Fiscal capacity is some type of quantifiable measure of economic resources existing within a political subdivision, jurisdiction, or governmental unit which may be utilized to support a wide array of public functions. Measures commonly used throughout the United States as indicators of economic capacity are tax bases and personal income. The most commonly used measure for fiscal capacity is equalized assessed value of property within the governmental units in question. Once the fiscal capacity is determined, relative capacity among governmental units may be calculated by dividing the aggregated capacity measure by total population or total pupils. The equalization of educational opportunity is dependent partially upon accurately measuring a locality's ability to pay taxes. Prior to the 1971 establishment of the Standards of Quality in Virginia, the public school funding formula relied exclusively on equalized (true) valuation per pupil to measure the fiscal capacities of the several school divisions. Unfortunately, by employing only true valuation per pupil as the sale measure of fiscal capacity approximately fifty percent of the ability to pay was ignored. As a consequence, the Commonwealth developed and implemented a index of fiscal capacity composed of several measures of fiscal capacity.

Ed. D.