Legislative Newsletter - February 20, 2008

Number 6

Calendar for 2008 General Assembly Session

February 21     House and Senate floor votes on their budget plans

March 3           Last day for committee action on bills

March 4           Deadline for budget conferees to agree on a compromise spending plan

March 8           Scheduled adjournment

Budget items of interest

       The House and Senate money committees have released differing versions of a proposed state spending plan for 2008-2010, just days after Governor Kaine announced that the state’s expected revenue shortfall for the next 28 months totals nearly $1.4 billion. Both chambers will discuss, debate and vote on their version of the budget on Thursday.

       Both plans identify millions in additional savings for the remainder of FY08 and over the next biennium in order to bring proposed spending in line with anticipated revenues. Both also propose withdrawals from the state’s “rainy day” in the current fiscal year, the House in the amount of $225 million and the Senate in the amount of $423 million, the maximum allowed. It is likely that this gap will be a major source of disagreement when senior budget negotiators try to hammer out a compromise spending plan over the next two weeks.

       Some critical changes are proposed for public education funding. The House includes several changes in funding methodology that would negatively impact localities well beyond the next biennium. The House plan proposes to recognize only state-awarded salary increases granted in the state budget in rebenchmarking (or updating) education costs for support personnel for the 2008-2010 budget.  This methodology would extend to teacher salaries the following biennium. The effect of this change would lower state dollars for rebenchmarking by about $225 million each biennium. In the next biennium, the House plan shifts some of those dollars to teacher pay raises (see details below) and to increasing school construction grants by $35 million, but there is no guarantee that these “saved” dollars would not be shifted elsewhere in the future. The House also proposes to increase the federal revenue deduction, which results in a savings to the state but an increase in required local costs, and caps state contributions for cost of living increases for retirement benefits for teachers, which would shift additional teacher retirement costs to localities.

       Meanwhile, the Senate plan makes no such methodology changes, but does seize half of the current $55 million construction grant dollars. The Senate also diverts about $17 million each year in anticipated lottery profits that normally would go to localities to help pay the state share of education. The governor had proposed diverting the entire $55 million in school construction grants, and $165 million of lottery proceeds to pay state K-12 basic aid costs.

       Both budgets also raid the Literary Fund, the House to the tune of $45 million and the Senate by $14 million. This strategy has been used over the past two decades to provide general funds for teacher retirement. Both plans also alter the pre-K initiative introduced by the governor, the House refusing to adopt the proposed expansion and the Senate building on the program currently in place.

       In transportation, both plans alter the governor’s proposal to defer (from 2009 to 2010) $180 million of the $500 million in general funds for transportation approved in last year’s transportation reform package. The House sweeps that money for other uses, but bonds the same amount. The Senate also sweeps the funding for other uses, and includes in its budget a 5-cent increase in the state gas tax (phased in over five years) as stipulated in SB 713. Neither has proposed a direct refill of transportation dollars (targeted for highway maintenance) being lost due to repeal of the abusive driver fee provisions from the reform package. Additionally, due to declining revenue forecasts, the Commonwealth Transportation Board is having to wrestle with funding reductions in the six-year transportation plan.

       Concerning employee compensation, the House proposes a 2% pay raise for state-supported local employees and teachers, effective December 1, 2008, and sets aside $85 million for a second-year salary increase. The Senate, meanwhile, proposes a 2.5% pay hike, for the same groups, effective December 1, 2009. Both plans also capture savings by changing the retirement amortization period from 24 to 30 years, saving the state more than $50 million.

       In the health and human services arena, both budgets embrace proposed mental health initiatives contained in the introduced budget. The House would provide an additional 650 mental retardation (MR) waiver slots on top of the 150 proposed by the governor. Both also more gradually phase-in the Governor’s proposal  to provide more financial incentives for localities to use community-based and foster care service along with disincentives for the use of residential services for children and youth. Both also include language calling for a workgroup with local representation to examine implementation of such incentives. The House also provides funding for additional outpatient clinicians (one per community service board). The Senate plan includes a language amendment requested by the TJPDC to require the Secretary of Health and Human Resources to report on the current CSA funding formula for local administrative costs and develop options for revising the formula.

       In public safety, the Senate provides an additional $2.5 million each year above the introduced budget for HB599 law enforcement funding to localities with police departments. This amount would fund this program at the statutorily-required amount in the first year. The House, however, diverts $15 million in 599 funding for a handful of other initiatives, including paying state costs for benefits under the Line of Duty Act.

Other amendments of interest include the following:

*Both budgets include language directing a study of local and regional jail capacity.

