Budget amendments offer no fiscal relief for localities

As local budget writers wrestle with increasing costs and stagnant or declining revenues, councils and boards of supervisors will have fewer state dollars than hoped to balance competing needs.

Gov. Tim Kaine submitted 41 amendments to HB 30, which funds the 2008-2010 biennium. The amendments include $8.9 million of proposed changes, mostly for economic development and land conservation activities. But, for the most part, the bulk of the amendments are technical, and none address the $378.2 million in budget reductions affecting state-mandated services and services delivered in partnership with the state. Nor, do any of the proposed amendments reverse the legislature’s decision to eliminate the revenue sharing program for ABC net profits and wine liter tax collections. And, no amendments were submitted to alter the new state policy to cap the amount of inflation recognized by the state in re-benchmarking non-personnel and health insurance costs for the Standards of Quality. This policy costs localities some $10.4 million each year in the upcoming biennium. (The March 21 edition of the Legislative Bulletin includes detailed information on the state budget.)

The General Assembly will accept or reject the amendments at its reconvened session on April 23.

Kaine also submitted amendments to about 35 pieces of legislation. The amendments were primarily technical in nature. Concerning HB 29, the bill amending the final months of this fiscal year, no amendments were submitted. contents

Town Section meetings to be held in May

VML will hold four Town Section meetings across the state in May.

VML staff will brief town officials on how the actions of the 2008 General Assembly will affect their communities. In addition, staff will brief Town Section members on: the new role for towns pertaining to land use law; the Go Green Virginia environmental initiative; a refresher on laws pertaining to FOIA and conflicts of interest; the VML Model Personnel Manual; and an overview of existing VML service programs benefiting towns.

The meetings will be held on Thursday, May 8, at the Farmville Train Station; Friday, May 9, at Lowery’s Seafood Restaurant in Tappahannock; Thursday, May 22, at the Town Hall in Bridgewater; and Thursday, May 29, at the new Wytheville Meeting Center.

Each meeting will begin at 11 a.m. and will include lunch. Download registration form (PDF). contents

VML pushes for transportation solution in letter

VML sent the governor and state legislative leaders of both houses a letter this week advocating that they find a sustainable approach to funding long-term transportation improvements.

The governor promised to call a special legislative session this spring following the implosion of the transportation funding plan approved last year by the General Assembly.

The letter reads:

Dear Sirs:

Transportation problems are more than just an inconvenience and expense for families and businesses. Congestion, aging facilities, and project backlogs threaten the Commonwealth’s ability to move people and goods. And this puts the state’s economic vitality at risk.

The $1.1 billion reduction in the official six-year forecast for the Highway Maintenance and Operating Fund and the Transportation Trust Fund, coupled with rising oil and steel prices, demand prompt action. Failure to address the transportation challenge jeopardizes future federal funding, meaning we will have even fewer resources to do the job.

The Virginia Municipal League advocates for a funding model that is adequate, sustainable, and dedicated with non-general funds to support Virginia’s transportation network. To that end, our organization urges you to approve a program that addresses the long-term statewide needs of road maintenance and transit operations, imposes tax or fee increases by the Commonwealth and not by individual localities, and provides adequate resources for new construction and other transportation modes.

We are ready to work with you to accomplish these aims.

Sincerely,

R. Michael Amyx

Executive Director contents

VRS certifies contribution rates; trust fund buffeted

The Virginia Retirement System’s Board of Trustees certified retirement, group health and group life insurance rates for state employees and teachers at its meeting held April 10 in Richmond.

The board last October set its assumptions at a 7.50 percent investment return, 2.5 percent inflation and a 20-year amortization period, but the General Assembly funded contributions based on assumptions of an 8 percent investment return, 3 percent inflation and a 30-year amortization period. Therefore, contribution rates are lower than what the VRS board announced last fall. Assumptions for retirement contribution rates for political subdivisions, however, do not change; their retirement contribution rates will be those certified in November 2007. The lower rates for the teacher retiree health care credit and group life insurance program will apply to political subdivisions.

Funded rates for FY09 (effective July 1, 2008) are as follows:

• State employees: 6.23 percent (not including the 5 percent employee contribution)
• Teachers: 8.81 percent (not including the 5 percent employee contribution)
• Group life: 0.82 percent (0.49 percent employee contribution and 0.33 percent employer contribution)
• Teacher retiree health care: 1.08 percent.

State reimbursement for a share of the cost of retirement for state supported local employees (such as positions funded through the Compensation Board) is based on the lower of either the state contribution rate of 6.23 percent, or the contribution rate for the locality.

For teachers, the costs of the group life and teacher retiree health care credit are shared with local governments on the basis of the composite index of local ability to pay. Further, for group life, the state only pays a share of the 0.33 percent employer contribution. Some employers pay the 0.49 percent employee contribution, but the state does not share in that cost.

The cost to the state and local governments for teacher retirement contributions will be about $980 million in FY09 and $1 billion in FY10. Local governments pay approximately 60 percent of the cost ($588 million in FY09 and $606 million in FY10), because of the failure of state funding formulas to recognize adequately salary levels paid by school divisions and the number of teachers employed in school divisions.

