Two years ago a fiscal equity analysis assessed the current Virginia equalization formula over its history (fiscal year 1975-fiscal year 2003). The findings indicated by accepted equity statistics were that the level of equity improved from fiscal year 1975 through fiscal year 1994 and leveled off from fiscal year 1994 through fiscal year 2003. Between fiscal years 2003 and 2005, a bipartisan effort increased the state funding for public elementary and secondary education by $755 million, or nearly 18% over the previous biennium. Usually when the state assumes a greater fiscal responsibility for funding its public schools, a higher level of fiscal equity is the result. Why then did the equity statistics in Virginia fall precipitously between fiscal years 2003 and 2005? It appeared that some local school districts--actually the local governing agencies--have used the increased state aid for local tax relief. Districts that decreased or level-funded their budgets were more likely to be administered by county governments and possess low fiscal capacity, low fiscal effort, high-percent free and reduced lunch counts, and low adjusted state and local per-pupil expenditures. (Contains 11 tables, 7 figures and 40 footnotes.)