*The House eliminates $2.9 million each year in funding for 14 local drug court programs.

*A language amendment proposed by the House would prevent the Board of Health from redistricting regional emergency medical services councils.

*The Senate includes $2.5 million in the first year to restore the exemption from recoveries of state funds used to house federal inmates in jails for which the federal government paid for the construction of the bed space utilized for that purpose.

*Both plans reduce state general fund dollars proposed in the introduced budget for purchase of development rights programs.

*The House eliminates $6 million to pay the state’s portion of LEO costs, which was proposed in the introduced budget as an incentive to assist localities with the costs of this new requirement enacted last year.

*The Senate captures $2.8 million in savings from implementing a 90-day hiring freeze for vacancies in sheriffs, jails, and Commonwealth Attorneys.

Budget briefings for legislators were held today. Again, floor votes on the competing plans are set for Thursday. A battle is brewing on the Senate floor over the budget, following a split, party-line vote in the Senate Finance Committee on Sunday to approve the spending plan.

Legislation Update

       The proffer/impact fee bill, SB 768, is in the House Rules Committee, where it likely will not come up for discussion until next week. The bill repeals local authority to accept voluntary cash proffers from new residential projects. It also limits the ability to accept off-site non-cash proffers and limits the amount of impact fees a locality can impose to an unscientific $7,500 per unit. Though discussions of possible changes to the bill have continued between homebuilding and local government representatives, the language and dollar amounts in the bill remain unacceptable to localities. The bill, if approved would leave many localities with inadequate funding for schools and roads, thus putting great pressure on localities to increase taxes to fund capital needs at a time when local budgets are tight and state funding to localities probably will be reduced (see above). Local governments continue to urge legislators to not undo 30 years of proffer policy in such a short period of time, but instead to carry over the bill for the year so that we can have an opportunity to fully analyze the bill and its impacts, and to have discussions with the bill’s proponents. Please continue to contact your House members about the harmful effects of this bill, and ask interested constituencies in your locality to do the same.

       HB 1009, which requires localities to establish a deferral program for real estate taxes on primary residences of taxpayers, and to provide additional information on both real and personal property tax bills about the tax rate and assessed values, will be heard in the Senate Finance Committee next week. Local governments will be looking to steer this bill to a Senate special subcommittee, designated earlier in the session by the Senate Finance chairman and to which a handful of Senate bills were referred.

       On Thursday, the respective transportation committees will consider the opposite chamber’s bills dealing with the highway revenue sharing program. HB 111 and SB 99 revise current highway revenue sharing provisions to give first priority to locally-administered projects, second priority when more local funds are committed than state funds requested, and third priority to projects that are accelerated in the state six year or local capital plan.

       In action from this past week, the Senate has approved HB 922, which increases the “$4-for-life” fee by 25 cents, with the additional revenues targeted for emergency medical services personnel training. Several bills addressing the Comprehensive Services Act also were passed this week. They include SB 479, to require the Office of Comprehensive Services to offer annual training/dissemination of information on best practices; SB 483, to require the State Executive Council (SEC) to oversee development of a uniform data collection (client specific) system and performance measures; and SB 487, to require the SEC to oversee development of uniform mandatory guidelines regarding intensive care coordination services for children entering, or at risk of entering residential care. This would require identification of children at risk of, or placed, in residential care to see if they could appropriately be served in a home or community setting.

       The Senate Local Government Committee reported a substitute version for HB 991, which permits the severance and transfer of development rights from a sending property without requiring those rights to be immediately affixed to a receiving property. The uncodified act provides such authority only to Albemarle County, expires in 2012 and does not become effective unless or until the county adopts an ordinance implementing the bill’s provisions.

       The Senate Privileges and Elections Committee narrowly advanced HJR 4 on an 8 to 7 vote. This is the measure that, if approved by voters in November, would allow the General Assembly to enact legislation to authorize localities to exempt or defer up to 20% of real property taxes a homeowner’s primary residence. A floor fight is expected on this measure by week’s end or early next week.

Locally-Requested Legislation:

       SJR 17 awaits action in the House Rules Committee. This resolution, introduced at TJPD request, calls on the Office of Comprehensive Services to revise or replace the service fee directory that deals with information about residential services. The resolution was amended to provide for an interim report by OCS in 2009, with a final report due to the 2010 General Assembly.

       Meanwhile, Senate Local Government reported HB 883 to allow the City of Charlottesville to adopt provisions in its zoning ordinance that would provide, in rezoning orspecial permit cases, for the construction of affordable units or for the payment of cash in lieu of units. The Senate version, SB 268, awaits actions in the House Counties, Cities and Towns Committee.

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)