Legislative Newsletter No. 13 — June 23, 2004

State Budget Issues

The General Assembly convened last Wednesday for a one-day session to consider amendments proposed by Governor Warner to the biennial budget the legislature approved in early May. In all, lawmakers approved 27 and rejected 16 of the amendments.

Only a handful of the proposed amendments were of interest to local governments. Among those approved were amendments to 1) ensure that a portion of the funding from additional sales tax to be collected as a result of exemptions being repealed, and from accelerated sales tax provisions, will be transferred to the Transportation Trust Fund (approx. $70 million); 2) funnel approximately $1.65 million in additional dollars to commonwealth's attorneys' offices; and 3) provide matching grants of $1.25 million in FY05 for localities participating in the federal grant program, Staffing for Adequate Firefighters and Emergency Response (SAFER), to hire additional firefighters.

The legislature's long-awaited action to approve a budget on May 7 spurred Moody's Investors' Services to reaffirm the state's Aaa bond rating in late May. Moody's cited three factors in the affirmation: 1) improving revenues brought about by a recovering economy; 2) a budget and tax package that restrains spending growth and provides significant new sources of recurring revenue; and 3) a cap on the state's liability for phasing-out the car tax. A downgrade in the state's bond rating also would have affected local government bond ratings.

The state budget is likely to close FY04 with a sizable surplus come the end of June. Revenue for the month of May increased 7.3% over the previous year, pushing year-to-date revenue growth to 9.3%, well ahead of the projected 6.7% growth forecast. Lottery revenues for the fiscal year are up over 8%, while sales tax collections are experiencing a nearly 10% increase. Part of any revenue surplus at the end of the fiscal year next week already is spoken for, as there are required deposits to both the "Rainy Day" Fund and the Water Quality Improvement Fund. Some of the dollars also will be used to offset revenue lost from the delay (from August 1 to September 1) in instituting the tax increases stipulated in HB 5018, which was approved during the special legislative session.

CTB Adopts Smaller Six-Year Plan; Sets FY06 Hearings

The Commonwealth Transportation Board (CTB) at its meeting last week adopted a new six-year improvement plan that is about $1 billion smaller than the current approved plan and the preliminary package unveiled this spring that was based on Governor Warner's introduced budget. Since the budget compromise reached by the legislature early last month did not include enhanced transportation funding, the cuts were necessary, meaning less will be available to deal with increasing transportation needs. Transportation Commissioner Philip Shucet has described the program as being in the beginning stages of a wind-down program, rather than one that is "going forward." In the plan, funding for secondary and urban construction dropped 25% and 30%, respectively, while the amount of money needed for maintenance of the existing system continues to increase. CTB also estimates that by 2010, only $123 million in state funding will remain for new projects after federal match obligations are met.

The Board also is making plans for hearings this fall on the next revisions to the plan. Last year, CTB moved traditional springtime hearings to the fall in order to get input from the public upfront in the development of the next plan. Hearings are being scheduled for September and October in the transportation districts across the state. The Culpeper District hearing tentatively is set for September 29, while the Lynchburg District hearing is slated for October 20.

No Child Left Behind

According to published reports, the General Accounting Office, the investigative arm of Congress, has released a report stating that the federal No Child Left Behind (NCLB) Act is not an unfunded mandate because states and districts participate as a condition of receiving federal aid, and that by definition under the 1995 Unfunded Mandates Reform Act, such programs are not considered to fit that label. The report, however, also notes that the law approved in January 2002 appears to have potential financial impacts. National, state and local educators continue to emphasize that federal funding targeted for implementing the law does not cover the costs of complying.

During the past General Assembly session, legislators were poised to pass resolutions that would have urged the federal government to exempt Virginia from the accountability provisions of NCLB, citing student achievement gains made through the state's standards and accountability reforms. The resolutions, introduced by Delegate Steve Landes and Senator Emmett Hanger, also requested that any action anticipated to enforce NCLB be deferred until full funding to implement the law has been authorized. However, differences in the language of the two resolutions were not resolved prior to adjournment of the session.

Greene County Joins Legislative Services

The TJPDC is pleased to announce that Greene County has joined the legislative services program, effective July 1. As you know, the service utilizes a ¾ time legislative liaison who represents the interests and positions of the PD localities before the state legislature and other state policymakers primarily during the annual legislative session, but also during the off-season. The legislative liaison works with the PD localities to develop a regional legislative program that serves as the basis for lobbying activities throughout the year. Welcome aboard!