Legislative Newsletter No. 6 — March 4, 2004

2004 General Assembly Calendar

• March 8 — Last day for committee action
• March 9 — Budget conference report deadline
• March 13 — Scheduled adjournment

Budget Issues

The House and Senate have appointed their members to serve on the budget conference committee, which will try to reach a compromise 2004-2006 state budget prior to a Tuesday midnight deadline. Conventional wisdom is that the two sides will not be able to reach agreement by March 9 given the vast differences in the respective House and Senate plans. Failure to reach agreement would push the legislature into overtime past the scheduled March 13 adjournment. Members of the budget conference committee are as follows: Delegates Callahan, Putney, Hamilton, Cox and Joannou; Senators Chichester, Wampler, Stosch and Colgan. They met for the first time Thursday afternoon and are expected to meet with the governor on Friday morning.

Even before the conferees met for the first time, some battle lines were being drawn. House Republican leaders endorsed an idea floated earlier in the week by former governors Wilder and Allen that a voter referendum be held on parts of the budget. Specifically, they recommended using existing revenues to fund the likes of education and health care, and then make new or expanded state programs contingent on voter approval of higher taxes. House leaders said that anything short of a voter referendum would result in an impasse; the governor and Senate indicated they would not accept such a referendum. A day later, there was some backing off that ultimatum by some House members, but the idea of a referendum has not been totally abandoned.

Perhaps the most troubling component of the House proposal is the plan to decouple the teacher VRS rates (the pooled rate in the introduced budget resulted in a higher state employee rate and lower teacher rate) and cap state reimbursement for teacher retirement at 6.03%. Localities would be responsible for the unfunded liability rate above the fixed 6.03%. The state's share of the retirement costs would be fixed at this rate not only in FY05 but also in succeeding years. Any contribution rate over 6.03 percent would be the liability of the locality; the contribution rate increase, however, would be phased-in over three years to recognize one third of the difference between 7.82% (the amount actually needed to fund the system) and 6.03%. Localities would be charged the higher rates, yet the state would calculate its share of the costs based on the lower, fixed rate of 6.03%. The picture gets worse in future years, as the VRS already has predicted that retirement contribution rates will continue to rise. The Senate, meanwhile, sets the teacher retirement rate at 6.56%.

Recall that 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.

Legislation

SB 670, the bill that directed VDOT to construct a bypass around Charlottesville, notwithstanding objections from the metropolitan planning organization, was debated on the House floor on Wednesday and resoundingly defeated on a vote of 63-35. Several of our region's legislators argued that this bill set a bad precedent in allowing the General Assembly to dictate single projects for a particular area. However, on Thursday, the bill was reconsidered and a substitute for the bill (see text at Legislative Information System) was proposed, adopted, and then the bill narrowly was approved on a 52-46 vote. The substitute says that if a 29 bypass is not constructed because of opposition from the MPO and the FHA requires repayment of federal funds spent on the project, then those funds will be deducted from the construction district in which the project was located (Culpeper district). It also stipulates that the amount of state funds spent on the project also will be deducted from the district.

In the Senate Transportation Committee Thursday afternoon, the language that had been approved by the House was tacked onto HB 1419 and approved. Therefore, these two bills are still in play, and both contain the language concerning the funds payback (HB 1419 still includes the transportation district authority language).

SB 284, the bill that alters current Line of Duty Act provisions is in House Appropriations and could be taken up by the committee on Friday. A subcommittee has recommended that the bill be carried over. 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. It is possible that amendments will be offered to lessen the retrospective impact on local governments.

Senate Rules on Friday is expected to take up HJR 170, which continues the Commission on Growth and Economic Development, but also proposes a study of the system of cash proffers. A subcommittee sent to the bill to the full committee without recommendation.

SB 58, concerning non-conforming billboards, is in a conference committee. The House had removed a Senate amendment that had watered down the bill from its original version, primarily with the addition of an amendment that allows the use of pre-existing valuation methods, rather than dictating use of replacement value.

HB 1212 and SB 543 create a Secretary of Agriculture and Forestry. The bills are headed to a conference committee, as the Senate does not agree with a House provision on the bill that the secretariat be established no earlier than the term of the next governor.

HB 504 and SB 214 are two bills that expand the use of the courthouse security fee to include, in addition to equipment, various equipment used in courthouse security. SB 214 has been approved, while HB 504 is in the Senate Courts of Justice Committee.

Both the House and Senate have approved the following legislation this week:

• HB 293 and HB 295, which address tax assessment and business license tax appeals and compromises.
• HB 549, which would impose a $1 fee on every deed, with the revenue generated to be distributed to the Virginia Outdoors Foundation for the preservation of open space lands.
• HB 1174 is the bill that has been worked on for several years by local government and industry groups and that sets up a "framework" for changes in telecommunications taxes. The intent is that legislation to carry out this bill's goals would be introduced next year. Specifically, the bill sets up a structure for eliminating various state and local taxes, with telecommunications services then subject to a 4.5% tax, plus there would be a statewide 911 tax of 75 cents/line. This year's bill stipulates that revenue from these two taxes will fully replace all revenue that would have resulted from the state and local taxes being repealed.
• HB 1350 and SB 365 are environmental permit fees bills that authorize DEQ to adopt a schedule of annual fees to support Virginia's waste and water permit programs. The increased fees would generate approximately $6 million annually to meet the costs of the state's water and waste permit programs. Localities have been provided information as to their specific fees.
• SB 353 requires inclusion, in the comprehensive plan, of a transportation element that designates a system of transportation infrastructure needs and recommendations, and directs VDOT to provide assistance to localities, upon request, in preparing that element.

Local Bills

The governor has signed HB 154, which adds Charlottesville to the list of those localities that can increase the income and financial worth limitations to provide tax-exempt provisions for the elderly and disabled. Both chambers have approved SB 152, which allow industrial development authorities to be called economic development authority (Nelson Co. request). In addition, both chambers also have approved several bicycle changes proposed by JABAWAC and included in SB 252, and legislation to authorize creation of the Rivanna River Basin Commission (SB 267). This bill was amended to include as part of the Commission, only the four localities (Albemarle, Charlottesville, Fluvanna and Greene) where more than half of their land area is included in the Rivanna watershed.