|
|
Adobe Reader required.
|
 |
|||||
|
||||||
 |
||||||
 |
|||
 |
|||
Preliminary local budget gaps tied to state education support
Local school divisions across the Commonwealth are preparing their first budget drafts as city managers and county administrators work on revenue projections for FY12. Budget development for the next fiscal year is shaping up to be as difficult, or perhaps even more difficult, than the past two-years experience. Below is a snapshot of some local budget developments that are unfolding.
The Newport News School Board estimates that the district will face a shortfall of $8 million for the next fiscal year, even after an additional $7.5 million in federal Education Jobs Fund (stimulus) money is included. The school system expects $4 million less in state funding while at the same time expenditures are projected to increase by $11.5 million. The city has cut $37 million out of the school budget in the last two years.
In Charlottesville, the school division is expecting a $2.4 million decrease in state funding in FY12 based on Gov. Bob McDonnell’s proposed budget amendments. The largest decrease – $1.2 million – comes from the proposed elimination of “hold-harmless” funds. The school system also expects to have to pay an additional $900,000 in retirement contributions to VRS.
(The hold-harmless money was appropriated by the last session of the General Assembly to cushion 97 school divisions from significant changes in the local composite index (LCI). The LCI is a critically important element in the state’s education funding formula. It is supposed to measure a locality’s ability to pay for public education.)
The Fredericksburg School Board was told by the superintendent that raising teacher salaries would be a priority in next year’s budget. City school teachers have not received any kind of salary increase for three consecutive years. The superintendent also expects to have to pay more to cover a 12 percent increase in health insurance ($360,000) and an increase in pension costs ($635,000). In addition, five new teachers will be needed to handle a projected enrollment growth of 7 percent or about 200 students ($320,000). A 2.5 percent pay raise for school employees would cost $536,000.
The Suffolk School Board was told to expect a $5.3 million budget gap this fiscal year and next. The school division could lose nearly $800,000 already accounted for in this year’s spending plan and about $2.5 million for next year under the governor’s proposed budget amendments. Also, another $2 million would have to be paid to VRS next year in additional retirement contributions.
In Virginia Beach, the city is again considering the use of school division savings to plug holes in the city budget. Virginia Beach finance officials estimate a $19.1 million shortfall, but the number could change depending on the outcome of the state budget. The school division points out that the $17 million in the textbook savings account will be needed in the next few years because the state will no longer provide support for new textbooks.
Norfolk schools could face a $21 million budget gap in FY12 based on less state aid, the end of federal stimulus dollars and higher expenses. The school division could collect $9.2 million less in revenue of which $8 million is fewer state dollars. At the same time, anticipated costs for pensions, health insurance, building repairs and maintenance, and other expenses could rise by up to $11.7 million. To close last year’s budget gap, the school board eliminated more than 300 positions and cut programs.
The finance director for Winchester Public Schools estimates a shortfall of $2.2 million next fiscal year based on the governor’s proposed budget amendments. The cuts come amid increased enrollment, changes in VRS retirement contributions, and need for more textbooks.
The Williamsburg-James City County School Board is facing next year with about $1 million less in state funding. Board members will consider using federal stimulus dollars received this year to prevent layoffs during the 2011-12 school year. The school board is waiting until the end of January to learn how much local money it will receive from the city and county for next year.
It is becoming increasingly clear that the decisions made this session by the governor and the General Assembly will profoundly affect local services and taxes.
In Richmond, the Richmond Times-Dispatch reported on Wednesday that the city’s school superintendent “is proposing a $244.8 million budget for next year that absorbs deep cuts in state funding, calls for two furlough days for employees and eliminates 13 positions.” The proposed operating budget for FY11-12, according to the newspaper, “gives no raises and assumes no change to the city’s appropriation of $124.2 million. Overall, the spending plan would increase by 1.2 percent over this year’s total of $241.8 million, with the help of federal stimulus funds and other one-time infusions of cash.”
contents
NLC defends stability of municipal bonds
As many local government officials are aware, there is a national debate brewing about the financial stability of the municipal bond market, fueled by predictions that there will be large numbers of sizeable municipal defaults in the next year.
Meredith Whitney, a banking analyst credited with accurately predicting the crash of the banking industry, has been leading these predictions, most notably on a CBS 60 Minutes segment in December and through several appearances on other programs, including one broadcast by CNBC last week.
