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Virginia grocery tax error results in school district deficits statewide

The elimination of the grocery tax across Virginia is affecting every school in the Commonwealth of Virginia. 

With the elimination of the tax Jan. 1, state budget projections for school districts did not take this into account. Suffolk Public Schools Superintendent John B. Gordon III spoke about the grocery tax and about what happened to put SPS in this financial position.

“It’s just about the amount that you pay for your transactions at the grocery store that are part of the Virginia state taxes and the challenge is when the state Department of Education did their calculation tool based on what they thought was going to be the expected revenue. The state department, I guess forgot, that holding the grocery tax harmless, which means basically no change, wasn’t calculated. And that created budget shortfall across the Commonwealth of Virginia,” Gordon explained. 

“For public education since our state amounts that we receive is based on revenue that the state receives for this fiscal year of 2022-2023, it created a shortfall of $58 million and for next fiscal year, because of the hold harmless, it created a shortfall of $143 million, for a total amount of $201 million.”

Gordon spoke on just how this mistake happened at VDOE.

“They said it was human error that occurred at the state Department of Education. And so, several superintendents, several finance officers from out of the 132 school divisions have asked for the actual calculation tool, the formula of how it was used to determine how much money the school divisions receive,” Gordon said. “This shortfall has now created approximately a $825,000 deficit for this fiscal year for Suffolk Public Schools, and we’re looking at a 2.2 million deficit for next year.”

Gordon spoke on how the shortfall gives SPS less operating money throughout all its districts.

“It affects everything that we try to do within the school division, especially when it comes to major purchases that we try to sometimes save for years end to see how much money that we have left over. And that leftover money a lot of times is what we’ve used for major projects such as playground purchases, purchases for facilities and maintenance for equipment. Purchases for roof replacement, purchases for HVAC,” Gordon said. 

“So we have to be very creative and what is disheartening is several school divisions across the state have already done their budget presentations, and now those school divisions have to go back and redo them. Ms. Forsman, our chief financial officer, actually had our budget balanced in preparation for what I was going to present to the school board and to the public on Feb. 23, now she’s got to go back and redo that knowing that we have 2.2 million dollars less for next year.”

In a presentation from the state focused on the “Status of Calc Tool of Estimating”, it provided background information that the estimating tool used for school divisions, which is known as the Calc Tool, “did not deduct the local grocery tax hold harmless amount.” This resulted with the local basic aid funding estimated being “overstated.” The presentation also said the overstated estimate “only occurred when the Calc Tool provided by VDOE.” The presentation also stated that the flawed formula was “first shared with school divisions in June 2022” instead of December as “previously thought.”

“So basically the error occurred last year, but it took six to seven months for it to be discovered,” Gordon said. “The error was discovered on Jan, 23. Now we received communication from the Virginia Association of School Superintendents last Wednesday. We received an email from the state last Friday. So if the error occurred at the state level, we should’ve heard directly from the state and we did not,” said Gordon. “The problem is they never told us how they’re going to solve this issue.”

He said they never informed any school divisions what they’re going to do to basically fix the fact that they thought they had more money. 

“Some of the smaller school divisions, some of the rural school divisions, let it be known that they don’t have the staff in place to check behind the Department of Education,” said Gordon. “No solutions were given, which was very frustrating to the 187 people, because it was superintendents as well as many of their finance folks that were on the call yesterday. That was extremely frustrating that no solution was given.”

Gordon spoke options are available, but they all must go through the state level: The money can be made up by being taken from a $4 billion surplus, which involves a vote from the General Assembly and signature from Gov. Youngkin. Another option, which might not cover the total amount, is using budget lines and funding sources to help reduce the amount lost. 

“All the solutions that probably make the most sense have to go through our legislators and legislators have been blown up with communication with superintendents, lobbyists,” Gordon said. “This is a huge mistake. And if something like this were to happen, let’s say, on a smaller scale in Suffolk Public Schools, we would’ve had resignations and terminations immediately. And that hasn’t happened at the state level, which also shows a lack of accountability.”

Finally Gordon discussed what parents need to know and provided a message to the parents of Suffolk.

“Parents need to contact their legislators as well. Parents need to contact the Department of Education. Parents need to contact the governor’s office. This is huge, I can’t state that enough,” emphasized Gordon. “We’re going to be as creative as we possibly can to support our staff, to make sure that we make Suffolk Public Schools and continue to make it an attractive place for folks to come work. That some of the plans might have to be multi-year now instead of being able to do it one year, and I am going to need tremendous support from the City Council for funding the superintendent’s budget.”

 

Editor’s note: Updated fourth quote at 8:27 p.m., Friday, Feb. 3 to reflect the correction to “purchases” and “HVAC.”