Legislative Newsletter - September 24, 2009

Number 13

Governor Slashes $1.35 Billion in FY10 State Spending

    Amidst a continuing decline in state revenue collections, Governor Tim Kaine has trimmed $1.35 billion from the state’s FY10 budget. The plan proposes a $283 million transfer from the state’s Rainy Day Fund and eliminates nearly state 1,000 positions, including 593 layoffs (half by closing two correctional facilities)
The governor stated that these actions are aimed at managing the shortfall while minimizing impact on K-12 education, safety net services and local governments, and making agency and targeted budget reductions that could be continued through the next biennium and beyond.

Here is a list of actions that affect or are of interest to localities:

   Compensation Board: 4.7% reduction for sheriffs and regional jails ($19.5 million); 5% reduction for Commonwealth’s Attorneys ($2.5 million); 10% reduction for registrars ($740,000), 15% reduction for Commissioners of Revenue ($1.6 million), Directors of Finance ($931,000), Treasurers ($1.6 million), and Circuit Court clerks ($4.2 million).

   Public Education: Nearly $69 million in FY11 ARRA funding for K-12 education is moved to the FY10 budget; reduces state sales and use tax revenues for public education by $37.6 million; transfers an additional $55 million in Literary Fund dollars to the general fund, to be used for teacher retirement.

   Teacher Benefits: Reduces state contributions by $51.3 million for teacher retirement for the last quarter of FY10 from the current rates of 13.81% (employer share of 8.81% and employee share of 5%) to 5%; this one-time savings to the employer decreases contributions to the retirement trust fund, which ultimately will lead to higher contribution rates (see below); localities with a higher composite index, higher teacher salaries and more teachers than required by the state will save the most; also reduces contribution rates for group life insurance and the health care credit for retired teachers for the last quarter of FY10.

   CSA: Captures $31.3 million in Comprehensive Services Act (CSA) funding, based on projected growth in expenditures of 3%, rather than the budgeted 10% growth.

   Public Safety: Reduces HB 599 law enforcement funding by $13.6 million based on the revised general fund revenue forecast (about $160K for both Charlottesville and Albemarle); reduces VJCCCA funding for detention and locally-operated court services units by 5% ($2.5 million); transfers $258,000 of “4 for Life” funding set aside for local governments to the State Police Medivac program; $335,000 of “4 for Life” funding set aside for local rescue squads also is transferred for this purpose.

   Health and Human Services: Reduces funding for the Louisa Resource Council by 10%; eliminates 100 Mental Retardation (MR) waiver slots planned for January 1 ($1.2 million); reduces indigent care funding for UVA and VCU by $7 million; $97 million in general funds are saved in the Medicaid match, as the federal government recently determined that due to the state’s unemployment rate, a higher federal reimbursement is due; reduces community services boards (CSBs) by $12.2 million (5%); captures $400,000 from the Auxiliary Grant Program; reduces chore and companion services at local DSS by 10%.

   Environment: Reduces funding in the Department of Agriculture by $100,000 for purchase of development rights programs for farmland preservation; reduces state support to the Virginia Outdoors Foundation by 5% ($97,000); reduces support for soil and water conservation districts by 10% ($587,000); reduces water supply planning grants by 10% ($10,000); reduces litter control grants to localities by $255,000.

• Reduces state aid to public libraries by nearly $869,000 reduction ($5%).
• Reduces funding for planning district commissions by $212,759.
• Captures $13.2 million in general funds from the Department of Transportation.

    Total general fund revenue collections fell 6.6% in August compared with August 2008. On a year-to-date basis, total revenues are off 7.3%, trailing the revised annual forecast of a 1.6% decline. September revenue collections will complete the first quarter of FY2010 and provide a clearer assessment of revenue growth.

Stormwater Regulation Revisions Proposed/Early October Vote Expected
    The Virginia Soil and Water Conservation Board plans to vote on proposed stormwater management regulations at a special meeting on October 5. In response to written comments and testimony received during a 60-day public comment period that ended a month ago, the Department of Conservation and Recreation (DCR) is proposing that the Board consider numerous revisions to the previous proposal. Those DCR proposals include the following:
    →Allow a 0.45 pounds/acre/year phosphorous standard on new development sites between 2,500 square feet and 1 acre (rather than 0.28), and allow a local program to set a phosphorous standard within urban development areas (UDAs) of between 0.28 and 0.45.
    →Allows a developer to pay for untreated, offsite phosphorous at a cost of $15,000/ pound, with payments deposited into a state fund, to then be used for urban stormwater quality and agriculture best management practices.  
    →Multiphase projects that have obtained certain approvals by July 1, 2010, will be grandfathered under the current regulations.
    →Allows local program strategies for addressing stormwater facility maintenance, rather than requiring inspections every five years.
DCR plans to post on its website early next week the agency’s response to the public comments it received. There will be an opportunity for public comment on the regulations at the October 5 meeting prior to the Board’s final consideration of the proposal that day.

Alternative Sewage Systems Regulations Forthcoming
    Proposed Alternative Onsite Sewage (AOSS) emergency regulations governing operations and maintenance of such systems are expected to be released next Monday, followed by a 30-day public comment period to run through October. Legislation approved this past General Assembly session required the Board of Health to promulgate the emergency regulations, which are slated to go into effect next April. A series of stakeholder meetings were held to help develop the regulations. According to the group facilitator’s final report, there was general agreement that while these systems are capable of treating effluent to a higher degree than conventional systems, there was concern that owners may not be well informed that their home utilized an alternative system and how to maintain it. Consensus items/recommendations included requiring an initial inspection and then yearly inspection (and report) by a licensed operator, and that such performance assessment include visual and field testing.
    Following the end of the public comment period on October 28, Department of Health staff will review and revise the proposed regulations before forwarding to the Department of Planning and Budget for final review. The Board of Health will have one year from the effective date of the emergency regulations (again, April 2010) to adopt final regulations, which will override locality authority over installation, operation and maintenance of such systems. The emergency regulations will form the basis of the final requirements.

Retirement Contribution Rates on the Rise?
    The Virginia Retirement System (VRS) is looking to increase retirement rates in the next biennium to address immediate needs and long-term funding status of the retirement system. VRS could be requesting General Assembly approval of teacher rates (employer contribution) as high as 13% for the next biennium (this does not include the 5% employee contribution most school divisions/localities pay for their school employees). However, such a rate would require additional state funding exceeding $140 million dollars, a challenging figure at best in these tight budget times. Local government costs would increase as well. Also being examined is a scenario that would require additional employee contribution to the retirement fund. An option presented in a 2008 study would increase the required employee contribution to up to 7%; however, this recommendation was contingent on the state providing salary increases.

    Other possible longer-term options for ensuring stability of the VRS fund that continue to be examined include increasing the retirement age to 60 years, reducing “cost of living” increases for new retirees, and shifting from the current defined benefit plan to a defined contribution plan for new employees. These options would save costs over the long term, but not provide immediate budget relief.

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)