House panel kills push to let localities fund their own school construction costs through sales tax

A Republican-led House panel voted Friday to kill legislation that would have allowed localities to raise local sales taxes in order to fund school construction costs.

The party-line vote came as a blow to many cities and counties across Virginia, as well as a growing — and bipartisan — contingent of legislators focused on school construction needs. While Virginia’s aging K-12 infrastructure has been a focus for nearly two decades, a recent report found that more than half of all school buildings are more than 50 years old. Replacing those buildings is estimated to cost roughly $25 billion.

Boosting local sales taxes was one solution recommended by the state’s Commission on School Construction and Modernization — the most recent task force convened on the issue. Multiple legislators, including Sen. Tommy Norment, R-James City, and Sen. Creigh Deeds, D-Bath, sponsored bills that would have allowed individual localities (in this case, Isle of Wight and the city of Charlottesville) to hold voter referendums on whether to increase the local sales and use tax by up to one percent. Groceries and essential household items such as toilet paper would be exempt, but revenue from the increase would go solely to school construction and renovation costs.

“Everybody I’ve spoken to supports this bill and the proposed tax being used on schools,” said Volpe Boykin, an Isle of Wight resident who spoke in favor of Norment’s bill on Friday. Sen. Jennifer McClellan, D-Richmond, sponsored broader legislation that would have allowed any Virginia locality to hold the same referendum.

Del. Dave LaRock, R-Loudoun, was the bill’s House patron, and Del. Sally Hudson, D-Charlottesville, co-sponsored a nearly identical bill with Del. John Avoli, R-Staunton.

Despite broad bipartisan support for the initiative, and no testimony in opposition, a handful of Republican House lawmakers killed the bills from Norment, Deeds and McClellan in quick succession on Friday. Dels. Kathy Byron, Bobby Orrock, Nick Freitas and Chris Runion voted against the legislation, while Hudson joined Dels. Kathleen Murphy, D-Fairfax, and Don Scott, D-Portsmouth, in voting in favor.

“I represent an area that sends us here to hold back on taxes,” said Byron, the panel chair. “They don’t want us to become a place where we put everything back to a referendum.”

There are still a handful of surviving bills related to school construction in the General Assembly, including a measure from Sen. Jeremy McPike, D-Prince William, that would require the Virginia Department of Education to develop a database on school infrastructure needs. But Republicans on another House panel have already voted down similar legislation from Del. Shelly Simonds, D-Newport News, and other local funding initiatives have also been killed.

The @VAHouse Early Childhood/Innovation Subcommittee tabled my SB 481 encouraging local governing bodies and school boards to collaborate to set aside for school construction any funds appropriated to the school board that are not spent. 1/ pic.twitter.com/FtAfI9oYFd

— Jennifer McClellan (@JennMcClellanVA) February 23, 2022

“It’s frustrating,” McClellan said. “Especially because I know if they had made it to the floor, they would have passed.”

‘I find that to be a double standard’

For some localities, the decision has sparked even greater anger, especially in the broader context of Virginia’s ongoing debate on school construction. One 1993 report found that state government began moving away from funding school infrastructure in the 1930s, and legislators on both sides of the aisle have spent decades describing capital projects as a local responsibility.

Despite the lack of state investment, towns and counties are limited in their ability to independently raise funds for school construction. Cities in Virginia can levy meals and lodging taxes, and all localities can increase their real estate and personal property taxes without intervention from Richmond. When it comes to raising sales tax, though, localities need approval from the General Assembly.

In 2019 and 2020, the legislature passed individual bills that authorized nine localities, most Republican strongholds such as Halifax and Pittsylvania counties, to hold local referendums. Of the eight areas to put the issue on the ballot, only one — Pittsylvania — didn’t approve a sales tax increase. 

“It feels like bias, that the citizens of our county are being discriminated against when nine other localities have been given this ability to have a voice,” said Will McCarty, a member of the Isle of Wight Board of Supervisors who testified in favor of Norment’s legislation. It was especially frustrating, he added, given the recent push for parental say in other school policies endorsed by both Republican legislators and the administration of Gov. Glenn Youngkin.

“So you’re going to say parents’ choice matters when it comes to masks, but their choice doesn’t matter when it comes to school funding?” he said. “I find that to be a double standard, and it should not be that way.”

Macaulay Porter, a Youngkin spokesperson, pointed to a loan rebate program proposed by the Virginia House of Delegates as an example of the governor’s support for school construction. The administration says the initiative would reduce the need for local tax increases, and Youngkin has been outspoken in prioritizing tax cuts as his next major policy goal.

“The governor is eager to work on rebuilding our school infrastructure and he will continue to work with the General Assembly to find ways to do so in a bipartisan fashion,” Porter said in a statement.

Both House and Senate budget proposals include money for school construction, a first since state legislators slashed education funding at the onset of the Great Recession. There’s wide acknowledgement, though, that neither spending plan includes enough to significantly address the infrastructure needs. 

The Senate proposal would allocate $500 million in general funds for one-time construction and renovation grants, distributed to school divisions based on a formula meant to reflect their locality’s ability to independently fund education costs. Some of the state’s largest divisions, such as Chesterfield, would receive more than $22 million under the plan. Isle of Wight would receive just over $2.8 million. While the numbers might seem large, none of the allocations would cover the full cost of building a single new school.

“We’re building one replacement school right now and when we first bid that out, it came out to around $26 to $28 million,” McCarty said. “Well, with COVID and inflation and all the other impacts, that school is now upwards of $40 million.” 

The House budget proposes $541.7 million for a loan repayment program that would prioritize Virginia’s highest-need districts. The first tier of rebates would pay down 30 percent of the principal and interest on local loans taken out to fund school improvement projects. But some of Virginia’s lowest-income localities have maxed out their ability to take on debt, and lawmakers have questioned why Republicans would restrict towns and cities from developing new funding sources.

“Loans are good, interest-free loans are good,” Hudson said in a floor debate on Thursday. “But localities still need revenue streams to pay them back.”

For many localities, boosting sales tax is preferred to raising assessments on real estate or personal property. Mayor Lloyd Snook of Charlottesville said gradually increasing property taxes — the approach favored by most towns and cities — just wouldn’t yield as much revenue — particularly in areas with slower appreciation on home values. And real estate tax increases are rarely a popular proposal. 

That’s true even in areas like Charlottesville, where property assessments have risen by 12 percent in the last year. As a result, Snook said taxes on some residents are already going up by more than 20 percent even without an increase by the city.

“We don’t want to say to folks who have lived in Charlottesville for 40 years and are now living on Social Security, ‘Hey, the biggest check you write every year is your check for property taxes and we’re going to raise it another 25 percent,” he said. “That scares people.”

Vice Mayor Juandiego Wade said the city was hoping to campaign for a sales tax referendum that would also leverage revenue from tourists. With Friday’s vote, there’s no way to make that happen. But the city is currently facing a $75 million bill to rebuild a middle school built in the 1960s. According to Snook, paying for the school with current revenues would consume the bulk of the city’s capital budget for at least the next five years.

“This is a situation where we’re looking for Charlottesville voters to be able to use Charlottesville money to solve a Charlottesville problem,” he said. “We’re not asking for a state handout.”