The National League of Cities thinks that the predictions about a crash in the municipal bond market are dangerous. If investors listen to these analyses and make decisions to exit the market, it will only make it more difficult for cities financially, according to NLC.
Chris Hoene, NLC’s director of research, has taken the lead in responding on behalf of cities, making the case that cities overwhelmingly protect their debt obligations and are making the cuts necessary to balance their budgets and maintain their fiscal solvency. NLC’s response has come in the form of two posts on its blog at http://www.CitiesSpeak.org.
Direct links to the two posts are provided below.
Dec. 22: http://bit.ly/f6IDDT
Jan. 12: http://bit.ly/ficLX3
In addition, The Wall Street Journal ran a lengthy story about the situation in its most recent weekend edition. Here is a link to that story that was still available on the newspaper’s website earlier this week: http://on.wsj.com/gBDTcy.
NLC also sent out press releases on the blogs and conducted targeted outreach to media outlets, policy makers and subject experts. Its perspective has been covered widely in the media. NLC is not speaking out along. Experts from various sectors also have come forward to denounce these predictions. Media outlets that have contacted NLC on this issue include: CNBC, Bloomberg TV, Market Place, and the Bond Buyer. In addition, NLC saw traffic to its blog increase tenfold in one 24-hour period last week.
NLC and VML want their members to be aware that this debate is occurring and to know that NLC will continue to play a lead role in responding and proactively making the case for cities.
Bay clean-up plan adopted; EPA backs off Va.
The U.S. Environmental Protection Agency has approved a new plan to clean-up the Chesapeake Bay and its tributaries that is less stringent than originally proposed.
As reported in the Nov. 26 Update, VML submitted written comments to EPA requesting the removal of “federal backstop measures” included in a draft federal Chesapeake Bay clean-up plan. The new plan adopted by EPA on Dec. 29 dropped the proposed backstops, which would have included the upgrade of point sources of pollution such as sewage treatment plants and storm water systems, well beyond limits originally proposed by the McDonnell administration.
The plan – officially known as the Chesapeake Bay TMDL (Total Maximum Daily Load) – sets limits for nitrogen, phosphorous and sediment that comes from various sources, including agriculture, sewage treatment plants, stormwater runoff and air pollution. It is required by the federal Clean Water Act and is designed to remove the bay and its tidal tributaries from the “impaired waters” list.
As part of the process in developing the draft TMDL, Virginia and other bay states submitted draft Phase 1 Watershed Implementation Plans (WIPs) to EPA in late August and early September detailing how they intend to meet their allocated loads for nitrogen, phosphorous and sediment by 2025 for each of its major river basins.
In the case of Virginia, EPA found the state’s draft implementation plan to contain “serious deficiencies” in meeting nitrogen and phosphorous reductions based on projected computer modeling of the actions outlined in the plan. Because of those deficiencies, EPA incorporated in the draft plan what it termed “federal backstop measures.”
In response to the EPA draft plan, Virginia submitted a revised WIP in late November to address the deficiencies in order to remove the backstops. Revisions made were based on discussions with the EPA and various stakeholders, including representatives from local governments, the agricultural and development communities and sewage treatment plant operators.
Key provisions of the plan include:
- An additional 2.6 million pounds reduction of nitrogen in the James River basin from wastewater treatment plants.
- High expectations for the adoption of resource management plans on agricultural operations that will feature water quality best management practices, with consequences if goals are not achieved.
- Actions that will lead to nitrogen-reducing septic systems.
- High standards for limiting runoff from new development and for the control of storm water in existing storm drainage systems.
- Use of new and emerging technology to achieve nutrient and sediment reductions.
- The expansion of the existing nutrient credit exchange program, which will be a tool for greater flexibility and cost effectiveness in pollution reduction actions.
VML recognizes that even with the removal of the federal backstops that reduction of pollutants from sewage treatment plants and urban areas will not be easy or cheap. Without significant cost-sharing assistance from federal and state sources, local governments will be faced with difficult choices in raising the necessary revenue to implement the plan.
