2007 Virginia General Assembly Budget Overview

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The 2007 General Assembly adjourned as scheduled this year, unanimously approving changes to the current, two-year state budget, and adopting a compromise transportation package that even some supporters said fell far short of what they wanted. Later, lawmakers overwhelmingly approved a substitute version of the transportation plan submitted by Governor Kaine. Legislators had a watchful eye on November, when all 140 seats in the General Assembly are up for election. 

The TJPD “action item” on transportation advocated additional and consistent revenues for transportation without heavy reliance on the general fund or debt.

HB 3202 details the specific transportation funding provisions that will be in place in coming years. Changes to the current budget earmarked $500 million in general funds for transportation, primarily for several key road projects and for rail and transit capital. This includes the $339 million set aside for transportation uses, but left unallocated by the 2006 General Assembly. As for HB 3202, provisions for the statewide component of the plan include a $3 billion bond package to be repaid over 25 years. The package stipulates that 20% of bond proceeds be used for transit capital and 4.3% be used for rail capital. The remaining proceeds will be allocated as follows: first, to match federal highway funds in order to make additional state construction funds available to the primary, urban and secondary systems; second, to provide necessary matching funds for the local revenue sharing program; and third, to fund the costs of statewide or regional projects.

The plan designates one-third of all insurance premiums to debt service on the bonds, and directs that three percent of existing recordation taxes be funneled to transportation (2% for transit and 1% for road maintenance). Increased user fees in the form of vehicle registration and abusive driver fees, along with an increase in the diesel fuel tax from 16 to 17.5 cents/gallon) will support highway maintenance. The package also dedicates two-thirds of any unobligated state revenue surplus each year to transportation.

The TJPDC action item on “public education funding” endorsed the state funding of its share of the realistic costs of meeting the Standards of Quality (SOQ). 

Approved changes to the current biennial budget reduce state direct aid for public education by more than $44 million in FY07, due largely to lower enrollment and other technical updates, while state funding increases $35 million in FY08, due largely to funds for the state share of a 3% salary increase for teachers and state-supported staff, effective December 1. As the legislature faces another SOQ rebenchmarking next year, along with various increased staffing proposals from the Board of Education, budget language directs a joint subcommittee of one member of the House Appropriations and Senate Finance Committees review K-12 education costs drivers and trends, existing incentive, categorical, at-risk and special education funding, and alternatives to across-the-board salary increases. This task had been tackled this past year by various agency staff. A report from the subcommittee is due by Sept. 15.

This TJPD “action item” on the Comprehensive Services Act supported full funding of the state pool for CSA and a cap on local expenditures.

The approved budget maintains the $16.3 million included in the introduced budget for reimbursement to localities under the Comprehensive Services Act (CSA), in part to cover declining federal funding. Budget language directs the CSA State Executive Council to examine current funding allocations for non-mandated services to children served through CSA and recommend any changes necessary, including additional funding, to eliminate gaps in the current formula. Language also requires the Office of Comprehensive Services to report on the potential fiscal impact of SB 1332 (see more details below).

Other Budget Items Affecting Local Governments:

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The budget provides funding for a four percent salary increase for state employees (effective November 25), and state-supported local employees (effective December 1). It also provides $3.2 million the second year to fund one-half of the outstanding shortfall in the Compensation Board's minimum staffing standards for Commonwealth's Attorneys.

Education

· In addition to maintaining the 3% salary increase for teacher and state-supported positions, as noted, the budget adds $11.9 million in the second year for state costs to increase the retiree health care credit from $2.50 to $4.00 per month for each year of service. This increase in the credit will cost local governments $18.6 million in FY 2008, with the cost reflected in a .46 percent higher teacher retiree contribution rate.

· The budget maintains an expansion of the Early Reading Intervention program ($4.1 million) proposed by the governor, but rejects the Standards of Learning Algebra Readiness initiative ($3.9 million). The current program targets 7^th and 8^th graders, and had been proposed to expand to 6^th graders.

· The spending plan alters the governor’s $4.6 million proposal for the Virginia Preschool Initiative to establish pre-kindergarten pilot programs, leaving $2.6 million (captured from the At-Risk Add-On program) for eligible school divisions that partner with private, nonprofit providers and elect to participate in the pilot for at-risk preschool students not being served.

