Legislative Newsletter May 25, 2005

State Budget and Revenues

            Strong April tax collections in several sectors continued to keep the state's revenues well ahead of projections. Total general fund revenues for April and for the first 10 months of FY05 both were up by 14.4% from 2004. Even discounting tax increases that took effect last September, collections were up by 11.5% percent, just ahead of the official forecast of 10.3% upon which the state budget is based. The healthy numbers keep the state on track to realize a projected surplus of around $1 billion when the fiscal year ends June 30.

New Transportation Panel Established

            The Senate Finance Committee, along with the Senate Transportation Committee, has formed a Statewide Transportation Analysis and Recommendation Task Force (START) to develop an action plan for addressing future state transportation needs. The workgroup includes 10 senators (including Edd Houck of Spotsylvania) and 15 citizens. It will hold a series of worksessions beginning in the fall to focus on needs, state and local policy reform and funding strategies. The announcement of the group’s formation followed a recent presentation to the Finance Committee on maintenance of the state’s roads and bridges. The report noted that annual maintenance costs are projected to increase 4% annually over the next six years, while revenue from state gasoline taxes should grow just 1.5%, and that by 2018, nearly all of the state’s transportation revenues will be needed to cover maintenance costs.

JLARC Studies Take Shape

            The Joint Legislative Audit and Review Commission (JLARC) released its yearly workplan earlier this month, providing details on studies of interest to local governments. A study of homeland security funding will look at federal grants (much of which is funneled to local governments) to ensure they are used for their intended purposes, including how localities determine equipment needs and how local security strategies conform to state strategies. JLARC staff will conduct site visits in about 16 localities. Study results are expected in September.

            The annual review of state spending will look at trends and factors explaining long-term budget changes, including a review of spending decisions that have kept Virginia as a top fiscally-managed state. Staff also will determine the costs associated with the legislative branch obtaining data about state agency budget requests on its own (earlier this month, the governor vetoed a bill requiring the Department of Planning and Budget to provide state agency budget requests and analysis to the legislature). JLARC also will produce its second report on state spending for the Standards of Quality. Reports on both these items are slated for December.

            HJR 643, approved by the General Assembly this year, directs a study of the land application of biosolids. The study will review the advantages and disadvantages of applying biosolids to agricultural land, the implementation and enforcement of the state’s biosolids regulatory program and if localities have adequate resources and support from the State Health Department to effectively administer their own biosolids programs. A survey of local governments and visits to application sites are planned prior to an October report.

            Management of the state’s social services system also will be reviewed, specifically with an eye toward the resources necessary to deliver quality services and the adequacy and effectiveness of state and local information systems. This work will include a survey of all local social services departments and case studies of 15-20 of these. A second study that will be part of this review is an examination of how the system fosters greater customer self-sufficiency, including an analysis of income trends and assistance received by clients. Site visits to 15 localities are planned. Separate briefings on these studies will be presented in the fall.

Housing Commission Begins Work

            The Virginia Housing Commission will have affordable housing as one of its focus areas of study during the coming year. At its initial meeting of the interim, the Commission established two work groups: one to concentrate on affordable housing and developing a housing policy and another to address eminent domain, brownfields and blight issues. The affordable housing workgroup will be chaired by Sen. Bill Mims, and will look at several issues, including local authority to implement affordable dwelling unit programs, right of first refusal for local housing authorities to purchase multifamily housing, and possible exemption of zoning provisions for nonprofit groups that construct housing for low-income persons.  Both workgroups will hold initial meetings on June 9.

New Medicare Drug Program to Impact Virignia

            A new prescription drug benefit available to Medicare beneficiaries taking effect in January likely will have state budget impacts. The 2003 Medicare Modernization Act adds a new Part D to provide prescription drug coverage. The program carries cost-sharing requirements and provides that low-income beneficiaries will receive “extra help” to offset those costs. In a recent presentation to the Senate Finance Committee, the Department of Medical Assistance Services (DMAS) estimated the need for eight additional state level staff and for 71 new staff at local departments of social services to handle administrative, reporting and “extra help” program responsibilities. States also are required to help finance Part D by paying (to the feds) the state share of coverage costs for Medicare beneficiaries who also are Medicaid clients (approximately 120,000 in Virginia). The DMAS report notes that the state and local administrative costs will be carefully considered in formation of the next state biennial budget.

Local Officials to Discuss Real Estate Tax Proposals

            Selected local government officials participating in the VACo and VML policymaking processes are meeting in Richmond today to discuss real property tax proposals that have become the early focus of the two gubernatorial campaigns. Recall that Democrat Lt. Governor Tim Kaine is proposing a local option “homestead exemption” of up to 20% of the value of owner-occupied homes, while 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 VACo/VML symposium will include presentations by noted researchers on the importance of the property tax base and the effects of the two proposals. It is hoped that participating local officials will develop a common base of knowledge about the real estate property tax and identify and discuss related policy issues to be addressed, with the ultimate goal of developing a policy position on property tax issues for the 2006 General Assembly.

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)