased 3.4%, adjusted for inflation, since 2008-2009. For FY 2021, local governments in Virginia invested $4.2 billion above the required local effort for SOQ programs. Localities continue to provide a greater share of funding, which allows wealthier divisions to go above and beyond local effort causing inequitable resources and opportunities for individualized education in divisions that are less wealthy and those divisions that serve high percentages of economically disadvantaged students. For instance, the school division with the lowest K-12 operating expenditures per student was $11,100 while the school division with the highest was $25,600.

The study will continue to compare current state staffing standards to workgroup recommendations, research literature, other states, and actual staffing; evaluate the SOQ formula, including all assumptions, data, and calculations so as not to be arbitrary and to reflect prevailing costs; assess current LCI formula assumptions and calculations and determine how well they measure local ability to pay; evaluate concerns raised by localities about the LCI; and identify alternative methods that could be used to measure local ability to pay, among other areas of interest. VACo staff provided an extensive interview to JLARC on these issues earlier this year. The final report will be presented at the June 2023 JLARC meeting and will likely include recommendations for substantial changes to Code and Appropriation Act language with significant budget implications for state and local governments.

VRS Oversight Report: JLARC staff’s report showed that VRS serves more than 788,000 members, retirees, and beneficiaries. The VRS Trust Fund held $96.8 billion in assets as of September 30, 2022. Ranked by value of assets, VRS is the nation’s 17th largest public or private pension fund. In FY22, VRS paid $5.7 billion in retirement benefits and $493 million in other post-employment benefits from the trust fund. VRS earned investment income in FY22 but had net investment losses of $124 million after accounting accruals and adjustments were made. VRS investments generated a return of –5 percent for the one-year period ending September 30, 2022. However, the total annualized return over the 10-year period was 7.9 percent, which is above the 6.75 percent long-term (30+ year) rate of return that VRS assumes for its investments.

The continued health and well-being of VRS is important to local governments as it administers retirement programs and other benefit programs for state and local government employees, including teachers. VRS receives funds from employer contributions, employee contributions, and investment income. The board-certified rates for the Teachers and State Employees plans decreased for the FY23–FY24 biennium primarily because of the substantial investment returns for the fund in FY21. Investment returns more than offset the increases in plan liabilities resulting from recent changes to the plans’ mortality assumptions, which assume future generations of plan members will live longer than current members. Even though the board-certified rates decreased for the Teachers and State Employees plans, the General Assembly maintained the higher FY21–FY22 contribution rates for the FY23–FY24 biennium in the 2022 Appropriation Act. Maintaining the higher FY21–FY22 contribution rates could result in $500 million in savings for the Teachers plan and $48 million for the State Employees plan, according to estimates from VRS staff and assuming the trust fund meets its 6.75 percent long-term investment return assumption.

The complete JLARC reports and presentations of the meeting as well as the video recording may be accessed here.

VACo Contacts: Jeremy R. Bennett and Katie Boyle

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