· Funding of $2.8 million for implementing an associated voluntary quality ratings system for child day care preschool programs also was eliminated.

Health and Human Services

· The budget increases the auxiliary grant rate for residents of assisted living facilities to $1,061 by July 1. When combined with funding included in the Governor's introduced budget, the auxiliary grant will have increased by five percent from January 1 to July 1.

· An additional $300,000 in the second year is added (on top of the $700,000 contained in the introduced budget) to increase the number of home-delivered meals provided by local Area Agencies on Aging.

· The budget provides an additional $2.3 million in the second year to match federal funds to increase services under the mental retardation (MR) waiver program by 160 slots. This is in addition to the 170 slots funded in the introduced budget, thus a total of 330 new MR waiver slots are to be phased-in during FY08.

· About $25 million in general funds is added to help meet new federal work participation requirements associated with reauthorization of the federal TANF program. A federal deficit reduction act last year means more TANF recipients must be in an approved work activity, driving a need for employment support and child care services.

· General funds for the Comprehensive Health Investment Project are increased by $2.2 million in FY08.

Public Safety

· The budget deletes $11.5 million proposed for incentive grants for localities providing enhanced retirement benefits to deputy sheriffs and jail officers under the Law Enforcement Officers Retirement System (LEOS). SB 1166 (see details below) requires localities to provide these enhanced benefits to their deputy sheriffs by July 1, 2008 (therefore, no state funding is included in the current biennial budget).

· The spending plan continues distributing HB 599 funds by the current formula, eliminating the proposed redistribution of 40% of funding to cities based on violent crime rates. It also holds those localities that would otherwise have lost funding harmless. A language amendment requires localities receiving 599 funds to certify annually to the Department of Criminal Justice Services the total amount of local support for public safety services and that 599 funds were used to supplement, not supplant, local funding.

· The budget provides $2.6 million the second year for the Virginia Crime Victim-Witness Fund, to cover a projected shortfall in nongeneral fund support from federal and state court fees for locally operated victim-witness programs statewide.

· The budget includes dollars to increase funding for Court Appointed Special Advocates (CASA) to $1.6 million the second year, which will double the amount of state support provided for each of the 27 local programs, from $20,000 to $40,000 for each program.

· Language and $100,000 is targeted for evaluation of the effectiveness and efficiency of local drug treatment court programs.

Environment

· The budget appropriates $20 million in FY08 for deposit into the Water Quality Improvement Fund (WQIF) to upgrade wastewater treatment plants within the Chesapeake Bay watershed in nutrient removal technology.

· The budget includes $6.6 million over the two years for land conservation initiatives, including $1 million for the Virginia Land Conservation Foundation, $1 million for the Virginia Outdoors Foundation, and $4.3 million for purchase of development rights. The governor had proposed $20 million in matching grants for natural and open space area protection programs.

· The budget provides $730,000 the second year to the Department of Environmental Quality (DEQ) for a program to site, permit, enforce and monitor biosolids application on farmland in the state. Another $173,000 is provided for DEQ to review nutrient management plans with particular emphasis on plans including land applications of biosolids. Budget language directs DEQ to convene a panel of experts to evaluate the impact of biosolids application on human health and the environment.

· The budget provides $300,000 the second year for the state's soil and water conservation districts, and includes new funding and positions for oversight of landfills and to enhance solid waste management compliance.

Other

· The budget provides just over $300,000 the second year for establishment of a nonprofit, nonstock corporation to provide wholesale wine distribution services for Virginia local and farm wineries in accordance with HB 2450 and SB 1413.

· In the second year, $190,000 is provided for HB 2197 and SB 1393, which require libraries receiving public funding to install technology protection measures to filter or block internet access to certain materials.

· The approved budget plan deletes the $2 million in additional funding contained in the introduced budget for the Virginia Housing Partnership Revolving Fund.

· For grants to non-state agencies, the spending plan earmarks $25,000 for the Pleasant Grove House in Fluvanna County, $15,000 for the Louisa County Historical Society, $35,000 each for the Nelson County Rural Health Outreach Passport, the Oakland Museum in Nelson County, and the Town of Louisa/Downtown Development Corporation. 

