Legislative Newsletter April 27, 2005

State Budget and Revenues

Through the first nine months of the current fiscal year, state revenues have grown 14.4% above the same period last year, well ahead of the budgeted 10.3% growth rate. The last three months of the fiscal year are all major revenue collection months, as about $3.8 billion (nearly 30% of the projected total) will need to be collected to meet the revenue forecast for FY05. Through March, income tax withholdings and sales tax collections were slightly ahead of projection. Corporate income tax revenue was up significantly. Also, through the first three quarters, lottery sales and net income were at record levels, though income growth is running slightly behind projections, as sales for scratch games were down through the winter and jackpots levels have been below expected amounts.

Legislative Studies to Get Underway

            The General Assembly’s “off season” work gets underway quickly in the coming weeks. Two important study groups will have their initial meetings in May. The Senate Finance Committee meets May 19 to being a comprehensive examination of transportation funding. The study is expected to focus on the following: transportation needs as identified in the VTRANS 2025 report; VDOT reforms; policies affecting transportation choices and costs, including the transportation/land use planning disconnect; and financing transportation infrastructure. The House also is expected to a conduct a transportation study during the interim. Recall that during the General Assembly, the House and Senate differed on the approach to a transportation funding study (the House wanted a two-year study), and so no study resolution or budget language directing a study was approved.

            The week before, a study panel examining Virginia’s polluted waterways will hold its initial meeting. HJR 640 established a joint subcommittee to study options for a long-term funding source to clean up Virginia's polluted waters, including the Chesapeake Bay and its tributaries. Specifically, the eight-member panel is charged with determining the most effective ways to provide a long-term funding source that will generate the necessary revenue to fund the pollution reduction measures necessary to restore polluted waters identified on the Clean Water Act's "dirty waters" list. Budget amendments approved by the General Assembly appropriated $50 million to the Water Improvement Quality Fund (WQIF) in FY06. The money is to be used to finance the costs of design and installation of biological nutrient removal facilities or other nutrient removal technologies at publicly-owned sewage systems.

Local Hearing on Roadside Management Regulations

            The Department of Transportation will be holding a hearing in our region in late May on proposed regulations for a comprehensive roadside management program. The 2004 General Assembly approved legislation directing VDOT to develop such a program that will allow communities to participate in the beautification of areas adjacent to state roads and highways. The regulation sets forth the requirements applicable to individuals, community groups or local governments that wish to landscape portions of highway rights-of-way, and will include procedures for approval and criteria used to evaluate proposals that are submitted. The public hearing on this regulation is scheduled for 9 a.m. on May 27 at the Department of Forestry offices at the Fontaine Research Park in Charlottesville.

Final Action on Bills Due

Governor Warner has until the end of next week to take final action on legislation returned to him by the General Assembly. Bills with amendments that were rejected by the General Assembly are sent back to the governor, who then has 30 days to either sign or veto such legislation (if the governor does not act, the bill becomes law). You will recall that the legislature accepted most of the governor’s proposed amendments when it met for its annual reconvened session earlier this month.

All but two of the proposed amendments to the General Assembly-adopted budget for FY06 were approved. One of the rejected amendments would have extended the eligibility for projects for the Local Partnership Program by one year, from 2006 to 2007. House members who spoke against the amendment were anxious to see the earmarked funds used expeditiously. The General Assembly approved $40 million to encourage increased local participation in construction projects by assuming responsibility for the management and administration of such projects. The other rejected budget amendment dealt with the Virginia Information Technologies Agency.

Only two of the governor's proposed amendments to legislation were rejected. One concerned criteria that localities would have to meet if taking over garbage services in the locality. The other would have scaled back the language in a bill requiring the Department of Planning and Budget to provide state agency budget requests and analysis to the legislature.

VACo, VML Consultant Analyzes Real Estate Tax Proposals

            An analysis of property tax relief proposals put forth by the two major gubernatorial candidates has been prepared by Fiscal Analytics, Ltd. for VACo and VML. Democrat Lt. Governor Tim Kaine is proposing a local option “homestead exemption” of up to 20% of the value of owner-occupied homes. Republican Jerry Kilgore, the former Attorney General, is proposing a five percent cap on annual real estate assessment increases until a property is sold.

The just-released report states that caps on assessments are used in 19 states and that 31 states allow local governments to provide real estate exemptions to homeowners. It says that Kaine’s plan would alter the equity in Virginia’s real estate tax system because it offers no tax break to either apartment-dwellers or businesses, while the Kilgore plan would allow identical homes in the same locality to be taxed differently based on the length of time each owner has lived there. It notes studies showing that there are clear consequences to limiting real estate taxes, as local governments in states that cap assessments have raised other taxes and used a variety of fees to cover lost real estate revenues. It concludes that capping real estate revenues would have serious implications for local budget priorities and likely would put pressure on state income tax rates, since pressure would increase for the state to fund education and other expenditures. Please let me know if you would like to receive a copy of this report.

General Assembly Contact Numbers for David Blount, TJPDC Legislative Liaison

804-644-3702 (phone)

804-783-8226 (fax)

979-7310 x350 (Charlottesville voicemail)

(Richmond email)