TACIR review flags virtual-school enrollment as driver of funding shifts; members request follow-up analysis
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Summary
TACIR presented its annual fiscal capacity report and commissioners pressed staff to analyze how virtual-school enrollment changes the county-level fiscal capacity index and state funding allocations; an ad hoc group will be formed to pursue further modeling.
Tennessee Advisory Commission on Intergovernmental Relations research director Michael Mount presented the commission’s annual county-level fiscal capacity index on May 20 and members pressed staff to model how virtual-school enrollment and other factors shift state funding between counties.
Mount said fiscal capacity measures a county’s potential ability to fund education from local taxable sources and explained that TACIR uses multiple regression with factors including sales tax base per student, equalized property assessment per student, per-capita income and service responsibility measured by students per population. “Fiscal capacity answers the question how much each local government must contribute,” he said. Mount noted fiscal capacity is a relative measure: a county’s share changes both with local growth and with growth in the other 94 counties.
A recurring point of discussion was virtual schools. Mount noted Tennessee counts virtual school students as enrolled in the virtual-school county regardless of the student’s residence; those students increase service responsibility for the operating county without proportionally increasing its property or sales tax bases. Senator Raum Yarbrough (Senator Yarbrough) and other members raised concerns that large virtual-school enrollments in a small number of counties were effectively shifting state funding toward those counties and away from others. “Those two counties alone have something like 6,000 of the virtual school students in the state,” Yarbrough said, adding that the distribution can create incentives and fiscal distortions.
Chair Senator Ken Yeager asked Director Lippert to prepare follow-up analysis. Lippert said staff can model alternative approaches—treating virtual students as resident students for fiscal-capacity calculations or other options—and present results at the next meeting or the following meeting. Yeager said he would form an ad hoc committee of legislators and local officials to review the issue and work with TACIR staff.
Commissioners also discussed Greenbelt/qualified agricultural property assessments and how the Comptroller’s tax-aggregate reports account for present-use assessment. Members asked for the regression spreadsheet and the model’s weights; Mount and Lippert said those files would be provided to members and that TACIR staff will bring a modeling update to the commission soon.
Why it matters: the fiscal capacity index feeds the BEP (Tennessee Investment in Student Achievement) equalization elements. Material changes to how students are counted or to how tax bases are treated can shift millions of dollars in state aid among counties.
Next steps: TACIR staff will prepare modeled alternatives showing fiscal-capacity impacts of virtual-school enrollments and other adjustments; the chair will convene an ad hoc committee to review results with staff.