Budget Language Amendments

· Language directs the Secretary of Health and Human Resources to report on the feasibility of restructuring the auxiliary grant program to make it a portable benefit for disabled consumers who choose housing arrangements other than assisted living facilities.

· Language specifies that funding for mental health services for children and adolescents with serious emotional disturbances and related disorders, which is provided through the Department of Mental Health, Mental Retardation and Substance Abuse Services to Community Services Boards, be allocated with priority placed on serving those children who are at-risk for custody relinquishment.

· Language directs the Department of Social Services (DSS), in collaboration with various state and local partners, to develop and disseminate clearly defined policies that encourage the use of non-custodial placement agreements to improve access to mental health services to children otherwise at-risk of placement in the state's custody. The department also must disseminate "best practices" information on such agreements and provide training to facilitate use of non-custodial placement agreements by local social services department.

Legislative Priorities

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The TJPD “action item” on Land Use and Growth Management specifies “enabling legislation for impact fees” as the top legislative priority for the region for the 2007 session.

Numerous bills were introduced to provide impact fees in various forms to some or all localities in the state. Ultimately, those bills were defeated. However, the approved version of HB 3202, the transportation package, includes authority for assessing road impact fees for many localities, including Albemarle, Charlottesville, Fluvanna, Greene and Louisa. The changes would allow impact fees to be imposed within service areas designated in the comprehensive plan and for construction of new roads or improving existing roads benefiting new development.

This legislative position also calls for opposition to “any preemption or circumvention of existing local authority to regulate land use” and encourages the state to “provide local governments with additional tools to manage growth.” The following approved bills relate to those statements:

HB 2493 (Albo) and SB 1205 (Hanger) provide that local restrictions on activities at licensed farm wineries be reasonable and take into account the economic impact of a restriction, whether such activities and events are usual and customary for farm wineries, and whether such activities pose a substantial impact on public health, safety and welfare.

HB 3120 (Albo) prohibits local ordinances that regulate storage, warehousing, or wholesaling of wine by a licensed farm winery that complies with state and federal law and ABC regulations.

HB 2500 (Orrock) provides “Northern Virginia” proffer authority to high-growth localities (5% population growth between the last two censuses).

The General Assembly also approved a handful of bills submitted by the region’s legislators at the request of or of particular interest to TJPDC localities:

HB 1685 (Toscano) and SB 887 (Deeds) will allow the Commonwealth Transportation Board (CTB) to allocate primary system road funds, derived from allocations to the construction district in which the project is located, for urban system road projects (provided the projects are components of the National Highway System), without a loss of urban system funds to the locality.

HB 2674 (Toscano) and SB 898 (Deeds) add a new definition of toy vehicles that are being observed by law enforcement officers as constituting a potential safety hazard when operated on highways, and prohibit them on certain highways (those with over a 25 mph speed limit, those with more than two lanes or those outside residential areas).

HB 2503 (Toscano) amends transfer of development rights legislation approved in 2006 to revise several definitions and to provide for the inter-jurisdictional transfer of development rights between any county and adjacent city (SB 869 is an identical bill).

HB 2451 (Toscano) and SB 1131 (Deeds) were rolled into other bills (HB 2010 and SB 955) that were approved to revise affordable housing provisions related to increased bonus densities and establishment of housing trust funds. Additional “affordable dwelling unit” issues raised by these and other related bills will also be examined this year by the Virginia Housing Study Commission

In the section that follows, you will find highlights of other approved legislation in the areas of the environment, finance, human services, local government, public safety and transportation. Approved studies and resolutions also are highlighted

Other Approved Legislation

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Environment

HB 1710 (Callahan) and SB 771 (Chichester) authorize the Virginia Public Building Authority to issue up to $250 million in bonds to finance grants for nutrient removal technology at local wastewater treatment plants designated as significant dischargers or as eligible nonsignificant dischargers. Funding is to be targeted to 89 plants, including facilities of the Rivanna Water and Sewer Authority and Rapidan Service Authority. State reimbursements will be phased in as local shares for the upgrades are expended.  

HB 2568 (Shannon) and SB 821 (Devolites Davis) increase local discretion to impose civil penalties for erosion and sediment control ordinance violations. 