The teacher retiree health care credit will cost $76.7 million in FY09 and $79.7 million in FY10. Again, local governments pay about 60 percent of these costs, or about $46 million in FY09 and $47.8 million in FY10. The General Assembly adopted this benefit in 1998, and said that the state would pay all the costs of the program. However, the budget adopted in 2002 funded the program the same way as other education costs, through a formula using the composite index. The General Assembly increased the retiree health care credit for teachers in the 2007 session.

Reflecting the downturn in the U. S. economy, the value of the Virginia Retirement System’s trust fund fell to $56.4 billion in April 2008, down from the high point of $61 billion in October 2007.

VRS Chief Financial Officer Charles Grant presented a series of depressing statistics to the Board of Trustees, which met April 10 in Richmond. Non-farm payrolls have decreased for the last three months, and unemployment has edged up. Consumer confidence, a key measure because the U.S. economy is driven by consumer spending, has plunged since 2007, and is approaching the lows recorded in 2002.

Grant also said that the Financial Standards Accounting Board (FASB) has adopted stricter standards for recognizing the fair value of assets and liabilities. There is concern that the Government Accounting Standards Board (GASB) will adopt similar standards for governments, which could result in lowering the value of assets held by pension funds and other assets. GASB often follows the lead of FASB in setting governmental accounting standards. contents

Education data reflect small hike in state, federal support

Data contained in the Superintendent of Public Instruction’s Annual Report for FY07 show that local governments continue to pay the largest share of the costs of K-12 education, but that the state has increased its share slightly over the past year.

Local governments continue to pick up the larger portion of operating expenditures for K-12 education:

• In FY07, local governments paid 48.61 percent of operating expenses, as compared to 50.18 percent in FY06.
• The state share (including the state sales tax dedicated to education as a state source) was 44.65 percent in FY07, as compared to 42.75 percent in FY06.
• The federal share was 6.74 percent in FY07, and 7.07 percent in FY06.

The improvement in the percentage of state support from FY06 to FY07 probably reflects that the state included funding for a 4 percent salary increase in FY07, and a 3 percent salary increase in FY06.

The data for FY07 can be found in Table 15 of the annual report, which is available in either PDF or Excel format on the Department of Education’s Web site.

The superintendent’s annual report generally is regarded as one of the most authoritative and comprehensive source of data on education funding. The figures are derived from the annual school reports submitted by the divisions.

Historically, the local, state and federal shares over the last five years are as follows:

Sources of financial support for education operating expenditures

(Expressed as percentage of total operating expenditures)

	FY07	FY06	FY05	FY04	FY03
Local	48.61	50.18	49.33	51.5	51.7
State	44.65	42.75	43.54	41.2	41.4
Federal	6.74	7.07	7.13	7.2	6.9

Source: Table 15, Annual Report, Superintendent of Public Instruction, for the fiscal years indicated. The state share includes the state sales tax dedicated to public education. contents

Policy committee nominations deadline is May 9

May 9 is the deadline for member local governments to submit the names of elected and appointed officials who want to serve on VML policy committees for 2008-2009.

A policy committee information and nominations package was mailed last week to all VML full-member communities. All of VML’s policy committees will meet on Thursday, July 24, at the Greater Richmond Convention Center.

VML’s Executive Committee has added a sixth policy committee – Community and Economic Development – to its list of committees. The committee will address community and economic development issues, including business development and retention, infrastructure development and investment, planning, land use and zoning, blight, enterprise zones, housing, workforce development and historic preservation.

VML’s policy committees are: Community and Economic Development; Environmental Quality; Finance; General Laws; Human Development and Education; and Transportation.

The committees prepare statements that define the league’s positions on a variety of policy issues. They also recommend legislative positions. For more information on the policy committees or the policy committee process, email Janet Areson or call at 804/523-8527. contents

Cash prizes for Green Government Challenge announced

By now, you’ve heard all about VML’s Green Government Challenge, which encourages local governments to implement environmental policies and practical actions that reduce carbon emissions.

But you haven’t heard everything!

MoseleyArchitects, a VML sustaining member, will award $18,000 in cash prizes to the nine winners of the Challenge.

The firm will award $3,000 to the first place winner, $2,000 to the second place winner, and $1,000 to the third place winner in each of the three population brackets. The inaugural ‘MoseleyArchitects Go Green Virginia Awards’ will be presented at the 2008 VML annual conference in Norfolk, Oct. 19-21.

Use your award money to help create a sustainable future by planting trees, conducting an energy audit, replacing incandescent light bulbs, designing a butterfly or community garden .... the choice is yours!

You can learn more about the awards at one of the four regional Go Green Virginia forums that kicked-off this week.

It’s not too late to sign-up for a forum. The remaining three will be held April 17 in Fairfax County, April 22 in Abingdon and April 29 in Lynchburg. For more information about the Go Green Virginia program, visit www.GoGreenVA.org. contents

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