Legislative Newsletter - December 20, 2005

2006 General Assembly Calendar

State Budget

Governor Warner submitted his proposed 2006-2008 state budget to the General Assembly money committees the end of last week. It proposes no major new programs and projects state revenues for the next biennium to grow 6% in FY07 and 5.3% in FY08. Strong revenue collections in the current fiscal year are anticipated to produce a $1.2 billion surplus, which the budget rolls over into the next biennium for one-time expenditures, primarily for transportation, Chesapeake Bay cleanup and higher education research and development.

The governor's plan includes about $625 million in general fund dollars for transportation. Of this amount, $286 million is to come from the insurance premiums tax, to be put toward payment on previously awarded projects and public transit capital needs ($57 million). Of the remaining nearly $340 million in one-time funding, $142 million provides state matching dollars for recently awarded federal funding earmarked for various transportation projects (this would include nearly $7 million for the Meadowcreek Parkway interchange), and $197 million is for additional high-priority projects.

The spending proposal contains $1.5 billion more for public education over the two-year period. Most of this funding ($942 million) is to update state costs of the Standards of Quality (SOQ). However, funding is not included for the four standards endorsed by the Board of Education in 2004 but not funded in the current biennium (principals, assistant principals, reading specialists, speech language pathologists). The budget distributes an additional $185 million in sales tax revenues to education and appropriates additional federal funding, primarily for No Child Left Behind Act grants and school nutrition programs. Public school enrollment over the biennium is projected to increase by 22,000 students.

The proposed spending plan includes more than $242 million for clean water programs. Of that, $200 million for the Virginia Water Quality Improvement Fund will go toward 'point source' reduction projects at sewage treatment plants in river basins (including the James and York) within the Chesapeake Bay watershed. This funding is on top of the state's required $56.6 million deposit to the fund from the FY05 budget surplus, 70% of which will be used to reduce 'nonpoint source' pollution. Another $25 million in grants proposed by the governor is targeted to local governments outside the Bay watershed for point source projects.

In the health and human services arena, an additional $564 million for Medicaid growth and for the new federal Medicare prescription drug program is included. An additional $48.4 million is provided for the Comprehensive Services Act over the biennium (an additional $7.5 million also is provided for the remainder of the current fiscal year). Nearly $7 million is provided for local social services departments for information technology cost associated with determining benefits eligibility. The spending plan also proposes $116 million to draw down more than $52 million in federal funds for community-based behavioral health services.

The governor's proposal recommends $8.6 million for an early childhood grant program to provide grants, training, and technical assistance to communities to improve access to early childhood services and programs. The competitive grants will be aimed at local public-private efforts that leverage and expand successful early childhood services, and that identify and fill gaps in current programs.

The budget recommends 3% salary increases for state-supported local employees ($40.3 million) and public school employees ($167.6 million), with the raises to be effective December 1, 2006. It also funds a 9.2% retirement rate for teachers, a 1.22% rate for group life and a .56% retired teacher health care credit. While these rates represent a sizable increase from current rates, they are less than those certified recently by the VRS Board. The budget also changes the assumptions underlying the calculation of retirement contribution rates to rely on a 30-year amortization schedule and an 8% investment return rate, which results in state and local savings.

Following are some other budget items proposed by the governor of interest to our local governments. Please look for much more additional information and detail forthcoming from the VACo and VML staffs.