SB 1061 (Watkins) restricts local governments from regulating fertilizers, but clarifies that regulation of fertilizer application or storage is permissible if conducted in a manner consistent with Chesapeake Bay Preservation Act or Department of Conservation and Recreation requirements.

Biosolids:

HB 2802 (Byron) and SB 1339 (Newman) consolidate the program that regulates the application of biosolids under DEQ. Such regulation currently is split between DEQ and the Department of Health. The bills also require DEQ to conduct unannounced site inspections while biosolids are being applied and establish a $7.50 fee on each dry ton of biosolids applied.  The bills take effect January 1, 2008, if DEQ has sufficient resources to administer the program.

SB 1300 (Newman) authorizes localities to require a special exception or permit for biosolids storage, except when being applied solely on the farm where it is being stored. This bill took effect April 4.

SB 1313 (Hawkins) requires that the state application to store biosolids include local government certification that the site of the proposed storage is in compliance with all local ordinances. The bill also gives localities the authority to adopt an ordinance that reasonably restricts the storage of sewage sludge to certain areas based on public health, welfare or safety criteria.

Finance

HB 2181 (Saxman) and SB 1151 (Wagner) provide a uniform method of defining “idle equipment” related to the machinery and tools tax.  Idle equipment is judged to be “capital,” and cannot be taxed by localities.  To be deemed “idle,” the equipment must be unused for one year prior to tax day, with no reasonable prospect of being used the prospective tax year; or the manufacturer notifies local tax officials nine months prior to the beginning of a tax year that the equipment will be out of service for all of the next tax year. The bill took effect January 1, 2007; manufacturers had until April 1 to project “idleness” for the 2008 tax year. 

HB 1930 (Rapp) exempts localities from fees charged by the Department of Motor Vehicles (DMV) for obtaining DMV data.

HB 2095 (Tata) requires the Virginia Retirement System (VRS) to provide each participating locality with the information necessary for the locality to determine specific assumptions that are driving its VRS costs.

HB 2362 (E. Scott) allows local governments to exempt one vehicle owned or leased by certain law enforcement officers, salaried firefighters and emergency medical technicians residing in the locality from the local motor vehicle license tax.

HB 2640 (Gear) prohibits imposition of local vehicle license taxes and fees on inoperable vehicles that are reconstructed or specially constructed vehicles.

SB 1063 (Rerras) requires localities to give 30 days notice of the public hearing required for a change in the real estate tax rate, as opposed to the seven-day notice in current law.

Human Services

HB 2032 (Hamilton) broadens the nature of long-term care services and defines three additional services (educational, housing and transportation).

SB 1332 (Devolites Davis) would increase the mandated population served under CSA to include children with mental health conditions whose private insurance has been capped, or who lack private insurance and are not Medicaid-eligible. In addition, the parents/guardian would have to be considering a foster care placement in order to obtain publicly funded services. The bill must be approved again by the 2008 General Assembly in order to take effect.

Local Government

HB 2218 (Amundson) and SB 806 (Puller) exempt charitable organizations that engage in food distribution to the needy from state and local regulations and ordinances that govern food service and preparation. The bill took effect March 15.

HB 2446 (Frederick) and SB 1387 (Puller) allow counties with the county executive form of government (Albemarle and Prince William) to provide grants, loans and other assistance for county, school board and constitutional office employees, to purchase or rent residences within the county. HB 2384 (Waddell) amends provisions for other counties to increase the grant amount from $5,000 to $25,000.

HB 2707 (Hugo) and SB 840 (Devolites Davis) will prohibit localities from purchasing direct electronic recording (DRE) voting machines after July 1, 2007.

HB 1974 (Fralin) allows cities to establish economic revitalization zones to provide incentives for developers to invest in declining neighborhoods or commercial zones.

HB 2676 (O. Ware) modifies the requirements for advertising and holding a public hearing to any proposed budget amendment that exceeds one percent of total expenditures. Currently, the hearing requirements apply if the amendment exceeds one percent or $500,000, whichever is less.

HB 2954 (Bell), SB 781 (Cuccinelli) and SB 1296 (Norment) redefine the term “public use” and list the types of projects that are appropriate for the use of eminent domain authority. They do restrict the ability to use eminent domain to clear blight. 