For the next step in the process, the states must submit Phase 2 Watershed Implementation Plans by June 1 that address pollution reductions necessary for 93 identified sub watersheds of the bay. These Phase 2 plans will essentially allocate how each locality will reduce nitrogen, phosphorous and sediment to comply with the Clean Water Act.
Staff contact: Joe Lerch, jlerch@vml.org.
Budget amendments introduced on behalf of VML
A number of budget amendments have been introduced on behalf of VML, which has worked with other organizations with similar interests, including VACo. All budget amendments were to be posted on the General Assembly’s state budget webpage on Wednesday afternoon. Look for them at: http://leg2.state.va.us/MoneyWeb.NSF/sb2011.
Some of the budget amendments proposed by VML and carried by General Assembly members include:
State assistance to local law enforcement (HB 599). Gov. Bob McDonnell did not allot any additional state dollars to this program in FY12, even though funding in that year is expected to drop to the lowest level in 12 years, and even though growth in the state’s general funds is projected to grow by 4.99 percent. Increases or decreases in this program’s funding are tied to projected growth in the state’s general funds. In the House, Del. Robert Tata of Virginia Beach (with a number of co-patrons) submitted an amendment to increase the state’s contribution in FY12 by $8.9 million. In the Senate, Sen. Janet Howell of Fairfax (with a number of co-patrons), submitted an amendment to increase the FY12 funding by $27.6 million.
Comprehensive Services Act for At-Risk Youth. McDonnell’s budget amendments eliminated all state funding for youth who are not strictly mandated by this program, meaning that communities that try to treat blossoming behavioral health and delinquent behaviors before they rise to a crisis level could no longer count on the state to help them. His amendments also seek to renege on the state’s commitment to help communities serve more children in the community by funding certain community-based services at a higher state match. Specifically, it would reclassify therapeutic foster care (TFC) services as a residential service. Local governments now pay a higher match rate for residential services, so it would shift the costs to local governments. Sen. Emmett Hanger has submitted an amendment to strike the language changing the TFC match rate and added language to give localities the authority to contract for this service on a regional basis. Also in the Senate, Senator Mary Margaret Whipple has submitted amendments to restore the state’s non-mandated funding share and to strike the change in the TFC match. Her amendments are matched in the House by Delegate Robin Abbott.
LCI hold harmless. McDonnell’s budget amendments eliminated the $57 million hold harmless funding included in the FY12 budget for school divisions adversely affected by changes in the local composite index. McDonnell proposes to use that funding to pay the state share of a two percent increase in the teacher retirement contribution rate. Local governments would have to pay their share of that increase as well. Thus school divisions – and local governments – would be hit by the double whammy of losing state funds already included in the FY12 budget and having to pay the local share of the increased teacher contribution rate. At VML’s request, Del. Mamie BaCote and Del. Charles Poindexter submitted a budget amendment to retain the LCI hold harmless funding.
Line of Duty funding. The budget adopted at the 2010 session shifts the costs for the state-mandated benefits for local employees under the Line of Duty Act to local governments. Sens. Chuck Colgan and Philip Puckett submitted a budget amendment to reverse this shifting of costs.
$60 million/year across-the-board cuts. The budget adopted at the 2010 session requires that localities shoulder an additional $60 million a year in across the board cuts in state aid. Del. Charles Poindexter and Sen. Louise Lucas submitted budget amendments to eliminate these cuts in FY12.
VRS contribution budget amendments clarified
Gov. Bob McDonnell’s budget would require local employees hired on or after July 1, 2011, to pay the 5 percent employee VRS retirement contribution. As previously reported in Update, the amendment would permit local employers to require employees hired prior to July 1, 2010 (Plan 1 employees) to pay this employee contribution if they also provide a salary increase of at least 3 percent.
The state budget currently allows local employers who had elected to pay the 5 percent member contribution to require employees hired after July 1, 2010 (Plan 2 employees) to pay some or all of the required 5 percent member contribution. Employers currently have no choice as to whether to continue paying the 5 percent member contribution for Plan 1 employees, however, if they had elected to do that in the past.
The budget amendment does not address local employees entering the system between July 1, 2010 and July 1, 2011. However, staff members of the House Appropriations and Senate Finance committees have opined that local employers that decide to begin requiring Plan 1 employees to pay the member contribution would have to also require employees hired between July 1, 2010 and July 1, 2011 to pay the 5 percent member contribution, even if a salary increase was not given.
