Legislative Newsletter No. 5 — February 23, 2004

2004 General Assembly Calendar

• February 26 — Each House to complete work on its budget bill
  
• March 8 — Last day for committee action
• March 13 — Scheduled adjournment

Budget Issues

The House and Senate money committees on Sunday afternoon released vastly different versions of the amended 2004-2006 budget, setting the stage for a big budget showdown over the next three weeks and possibly beyond. The Senate plan, touted as an investment that will ease pressure on local real estate taxes, relies on enhanced revenues from changes in tax policy to pump additional state dollars into the likes of public and higher education, transportation and health services. The House proposal balances the budget largely by capturing revenue from the repeals of long-standing sales and use tax exemptions for businesses, while level funding and reducing programs.

School funding, as usual, plays a major role in both plans. Overall, the Senate plan provides an additional $1.7 billion for public education over the FY04 state allocations, while the House plan increases funding $71 million. Specifically, the Senate plan funds the Standards of Quality (SOQ) rebenchmarking proposed by the governor, but rejects his item that would reduce state education costs by deducting certain federal and state revenues (totaling over $400 million) from the cost calculations. The Senate version also earmarks over $430 million for several initiatives recommended by the Board of Education (BOE) last summer that would recognize prevailing practices in school divisions. This includes providing resource teachers in art, music and physical education (5/1,000 students); providing a planning period for middle and secondary school teachers and funding instructional and support technology personnel. Nearly $100 million is included for serving more at-risk four year olds.

The House plan funds the SOQ rebenchmarking and rejects the proposal to deduct locally generated revenues from the cost calculation ($111 million). It eliminates the BOE-proposed remediation program ($42.6 million) and redirects $20 million for the Student Achievement Grant program to the local revenue deduction. It also reallocates $9.9 million in excess lottery funds in FY04 to support No Child Left Behind initiatives in FY05. Small increases are provided in at-risk funding and for the K-3 class size reduction program. The House plan decouples VRS rates (the pooled rate in the introduced budget resulted in a higher state employee rate and lower teacher rate) and limits state reimbursement for teacher retirement to 6.03%, limiting future state liability. Localities would be responsible for the unfunded liability rate above 6.03%. It appears that teacher pay hikes given by localities were not recognized in these calculations, thus lowering state costs. The Senate plan also decouples rates, but does not include the House provision that sets a fixed rate for the state.

Neither the House nor Senate provides earmarked funding for a teacher salary increase. Both plans swept money contained in the introduced budget for that purpose. The Senate contends that its cash-rich plan will allow localities to continue improving teacher salaries. Following is information on some of the budget items of interest to local governments proposed by the money committees. More specifics will be available on Tuesday when details of all the amendments are released. Floor votes on the competing plans are set for Thursday. Please look for more details on the two proposed budgets be forthcoming from VACo and VML:

House-

• Removes $35.5 million (contingency item in introduced budget) for HB 599 funding.
• Reduces funding for treasurers and commissioners of revenue by $6.8 million.
• Level funds ABC and wine profits funding to localities.
• Removes $16.2 million in jail per diem payments, while providing an additional $19 million for jail staff and additional deputies.
• Rejects the introduced budget proposal to provide $272 million from insurance premium revenues for transportation.
• Provides an additional $1.5 million for the Governor's Opportunity Fund.
• Provides $68,000 for a new Secretary of Agriculture and Forestry.
• Changes policy on litter control grants to one of reimbursement rather than up-front payment.
• Contains language that allows Nelson (in conjunction with Appomattox and Amherst) to be exempted from a moratorium on planning for a regional jail).
• Contains language that requires the Dept. of Game and Inland Fisheries to operate the Montibello Fish Hatchery for the biennium.

Senate-

• Provides $35.5 million to restore HB 599 funding for localities with police departments.
• Provides nearly $950 million for highway construction.
• Provides $26.4 million for local jail per diem payments.
• Provides $37.2 million over the biennium for salary increases for sheriffs, deputy sheriffs and regional jail officers.
• Provides $150,000 each year for a new Secretary of Agriculture and Forestry, and $200,000 each year for a Center for Rural Virginia.
• Provides funding for expanding the mental retardation and developmentally disabled waiver programs, and for creating a new day support waiver program.
• Provides nearly $1 million over the two years for water quality improvements and about $15 million for the Virginia Land Conservation Fund to preserve historic sites, forests and parks.
• Provides $1.2 million in FY04 litter control grants.

Both budgets earmark additional money for the "rainy day" fund, the House proposing an additional $15 million in FY06, while the Senate plans an additional $100 million in both the current fiscal year and in FY06. Both plans provide a 3% salary increase for state-supported local employees (effective 12/05 in the House plan, 12/04 in the Senate plan). Both also provide for the planning and housing of more than 1,000 state-responsible prisoners in local and regional jails during the biennium. Both proposals maintain car tax reimbursements to localities at the current 70% level.

Other

Last week on the floor of the House, delegates narrowly defeated HB 412, the bill that called for a referendum to increase the meals tax in cities and towns. Also defeated by the House was HB 461, which restricted local BPOL tax authority. The Senate defeated the anti-living wage bill, SB 428, on a 23-17 vote.

SB 670, the bill that directs VDOT to construct a bypass around Charlottesville, notwithstanding objections from the metropolitan planning organization, is in the House Transportation Committee and could be considered this week. HB 1419, the lengthy bill authorizing creation of a Charlottesville/Albemarle transportation district, is being held in the Senate Transportation Committee pending consideration of SB 670 in the House committee, which likely will take place on Thursday.

SB 284, the bill that alters current Line of Duty Act provisions is in House Appropriations. Recall that this bill puts benefits administration under VRS and establishes a fund to pay for the benefits, requiring political subdivisions with eligible employees to now pay a contribution rate of .31 percent of payroll to the fund. The state would have to contribute to the fund as well. The Senate budget plan projects about $2.6 million in state savings with enactment of the bill.

SB 58, concerning non-conforming billboards, is in House Transportation. A subcommittee has recommended removing a Senate amendment helped water-down the bill by allowing use of pre-existing valuation methods, rather than dictating use of replacement value. Several "photo red" bills are still alive in the House; however, the main focus of the bills' proponents at this point is to try to preserve the program for localities already granted photo red authority (presently, the law is set to expire July 2005).