Public Safety

HB 1603 (Rapp) requires multiline telephone systems acquired or installed after July 1, 2009, to be maintained and operated so that calls to 9-1-1 from each telephone station on the system provide automatic location or number identification information.

HB 1679 (Cosgrove) and SB 742 (Y. Miller) exempts fire and emergency medical vehicles responding to or returning from emergency calls from weight limits on bridges and culverts, except those maintained by a railroad, provided the vehicles are not so heavy as to cause immediate structural damage.

HB 1778 (Cosgrove) and SB 829 (Devolites Davis) grant localities the authority to operate photo-red traffic signal enforcement systems. Localities may install photo-monitoring systems at no more than one intersection for every 10,000 residents at one time. The bills limit the use and retention of images recorded, and stipulate a number of parameters for the use of such cameras. Any locality operating such a system also must conduct a public awareness program

HB 2308 (Lingamfelter) requires the Board of Game and Inland Fisheries to develop model ordinances for hunting with firearms.

HB 2547 (Carrico) provides that counties can only regulate the carrying of firearms being used for hunting along public highways.

HB 2726 (McClellan) grants local authority to require review of emergency plans of nursing homes, assisted living facilities, adult day care centers, and child day care centers located within the locality.

SB 1082 (Puckett) increases the allowable fee on criminal or traffic cases from $5 to $10. The proceeds from this fee can be used to help pay the costs of courthouse security personnel.

SB 1318 (Puckett) requires every local and interjurisdictional agency to review and update its emergency operations plan every four years.

Transportation

HB 2228 (Wardrup) and SB 1312 (Hawkins) require the Commonwealth Transportation Commissioner to develop and implement highway access management standards.

HB 2838 (Amundson) and SB 1128  (Norment) require the Virginia Department of Transportation (VDOT) to submit a biennial report on the condition and needs for operating and maintaining the state’s transportation infrastructure.

HB 2850 (Moran) and SB 1199 (Houck) change the name of the "Intermodal Office" under the Secretary of Transportation to the "Office of Intermodal Planning and Investment" and stipulate additional duties, including to address pedestrian, bicycle and other nonmotorized transportation in the state six-year and other state and regional transportation plans, and to identify and facilitate public and private partnerships to achieve the goals of state and regional plans.

SB 1110 (Houck) allows localities to create special service districts and impose additional estate taxes for any transportation service, system, facility or roadway that will be operated and maintained by VDOT.

SB 1181 (Williams) requires CTB to adopt secondary street acceptance regulations, which shall address road and pedestrian network connectivity and provisions to minimize stormwater runoff.  

SB 1200 (Houck) limits fees charged by VDOT for review of local highway improvement applications, plans and plats to no more than $1,000 for each review.

Miscellaneous

HB 2197 (Nixon) and SB 1393 (Stosch) require the library board or governing body of a library that receives state funding to include provisions in its acceptable Internet use policy for a technology protection measure to filter or block Internet access to certain materials. The bills also require the policy to include a provision for disabling the technology protection measure for legitimate research. 

HB 2370 (Tata) and SB 1218 (Hanger) increase the health insurance credit for retired teachers from the current $2.50 a month for each year of service to $4 a month.  In addition, the bills remove the cap (currently $75) on the maximum size of the monthly credit that a teacher can receive.

HB 2450 (Saxman) and SB 1413 (Hanger) create a new restricted wholesale wine license that authorizes the licensee to provide wholesale wine distribution services to winery and farm winery licensees, provided that no more than 3,000 cases of wine produced by a winery or farm winery licensee is distributed in any one year. The bill was effective April 4, 2007.

SB 789 (Stosch) allows localities to establish local trusts or equivalent arrangements to fund post-employment benefits. New standards issued by the Governmental Accounting Standards Board require that governments recognize the cost of benefits for retirees during the time period the employee is on the payroll, as opposed to when the employee actually retires.

