Legislative Newsletter — December 19, 2003

2004 General Assembly Calendar

• January 14 — General Assembly convenes; bill pre-filing ends
  
• January 23 — All bills and resolutions to be submitted
  
• February 17 — "Crossover" of bills
  
• February 22 — House and Senate versions of the budget released
  

State Budget

Governor Warner submitted his proposed 2002-2004 budget to the General Assembly money committees this week, embedding his tax restructuring proposals released last month into the budget and making some funding proposals contingent on passage of the tax reform plan. The proposed budget assumes 5.3% growth in revenue for FY05 and 5.1% in FY06 (the revised revenue growth estimate for the current fiscal year is 6.8%) without tax reform. If his tax policy changes were to be adopted, projected revenue growth in each year would be near 7%. In his remarks to the General Assembly's money committees, the governor also emphasized that six-year revenue projections show that even with solid revenue growth, budget shortfalls will continue through the end of the decade. And in light of closer scrutiny of the state's AAA bond rating from Wall Street, payments into the state's revenue stabilization ("rainy day") fund are proposed for the current fiscal year, as well as for FY06.

While the proposed budget does include more than $700 million to update the Standards of Quality (SOQ) to account for enrollment growth, inflation and increased benefit costs, it does not tackle the significant state underfunding of education cited in the 2001 JLARC report. There also is a corresponding $418 million reduction in basic aid as a result of a provision requiring that federal money and tuition paid to other localities be deducted from the calculated SOQ cost; this means that state and local funding shares will be smaller. The budget also does not seize upon recommendations proposed by the Board of Education (BOE) this past summer to enhance state support of K-12 education. The lone exception is the BOE's revamp of the SOQ prevention, intervention and remediation funding formula, which is supported with additional lottery proceeds and current remediation funding.

Other provisions of the proposed education budget include the following:

• Continuing the school construction grants program ($27.5 million each year)
• A proposed teacher salary increase of 3%, effective December 1, 2005, contingent on tax reform ($51 million)
• Pooling of the retirement contribution rates for teachers and state employees, contingent on tax reform, to yield a teacher rate of 6.56% of salary (Localities soon will be receiving their VRS contribution rates for the next biennium. For most, the rates are increasing significantly. Poor market performance, higher than expected payrolls in some localities and the provision of additional local benefits are the primary drivers behind the hikes.)
• Provides funds to help local school division meet requirements of the federal No Child Left Behind Act ($9.5 million)
• Diverts Literary Fund dollars to support teacher retirement ($31 million) and reduces the Fund's interest rate subsidy amount from $10 million to $5 million each year.

Following are some other significant budget items proposed by the governor of interest to local governments. Look for additional information forthcoming from VACo and VML:

• Registrars and Voting Machines-Adds funding to update voter registrar and electoral board salaries ($1 million) and appropriates federal funding of ($60 million) for new voting equipment required by federal law.
• PDC Funding-Reduces funding for planning district commissions by 10% each year. No funds are included for the Regional Competitiveness Act.
• Comprehensive Services Act-Increases state funding by $47 million over the two years for CSA and adds $2 million each year for additional mental health services for children not mandated for CSA services, contingent on tax reform.
• Temporary Assistance for Needy Families-Adds $10.3 million to address a shortfall in TANF benefits and maintenance of effort.
• Healthy Families-Increases funding for parenting and child health initiatives under Health Families Virginia.

Environmental Issues:

