Legislative Newsletter - June 20, 2006

Number 14

Budget Agreement Reached!

            After more than five months of wrangling, agreement on a state budget for the 2006-2008 biennium finally has been reached. Senior lawmakers reached the compromise Friday evening, setting the full stage for General Assembly approved of the spending package this week. The Senate unanimously endorsed the plan on Monday, while their House counterparts approved the plan this afternoon on a 91-2 vote. The budget now goes to Governor Kaine, who has seven days in which to recommend any changes to the spending package. The legislature then will return to Richmond next week to act on those proposals before the governor signs the measure into law.

            In a related matter, the House and Senate have both approved bills having budget implications that would repeal the estate tax and also put some new limits on current land preservation tax credit provisions. The bill eliminates the estate tax for deaths that occur after July 1, 2007, and changes the tax credit to help pay for eliminating the estate tax. In action today, the House tabled the Senate version of the bill that was endorsed on a 24-9 vote in the Senate yesterday, then approved its own version (HB 5019) on a 63-25 vote. Under the bill, the credit value is reduced from 50% of easement value to 40%, and the statewide amount of credits is capped at $50 million for CY2007 and $75 million per year thereafter. Credit amounts registered above the cap in one year would be rolled over to the top of the next year’s list. HB 5019 will be before the Senate next week.

            Here are highlights of the compromise budget for 2006-2008:

TJPD Action Items:

Transportation

The compromise budget used nearly $229 million from automobile insurance premiums to cover previous transportation debt service. It also set aside $339 million in one-time general fund dollars for implementing transportation legislation to be adopted by November 1. In the absence of that, those funds will revert to the general fund for other uses. A language amendment directs VDOT to examine establishing a program for the state to supplement local dollars approved through a local transportation referendum ($1 for each $2 generated locally). Language also is included to assert that the state cannot reduce support to a region or locality if they increase local transportation revenues. VDOT also is directed to develop a legislative proposal for next year regarding a comprehensive limited access management program.

Legislators will return to Richmond later to continue work on crafting a transportation funding package. Late last week, the Commonwealth Transportation Board approved a new six-year transportation plan that cuts urban and secondary construction funding by 40%. That plan was built on the official revenue forecast developed last November.

Education

The compromise budget increases direct aid education funding by more than $40 million over the introduced version (which contained about a $1.5 billion increase, primarily for the Standards of Quality, over the previous budget). Most of the increases are slated for FY08, when an additional $22 million is set aside for funding the state share of a 1.5% teacher pay hike. The approved plan includes the state share of a 4% salary increase for SOQ-funded positions, effective December 1 of this year. An additional $20 million is earmarked for the Literary Fund to help reduce the waiting list for school construction loans. The retirement rate is increased from 9.2% to 10.3% in FY08 to reduce the amortization period from 30 to 21 years. The state payment for the at-risk four-year-old program is increased from $5,400 to $5,700/student, the first increase in 10 years. The state saved nearly $34 million by capping inflation above 5%. Budget language provides for the Department of Education convene a state technical workgroup to study K-12 education cost drivers and trends, with a reporting date of September, 2007.

Comprehensive Services Act

The additional $48.4 million for CSA as proposed in the introduced budget is maintained in the compromise plan. Another $750,000 is added over the two years for grants to localities to create community-based alternatives for children served in CSA.

Public Safety

The approved plan includes a $33.8 million increase over the two years for the HB 599 law enforcement program, as proposed in the introduced budget. An additional $3.5 million is included, to be distributed based on levels of violent crime and to be used for activities that respond to or reduce violent crime incidents. Language also directs the Finance and Public Safety secretariats to examine the current HB 599 distribution formula for possible modification. The compromise package also maintains language that exempts jails where federal capital costs exceed the state’s capital contribution from state-funded personnel cost recovery. The budget also includes $5 million in general funds to replace federal funds for 14 existing drug courts that had been supported with federal grants. It eliminates $3.6 million in funding for grants for law enforcement and local and community agencies to reduce gang violence.

Other Budget Items of Interest to Local Governments:

· Provides funding for a 4% salary increase, effective December 1, for state-supported local employees, and for a 3% salary increase in the second year of the budget.