SB 1166 (Stolle) requires deputy sheriffs to become members of LEOS, effective July 1, 2008. The costs of the enhanced benefits will be phased in over five years beginning in 2008, under a schedule to be developed by VRS. The bill does not increase the retirement multiplier for sheriffs, but does so for state police officers (to 1.85%) and authorizes all localities to likewise increase the multiplier for local public safety officers the same amounts. The cost for these benefits will be borne by localities and reimbursed to some extent by the Compensation Board, which currently bases its payments on the lower of either the local or state retirement contribution rate.  The Appropriations Act includes language permitting the governor to include in his budget recommendation for 2008 funding for any additional cost incurred by the Compensation Board as a result of localities providing these enhanced benefits in the upcoming year.

FOIA:

HB 1791 (Griffith) adds an additional possible response to Freedom of Information Act (FOIA) requests for records, to address situations when requested records cannot be found or do not exist. The public body receiving such requests must state that fact affirmatively in its response, and if the records are known to held by another public entity, to redirect the requester to that source.

SB  1001 (Houck) allows regional public bodies limited authority to conduct meetings at which some members attend by telephone or video link and allows members of all public bodies to attend a meeting electronically in certain cases of illness, disability or emergency.

SB 1111 (Houck) adds a closed meeting exemption to FOIA for discussion of reports or plans related to the security of any governmental facility or the safety of persons using such facility. Currently such plans and reports are exempt from disclosure but no provision exists for closed meetings to discuss them.

Constitutional Amendments:

SJR 354 (Rerras) would authorize the General Assembly to enact legislation to allow localities, by ordinance, to exempt or defer from real property taxes up to 20% of the annual value of residential or farm property that is the owner/occupant's primary dwelling and lived in continuously. SJR 340 (Devolites Davis) would authorize the General Assembly to enact legislation to allow localities to exempt the motor vehicle of a member of the armed forces serving in an area of conflict from personal property taxes.  Both proposed amendments would need to be approved again in the 2008 session in order to be placed on the November 2008 ballot.

Studies and Resolutions

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House

HJR 683 (Landes) directs the Joint Legislative Audit and Review Commission (JLARC) to analyze the cost of substance abuse to the state to determine possible savings as a result of providing treatment to offenders diverted from incarceration. Similarly, SJR 395 (Hanger) directs JLARC to examine the impact of issues related to substance abuse on state and local fiscal expenditures.

HJR 694 (Byron) directs the Secretary of Natural Resources and the Secretary of Health and Human Resources to convene a panel of experts to study the impact of land application of biosolids (sewage sludge) on human health and the environment.

HJR 692 (Cline) and SJR 401 (Hanger) continue the subcommittee studying land preservation, and include a requirement, among other assignments, to develop a plan for sharing of the costs of land preservation among the state and local governments.

HJR 696 (J. Miller) directs the Housing Commission to study the effect of residential overcrowding on neighborhoods and localities, including ways in which zoning, building code and fire safety code laws may be strengthened to help localities protect residents.

HJR 729 (Cox) directs JLARC to study the Virginia Preschool Initiative, particularly its authorization, funding, cost and effectiveness.

HJR 743 (Rust) creates a legislative subcommittee to examine incentives used for fire and rescue squad volunteers to recruit and retain qualified individuals.

HJR 774 (Kilgore) recognizes the Department of Mental health, Mental Retardation, and Substance Abuse Services as the primary state agency responsible for planning and delivery of mental health services, and that neither the Department of Social Services, nor CSA is the default system for children’s mental health services.  It requires development of budget recommendations that facilitate and fund service delivery for children through the state’s mental health, mental retardation, and substance abuse system. 

Senate

SB 1386 (Stolle) directs JLARC to conduct a pilot program to analyze and evaluate estimates submitted by state agencies for the biennial budget to determine that requested sums are appropriated based on the missions, operations, practices and duties of such agencies.  Results must be reported in 2009.

SJR 329 (Locke) requests the Board of Education to study high school dropout and graduation rates. 

SJR 361 (Ticer) directs JLARC to undertake a two-year study of waste minimization, reuse and recycling. JLARC will evaluate the success of current programs in Virginia and other states and recommend a plan to achieve long-term waste minimization. 

SJR 372 (Norment) establishes a legislative subcommittee to study the feasibility of a statewide health insurance experience pool for educators and local government employees.   

SJR 385 (Wagner) establishes a legislative subcommittee to study fuel-efficient vehicles and transportation funding.