• Provides $15.1 million (from recordation taxes) to a new Natural and Historic Resources fund dedicated to water quality and land conservation.
• Provides $1 million over the two years for additional positions at DEQ to assist local governments with water supply planning.
• Provides funding for the Water Quality Improvement Fund for the first time in several years, some from the year-end surplus for FY 2003, plus an additional $5.8 million for nutrient reduction technology as part of the state's Chesapeake Bay Tributary Strategy.
• Increases environmental permit fees ($2.6 million each year) to pay for DEQ positions for agency regulatory programs, as well as for stormwater management permitting. Most of the positions are needed for the stormwater management program, which may be transferred to the Department of Conservation and Recreation (also, DEQ plans to increase environmental permit fees paid by public and private holders of landfill, wastewater, water and other facilities to generate approximately $6.5 million each year).
• Virginia Juvenile Community Crime Control Act-The budget level funds the VJCCCA, continuing the 51% reduction imposed in 2002.
• HB 599-The budget fully funds the HB 599 aid to law enforcement program. An additional $35.5 million is proposed contingent on tax reform.
• Jail per diem payments-Adds $15.1 million for increased reimbursements to localities for housing state inmates in local and regional jails. Also, the budget proposes funding for additional deputies for law enforcement and to address inmate crowding in local jails.
• Drug Courts-Appropriates $520,000 each year for drug courts.

Transportation Issues:

• Provides funding from the insurance license tax (previously approved but not implemented) to the Priority Transportation Fund ($272 million)
• Funds additional FRAN debt service to cover full cost of debt service on previously-issued $317 million in bonds.
• Defers $38 million in highway maintenance from FY04 to FY05 due to Hurricane Isabel-related expenses.
• Salaries-Provides $12.4 million in FY06, contingent on tax reform, for a three percent salary increase for state-supported local employees, to be effective December 1, 2005.
• Car tax-Provides an additional $103 million to continue personal property tax relief at the 70% level for the biennium. Includes an additional $157 million, contingent on tax reform, to increase reimbursements to localities for car tax relief to 77.5% in calendar year 2005 and 85% in calendar year 2006.

Public hearings on the proposed spending plan once again will be held by the House Appropriations and Senate Finance Committees. The closest one to our area will be held on Tuesday, January 6, 2004, at the August County Government Center in Verona beginning at 12 noon. The Richmond area hearing will be held on Monday, January 19 at 1 p.m. in the General Assembly Building. Your locality is encouraged to testify at a public hearing about how the governor's proposed budget and tax code initiatives impact your local budget! In addition, VML and VACo are interested in hearing your reactions to the introduced budget, so that the organizations might get a sense of how localities in general across the state feel about the proposed budget. Please direct any responses, copies of letters, etc. on the budget to them and to me. Thank you.

Adequate Public Facilities

The Growth and Economic Development Commission, a workgroup of which has been examining adequate public facilities (APF) ordinances this year, met this past week and agreed to submit a resolution to continue the panel's work so that discussions about the APF issue can continue. The workgroup indicated last month it would not move forward with legislation in the 2004 General Assembly, though a handful of APF measures are expected to be filed (including one by the chairman of the Senate Local Government Committee, which will address school capacity). You will recall that the co-chairman of the workgroup requested two attorney general opinions about 1) the legal authority of local governments to contractually obligate for the provision of APF, and 2) whether statutory authority is necessary for a local governing body to deny a rezoning request on the basis of inadequate public facilities. In letters dated the same day as the Commission meeting, the Attorney General stated that it was not appropriate, under existing Code provisions, for 1) a county board of supervisors to adopt an APF ordinance that binds a future body to fund capital improvements without submitting the matter to voters, and 2) for a local governing body to deny a rezoning request solely on the basis of inadequate facilities. If the Commission in continued for another year, expect APF bills submitted this coming session to be funneled to it for consideration.

Pre-filed Legislation

Under rules first initiated by the General Assembly several years ago, legislators now have until the first day of the session (in this case, January 14) to "pre-file" as many bills as they want; after that date, lawmakers are limited in the number of pieces of legislation they can submit before this year's second deadline of January 23.

As of this writing,163 bills and resolutions have been submitted by delegates and senators; typically 2,500 to 3,000 pieces of legislation are filed each year. Several measures that would increase both the cigarette and gas taxes are in the hopper. Additional legislation will be posted online in the next several weeks prior to an expected flurry of bills submitted just before the January 14 deadline.

**The approved 2004 TJPD Legislative Program was sent out recently. It also can be accessed through the link to the left of this page.