Legislative Newsletter - June 7, 2006

Number 13

New budget remains elusive as lawmakers approve FY06 plan

While House and Senate budget negotiators remain mired in disagreements over the next biennial state budget, the General Assembly signed off on adjustments to the current (FY06) spending plan. Legislators previously approved the so-called “caboose” budget on May 12, and Tuesday, convened to consider an amendment and line item veto proposed by Governor Tim Kaine. The vetoed item, dealing with the Virginia Performing Arts Center, was allowed to stand while the amendment was not approved. However, lawmakers did make one other significant change to the current budget, which was to appropriate an additional $31 million to reimburse localities for the Personal Property Tax Relief Act (PPTRA) in the current fiscal year. Because no car tax reimbursements will be made to local governments for collections in tax years 2005 (and before) after September 1, 2006, localities have been working to collect delinquent accounts and have done so in excess of state estimates. The FY06 state-appropriated amount for car tax reimbursement to localities is just over $719 million, including an estimated $24 million to cover delinquent reimbursement requests. As of late last week, total reimbursement requests for the fiscal year stood at over $714 million. The state anticipates localities, through September 1, to request about $36 million for FY06 reimbursement, due in large part to the increased compliance efforts. Thus the additional appropriation was approved to cover the anticipated requests over the next three months. Legislators also had disagreed over an upward revision in state revenue collections. The House initially wanted to include those extra dollars in the FY06 plan, while the Senate maintained they be part of the next biennial budget. Ultimately, the revised revenue figures were not included in the FY06 plan.

As for the state budget for FY07 and FY08, budget negotiators huddled again after Tuesday’s floor sessions. With new revenue sources for transportation off the table, House and Senate negotiators now are at odds over addressing those needs using available resources (e.g. general fund dollars) in the budget, further complicating efforts to reach a budget deal. Earlier in the day on Tuesday, Secretary of Transportation Pierce Homer told the Senate Transportation Committee that the Six-Year Improvement Program slated to be adopted by the Commonwealth Transportation Board next week will fully fund the maintenance budget, but primary road construction dollars will be 20% less than in the current program, secondary and urban funds 40% less, and the transit capital reimbursement rate about one-half the current level. Overall, that proposed plan reduces revenues by $870 million over the current program.

Finally, officials in the Kaine administration have told senior legislators that for a new biennial budget to take effect July 1, a final enacted budget is needed by June 23 in order to give the state at least five business days to input the plan and authorize spending by agencies. Just before Memorial Day, the governor, looking at the possibility of no budget being in place by July 1, authorized funds to cover state employee payroll for the latter part of this month, and moved the payroll date from July 3 back to June 30, the close of the fiscal year. He also authorized a $19 million appropriation for social services reimbursements to local governments for various June activities. Local social service agencies closed their fiscal year the end of May; June expenses typically are paid in the next fiscal year. Attorney General Bob McDonnell has told budget conferees that the governor has no constitutional authority to run government unless legislators pass a budget appropriating the funds, an assertion the governor disputes. Kaine says he will keep government running should no new budget be place on July 1.

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)