• Provides funding of $207.6 million in each year to bring car tax reimbursement funding up to the $950 million cap approved in 2004. For the current fiscal year (FY06), the appropriation for car tax relief is decreased by over $36 million to reflect the revised forecast of the average value and number of vehicles qualifying for car tax relief.
• Provides increases of $11.5 million in FY07 and $22.2 million in FY08 for the HB599 law enforcement program.
• Maintains language that exempts jails where federal capital costs exceed the state's capital contribution from state-funded personnel cost recovery.
• Provides an additional $570,000 over the two years for reimbursement to localities for housing inmates in local and regional jails. This adjustment reflects actual inmate population counts through the first quarter of 2006 and establishes the base for the 2006-2008 biennium.
• Provides funding to fully annualize the December 2005 salary increase for constitutional officers in the next biennium. Additional dollars also are proposed for increasing staffing levels in these departments by 12.5% in the first year and 20% in the second year.
• Provides an additional $1 million for Healthy Families and $700,000 for the Comprehensive Health Investment Program.
• Increases support for community action agencies by just over $1 million.
• Provides a $14/month increase in the auxiliary grant.
• Targets $17 million to expand heating assistance and weatherization projects to aid elderly, disabled and the poor through the winter months.
• Provides $12 million in the first year to localities to support fire services, via a $2 state match for every $3 in funding provided from the Fire Programs Fund.
• Restores general fund support of $1.2 million each year for PAPIS.
• Provides $1.6 million for grants to localities in the first year to assist local law-enforcement agencies in reducing gang violence.
• Increases funding by $1 million each year to encourage commuters to join carpools and van pools and to ride other mass transit systems.
• Provides $500,000 each year to Soil and Water Conservation Districts to assist farmers with implementing nonpoint source pollution and conservation programs.
• Maintains PDC funding at $90,000 per year.

As is typical, the legislature's money committees will hold public hearings on the proposed two-year spending plan. The closest ones to our area will be held on Thursday, January 5, 2006, at Central Virginia Community College in Lynchburg beginning at 12 noon, and on Monday, January 16, 2006, at 1 p.m. in the General Assembly Building in Richmond.

"START" Group Outlines Legislation

The Senate's Statewide Transportation Analysis and Recommendation Task Force (START) may recommend a variety of actions to address the state's transportation needs when the General Assembly convenes next month. Last Friday, the group met for the final time this year to review a lengthy list of possible actions to address funding needs, spending priorities, land use and transportation, and governance. The task force reviewed 18 possible sources of new transportation revenues; however, none were formally voted on. Legislators and staff instead will draft a specific transportation funding proposal to be considered by the legislature.

The panel spent much time discussing transportation and land use planning linkage. Chairman Charles Hawkins suggested a comprehensive study of these issues might be needed, to include local, VDOT and state representatives. Some of the other possible actions that were discussed and that could be included in legislative proposals include the following:

• VDOT to develop a six-year maintenance and operations budget similar to the six-year improvement plan.
• Establishment of a Rural Transportation Fund, with projects awarded based on MPO, PDC or VDOT/DPRT application.
• Establishment of an Urban Congestion Relief Fund, with funds available for MPO-approved "quick relief" projects.
• New dollars targeted as regional or local transportation money to be used exclusively for projects and services within that region or locality.
• Authorization for additional revenue sources at the regional and local levels for transit.
• Revision of VDOT regulations to provide for interconnectivity of local roads.
• Authorizing the General Assembly to appoint some members of the Commonwealth Transportation Board (CTB).
• Authorizing CTB members rather than VDOT staff to serve on MPO policy committees.
• Creation of and funding for an intermodal office.

JLARC Spending Reports

The Code of Virginia requires the Joint Legislative Audit and Review Commission (JLARC) to annually review and report on overall state spending as well as state dollars provided to localities for public education. JLARC staff recently made these reports to senior legislators. The state spending report noted that 24% inflation, state population growth of 12%, agency workload and service population increases and policy choices were primary drivers behind state spending increases over the past decade (FY1996-FY2005). The largest spending growth has occurred in Medicaid and education funding. In all, 10 state agencies accounted for just over three-fourths of the budget growth over the ten-year period.

The Standards of Quality (SOQ) report noted that total SOQ state spending in FY2005 was $4.26 billion. Of this amount, $1.89 billion was sent to 10 school divisions that educate nearly half of the state's 1.2 million public school students.

JLARC also received a status report on the Virginia Retirement System, whose market value the end of September stood at $45.8 billion. Investment returns were up 16.6% this past year. The three year return rate is nearly identical, but it stands at just under four percent for the most recent five-year period.

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)