· Adds $9.7 million for the state’s plan to fund Compensation Board staffing standards for Commonwealth’s Attorneys.

· Provides state funding for a $28 per month increase in auxiliary grants (the introduced budget proposed a $14/month increase).

· Maintains funding of $200 million contained in the introduced budget for Chesapeake Bay cleanup efforts.

· Provides an additional $3 million to Soil and Water Conservation Districts for conservation specialists in the Bay and southern river watersheds.

· Provides $100,000 to study broadband telecommunications services in the central Shenandoah Valley and central Virginia regions, including Planning District 10.

· Provides $305,000 for the Office of Farmland Preservation for assisting localities in implementing local purchase of development rights programs.

· Adds $1.3 million (NGF) to the Department of Taxation for staffing and resources to administer the new telecommunications tax law (see story below), and authorizes a treasury loan for the agency to modify forms, databases and compliance tools.

· Adds funding to increase local tourism grants from $250,000 to $425,000 each year.

· Adds $750,000 over the two years to increase the number of meals delivered by agencies on aging by nearly 1,800 meals/week.

· Eliminates the proposed $12 million from the introduced budget to distribute to fire departments for apparatus, training and other needs in FY07.

· Provides $700,000 over the two years for the Dam Safety, Flood Prevention and Protection Assistance Fund, to provide grants or loans to localities or individuals for dam renovation or repair.

· Provides just over $278,000 for establishing a state dangerous dog registry.

· Provides funding for updating the statewide aerial photography base map used by state and local governments.

· Provides $1 million for expanding community-based programs that divert individuals with mental illness from jails.

· Provides about $350,000 over the two years for development of specialized training and standards for campus police and security officers.

· Provides $15,000 to the Department of Health to administer and manage the biosolids program.

· Non state agency grant money is provides as follows:  Louisa Co. Historical Society and Friends of Wilderness Battlefield both receive $12,500; the Louisa Town Hall and Art Center receives $50,000; the Rural Health Outreach Program (Nelson) receives $12,500; and the Paramount Theater (Charlottesville) receives $20,000.

· The budget increases the reimbursement rate for use of a personal vehicle on state business from the current 32.5 cents/mile to the Internal Revenue Service rate of 44.5 cents/mile.

· A language amendment requires MHMRSAS and DHCD to report on the extent to which local ordinances accommodate innovative housing initiatives to benefit the mentally ill. Another provision directs MHMRSAS to develop a clear medical screening and assessment process for individuals subject to an emergency or temporary detention order.

· Another language amendment directs the Social Services Commissioner to develop proposed criteria for assessing funding requests for space needs by local departments.

Traffic Impact Regulations being Developed

The Virginia Department of Transportation (VDOT) has begun the process of developing regulations for how it will review and comment on proposed changes to local comprehensive plans, rezonings and subdivision plans. HB 1513 and SB 699, as approved by the 2006 General Assembly’s regular session, require the regulations as part of an effort to better coordinate state and local transportation planning; those measures take effect July 1, 2007. The regulations will define standards for traffic impacts, should not require redundant analysis during or add time to the local approval process, and will include exemption criteria. A technical committee of VDOT and local representatives, which includes TJPDC Executive Director Harrison Rue, is spearheading the work. The first draft of the regulations are expected to be made public next month, with a public comment period slated for early fall.

Implementation of new Telecommunications Provisions are Highlighted

             Virginia Department of Taxation officials meet with local government and industry representatives recently to review the new telecommunications tax law that was approved by the General Assembly this winter and that takes effect January 1. The new law eliminates local consumer utility taxes, business license taxes in excess of one-half percent of gross receipts, cable franchise fees and local E-911 fees, replacing them with a statewide 75 cents/month E-911 fee and a 5% sales and use tax on all voice, video and audio communications. Cable companies would also collect and pay the rights-of-way use fee now applicable to local exchange telephone companies. Under these new provisions, the distribution of revenue from the new state tax to each locality will be the same as its percentage of the FY 2006 state total of the taxes and fees being eliminated. State officials likely will convene industry and local government working groups this summer to assist them with fine-tuning regulations to implement the new law. A first draft of regulations could be ready in several weeks.

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)