Legislative Newsletter - June 28, 2007

Number 9

State Budget and Revenues

State revenue collections likely will fall several hundred million dollars short of estimates for the fiscal year ending this week. Total general fund revenue collections grew just under 14% in May compared to a year ago. On a year-to-date basis, revenues have grown 4.7% over the same period last year, lagging behind the forecast of 6.5% growth. Sales tax collections are disappointing and individual income tax refunds are exceeding expectations, dampening growth.

June collections must total about $1.9 billion to meet the forecast for the fiscal year (collections last June totaled $1.6 billion). 

The state Code requires a re-estimate of general fund revenues if the sum of individual income, corporate income and sales taxes falls more than 1% below the official budget estimate for the sum of those three sources. As part of the reestimation process, the Governor’s Advisory Board of Economists met earlier this month and recommended an interim economic forecast that reflected weaker growth. Next month, a meeting will be convened with housing industry representatives to gauge the future impact of the housing slowdown on Virginia’s revenue collections. The governor will release an interim revenue forecast for fiscal years 2008 through 2010 when he addresses a meeting of the General Assembly money committees in August.

CSA Committee Dives into Several Issues

The Joint Subcommittee Studying the Comprehensive Services Act (CSA) had a handful of hot topics on the agenda for its first meeting of the year last week. It received a review of proposed regulations for Interdepartmental Regulation of Children’s Residential Facilities. The changes being made to the regulation are designed to bring the children’s residential facility industry up to meet current industry practices, and will replace an emergency regulation enacted last year (for additional information on the proposal, please see the May 25 Legislative Newsletter). In an overview of the CSA program, it also was told that while the rate of growth in CSA expenditures is decreasing, they still are growing about 9.5% per year. It was noted that 16 communities received grants from the state’s innovative community service grant funds ($250,000 in FY07); 30 proposals were received, requesting more than $8.4 million. Committee members spent much of their time reviewing recent findings and action on the topic of parents relinquishing custody of their children in order to obtain CSA services. The Attorney General opined in December that custody relinquishment was not necessary to obtain mandated services.

Some legislators complained that the study was not looking at some of the fundamental questions facing CSA, citing problems with responsibility and accountability. The panel’s chairman stated that future meetings would look at the structure of CSA. The TJPD legislative position on CSA for next year will stress the need for more state funding for CSA and address accountability by residential providers.

Land Preservation Study Gears Up

The Joint Subcommittee studying Long-Term Funding Sources for the Purchase of Development Rights to Preserve Open-Space Land and Farmlands held its first meeting of the year last week. The two-year study was directed by HJR 692 and SJR 401 from the 2006 General Assembly. Much of the group’s attention focused on a review of the past year’s activities in land conservation. Staff noted that 2006 legislation capping the land preservation tax credit, effective this year, spurred a big jump in acreage being preserved, as land owners rushed to receive credit for preserved land under the more generous credit provisions. The Chesapeake 2000 agreement calls on Virginia to preserve 20% of the Chesapeake Bay watershed. Just over a quarter of a million acres still need to be preserved by 2010 to meet that goal, though estimated preservation over the next year is expected to cut that number in half. If the state were to pay all the costs to set aside the remaining acreage, it would cost between $167 million and $279 million.

The panel also was told that state funding of $4.25 million appropriated in the current two-year budget to match local PDR program dollars likely will be divided equally among the localities that have established such programs. The panel is expected to hear from interested stakeholders at its next meeting, likely to be held in late August.

Education Rebenchmarking Costs to Top $1 Billion Again

Updating the costs of public education through the biennial “rebenchmarking” process will be expensive, and likely controversial, in the next General Assembly session. Additional state costs for K-12 education over the next biennium could run as high as $1.5 billion (the last two cost updates also totaled over $1 billion). This scenario has prompted legislators to take a harder look at what drives the state’s share of education costs. A two-person subcommittee (one delegate and one senator) was established through budget language to make that examination. The duo was scheduled to meet recently, but the meeting was canceled and has not been rescheduled. Their report is due the middle of September. One area they make look to save dollars is in the area of employee compensation, as the largest chunk of state education dollars go to salaries and benefits. The Virginia Board of Education is expected to get its first look at education costs for the next biennium at its July 25 meeting.

Draft PPEA Guidelines Released

A workgroup established to revise model guidelines for implementing the Public-Private Education Facilities and Infrastructure Act of 2002 (the PPEA) has released a working draft of suggested revisions. The PPEA  grants  a  responsible  public  entity  the  authority  to  create public-private  partnerships  for developing public use projects if it is determined there is a need for the project and that private involvement may provide the project in a timely or  cost-effective fashion. A governing body must adopt guidelines it will follow to receive and evaluate any proposal submitted under the provisions of the PPEA. Initial model guidelines were completed in 2002 and have been revised the past two years as well. The latest revision was directed by SB 756 from the 2007 General Assembly. The draft proposal is available at http://dls.state.va.us/groups/ppea/SB756_HB2381/Notice07.htm. Written comments can be submitted by July 12 to the Division of Legislative Services.

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)