Legislative Newsletter - July 28, 2009

Number 11

Governor Requests Reduction Plans; Budget Outlook Gloomy

     Governor Tim Kaine has directed state agencies to prepare 5, 10 and 15 percent reduction plans for fiscal years 2010, 2011 and 2012. A memo from the governor’s chief of staff to state agency heads notes that these new reductions will be in addition to the reduction amounts already contained in the state budget. The governor is asking agencies to conduct a comprehensive review of all options, by looking especially at areas where costs exceed national norms, by reviewing current state policies that might lead to higher costs, and by focusing on targeted cuts rather than across-the-board reductions. He also asked that the plans not degrade essential services in public education or take actions that could compromise public safety, health, and welfare.

     The gloomy budget outlook paints a messy picture for both the state and localities over the next two years. Localities should prepare for additional reductions in state aid beginning in FY10 (the current budget year). Moving forward, keep in mind that 98% of state aid to localities is in the following areas: K-12 education, the car tax (yes, the state calls this “state aid” to localities!), Compensation Board, Comprehensive Services Act and HB 599 funding for law enforcement. State education funding was reduced by more than $600 million during the past legislative session, and despite increased cost pressures (see below), is a prime target for cutting again. Stimulus funding that helped offset some education reductions this past session again will be plugged into the FY11 budget (about $365 million), but will not be available in FY12.

     Governor Kaine will present a reforecast of general fund revenues at an August 19th meeting of the joint money committees. It is anticipated that more information about the state agency reductions, and corresponding effect on localities, will be made known at that time.

Updated Education Costs Presented to Board of Education

     The costs of “rebenchmarking” the state’s share of costs for K-12 public education would be reduced drastically if a cap on the number of support positions is continued by the state. The 2009 General Assembly included the cap, which had been recommended by the governor, in the approved budget for FY10 only. The budget document directed the Board of Education (BOE) to compile two rebenchmarking calculations for the next biennial budget, one based on this capped support position methodology and one not.

     Figures presented to the BOE last week by Department of Education (DOE) staff show that including the cap on the number of educational support staff would save the state an estimated $754 million over the next two years, resulting in a preliminary estimate of nearly $139 million in increased state costs due to rebenchmarking. However, if the cap is not included, state education costs over the next biennium are estimated to increase nearly $893 million. In FY09, the state contributed to the cost of about 37,000 support positions; in the current fiscal year, that number is reduced to about 23,000.

     Cost rebenchmarking occurs every two years, and largely is a technical update to project costs forward for anticipated changes in the likes of student enrollment and inflation. It does not involve policy changes.

Land Use Study Group to Mull Growth Area Bills

     The Joint Subcommittee Studying Development and Land Use Tools meets later this week to review a pair of draft bills dealing with locality growth areas. The bills would amend provisions adopted in two years ago as part of HB 3202, the 2007 Transportation Act. One bill amends draft legislation presented at the June meeting of the workgroup. You will recall that bill received a cool reception from local government representatives and planners due to the prescriptive nature of the bill’s density requirements. The new draft has not yet prescribed density standards, leaving that for discussion at the meeting.

     The second bill deletes the 2007-approved UDA provisions, and instead, proposes a requirement for designated growth areas to be established. The new language stipulates that any such areas be located to maximize public infrastructure, and lists varying characteristics to be considered when growth areas are being designated. Text of the draft bills and additional information can be found at the subcommittee website, http://dls.state.va.us/DLUT.htm.

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)