Legislative Newsletter - May 27, 2009

Number 9

State Revenues Drop; Now Lag Estimate

       State revenue collections through the first 10 months of the current fiscal year are down 8.6%, which trails the revised annual revenue forecast of a 7.3% decline. Recall that revenue collections through March were down 6.8%, still ahead of the forecast. Compared to last year, total general fund revenues fell nearly 20% in April, the largest monthly decline since May, 2002. Most of the April decline was due to a sharp drop in individual nonwithholding and a jump in individual refunds (see below). Sales tax collections also are trending below estimates and likely will not meet the year-end forecast. May and June both are significant months for revenue collections; about $3 billion in total revenue must be collected during those months to reach the estimate for the year.

       As a result of the latest revenue downturn, Governor Kaine has said that state agencies might be forced to cut an additional $225 million to keep the state’s books balanced. The governor told state agency directors to start looking for deeper budget cuts, though he did not tell them how much or where specifically to cut.

       Through April, $1.6 billion in individual tax refunds have been issued, compared with $1.5 billion in the same period last year. Year to date, refunds are 13% ahead of the same period last year, beating the annual forecast of a 7.4% increase.

       State officials recently told Senate budget writers that the State is owed more than $3.6 billion, with the largest portion of the money owed being in unpaid taxes. However, only about $32.6 million of the money is owed to the general fund, where the bulk of budget cuts will have to be concentrated.

JLARC Studies Take Shape

       The Joint Legislative Audit and Review Commission (JLARC) released its yearly workplan earlier this month, providing details on several studies of interest to local governments. Pursuant to language included in the approved budget, JLARC staff will be examining state funding of district and circuit courts, including whether the current fee structure is equitable, efficient and sufficient, and correspondingly will review funding of courthouse construction, operation, maintenance. Specifically, the examination will look at the costs of district and circuit court operations, including local supplements, and if efficiencies reduce costs. It will examine if the fee structure provides an equitable, efficient and sufficient source of revenue for courthouse construction, operation and maintenance, the roles of the state and localities for funding courthouse operations and maintenance, and if those roles are appropriate and equitable. An initial report on this study is anticipated this fall.

       SJR 328 (2009) directs JLARC to study post-election audits of voting equipment in Virginia. The study will look at, among other things, the time requirements and costs of post-election audits and the level of statistical confidence of different audit strategies. A report will be made in November, 2010.

       The Code of Virginia directs JLARC to periodically review exemptions from the Virginia Administrative Process Act (VAPA), which governs the process for state agencies to promulgate regulations. The review will examine the implications of these exemptions, how the number and use of exemptions has changed over time, and which exemptions, if any, should be discontinued or modified. A report is due in September.

       JLARC also will study ways to reduce homelessness among veterans. The U. S. Department of Veterans Affairs reports more than 814,000 veterans living in Virginia. Staff will examine current services provided by federal, state, local, and private sources; identify gaps in those services; and identify need and costs for additional services. A report is due in 2010.

CTB to  Act on Funding Reductions

       The Commonwealth Transportation Board (CTB) will act next month on various recommendations released last week by the Virginia Department of Transportation (VDOT) for reducing services around the state. The recommendations come on the heels of a projected $2.6 billion revenue shortfall over the next six years. Hardest hit by the planned reductions is funding for the state’s construction program, with dollars for secondary road construction shrinking from $1.3 billion under the current plan to $500 million under the FY 2010-2015 plan.

       Maintenance and operations services will be reduced by 13% under the proposal. VDOT proposes to reduce spending for mowing by $20 million by changing the frequency of mowing and restricting aesthetic mowing, focusing instead on sight-distance mowing needs. The proposal also reduces the number of VDOT residencies across the state from 44 to 29. This includes closure of the residency in Louisa, which also will lose its equipment maintenance shop. The Hatton Ferry near Charlottesville will be eliminated and most roving service patrols, including the one along I-64 in this area, will be eliminated.

Standards of Quality Review Underway

       The Virginia Board of Education is undertaking its biennial review of the Standards of Quality (SOQ), which sets minimum requirements to be met by local school divisions. You will recall that the General Assembly-approved budget directed the Board to compile two rebenchmarking calculations for the next biennial budget, one based on the capped support position methodology included in the budget for FY10 and one not. The Board also must review the current SOQ to evaluate the appropriateness of the existing staffing standards for instructional positions and the appropriateness of establishing ratio standards for support positions. This came on the heels of the governor’s recommendation to cap the number of education support positions funded by the state that resulted in a reduction of $340 million in state funding for 13,000 education support positions ranging from assistant superintendents to custodians. Those cuts were included in the budget bill adopted by the General Assembly, although the funding reductions were offset using federal stimulus funding.

       The Board is accepting public comment on the SOQ revision through the end of July. An additional comment period and hearings are planned for early fall, prior to the Board adopting a recommendation in October.

TJPDC Stimulus Efforts

       The TJPDC is beginning to work with localities in the region on possible applications for available funds under the American Recovery and Reinvestment Act (ARRA). One area being explored is funding for broadband initiatives. The Act includes funding to establish a Broadband Technology Opportunities Program (BTOP) in the National Telecommunications and Information Administration (NTIA) to develop and expand broadband services to rural and underserved areas and to improve access to broadband by public safety agencies. Over $3 billion likely will be available for BTOP in three rounds of grants to be awarded through June, 2010. NTIA expects to publish guidance for the first round of funding in late June, with initial grant awards to be made in December. An additional $2.5 billion will be available in Rural Utility Service (RUS) grants, loans and loan guarantees, administered through the U.S. Department of Agriculture (USDA).  It also anticipates three rounds of awards, spaced several months apart. The RUS grants are to private providers, but nothing would preclude a locality from partnering with a private company.

       Second, the TJPD Commission has directed staff to investigate a joint application for Fluvanna, Greene, Louisa and Nelson in the area of energy efficiency. The four counties will be eligible to apply for a share of approximately $9.7 million in energy efficiency grants through the Virginia Department of Mines, Minerals and Energy (DMME). These funds are part of nearly $61 million that are flowing to the state through the Energy Efficiency and Conservation Block Grant (EECBG) program. Numerous cities and counties (including Charlottesville and Albemarle) will receive dollars through a formula grant program and additional dollars stay with the state energy office. DMME will be preparing a grant application process for the $9.7 million following approval of the state application (submittal due in late June) to the federal government.

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)