Staff contact: Mary Jo Fields, mfields@vml.org.
Webb requests local appropriations submissions by Feb. 25
The office of U.S. Sen. Jim Webb will entertain requests for local appropriations for FY12 up until Feb. 25. Conaway B. Haskins III, state director for Webb, shared the following information with VML recently:
Dear Friends,
Please see the information below from U.S. Sen. Jim Webb regarding potential federal funding opportunities via the FY12 Congressional Appropriations process as this may be of interest to the local governments that your organizations serve. Applicants can also find the list of projects for which Sen. Webb attempted to secure funding in previous years on the website linked to below.
Appropriations process and requests found at: http://webb.senate.gov/constituentservices/appropriations.cfm
Webb wrote the following:
“My work to secure appropriations for projects important to Virginia is entirely consistent with what I believe to be the traditional, constitutional authority of a member of Congress. My work has been open and transparent, and has resulted in projects ranging from new health clinics in rural, undeserved areas to new VRE rail cars to relieve congestion on Virginia’s traffic-choked roads.
“Current proposals to ban such appropriations projects would simply leave spending decisions to unelected officials in the executive branch. Accordingly, unless there is a rule change or all members agree to refrain from earmarks, I plan to continue to accept applications and to pursue funding for projects important to Virginia and the nation.“My office, together with Senator Warner’s, will be jointly reviewing all appropriations requests. Only one request will need to be made, which both offices will receive.
“All applicants are encouraged to also contact the member of Congress who represents the district in which the funds would be spent to submit requests to be considered by both the Senate and House appropriations committees.
“Please note that not all requested projects are funded. The appropriations process is intensely competitive and the Senate Appropriations Committee ultimately decides which projects receive funding.
“Please note that while we are currently accepting appropriations requests for FY12, we are still awaiting guidance regarding the inclusion of congressionally directed spending projects in FY12 appropriations bills. In the meantime we will be accepting requests from constituents for consideration.”
Non-defense appropriation requests: To submit a request for consideration for the FY12 Non-Defense appropriations bills, please use the application at this web address: http://bit.ly/dObQAa.
Defense appropriation requests: To submit a request for consideration for the FY12 Defense appropriation bill, please use the application at this web address: http://bit.ly/fZ7Wop.
The deadline for submitting Appropriations requests is Feb. 25.
Are you reading the Legislative Bulletin?
The delivery of this year’s Legislative Bulletin has been changed a bit. Because VML is using a third-party vendor to distribute it, subscribers should have received an automated request via e-mail asking them to confirm their subscription. There is always a chance that some of the e-mails, which were sent as a batch, were trapped in spam filters or deposited in junk e-mail folders.
If you or someone on your staff who should be receiving the Legislative Bulletin is not, sign-up to receive it at: http://forms.aweber.com/form/45/1476587245.htm. It is important that people who wish to receive the Legislative Bulletin do so by going to this link. If someone on your staff is having trouble signing-up, contact David Parsons at dparsons@vml.org or 804-523-8527.
VML president pens Op-Ed piece
The Virginian-Pilot newspaper published an Op-Ed piece on Sunday written by VML President James P. Councill III that detailed the unyielding fiscal pressures local governments face because of depressed real estate markets and questionable state budget priorities.
In the 800-word article, the Franklin mayor also offered some suggestions on what the General Assembly could do to help the situation. To read the story on the newspaper’s website, follow this link: http://bit.ly/eiy8dc.
Virginia Local Tax Rates book for 2010 available
The 29th annual edition of Virginia Local Tax Rates (2010) is available from the University of Virginia’s Weldon Cooper Center for Public Service.
This important reference book, which contains detailed information on tax rates and fees in all of Virginia’s 95 counties 39 cities and 36 large towns, is based on a comprehensive survey conducted by the Center for Economic and Policy Studies at the Cooper Center. The publication also includes information for 113 of the remaining 154 smaller towns.
As local governments continue to struggle from the fiscal fallout of the Great Recession, now is the time to review state statutory restrictions and to examine local sources of revenue in comparison to what other localities are doing. Such analysis is made easy by using this 396-page publication that contains explanatory text for each source, 38 text tables, 67 detailed tables, and five charts. An overview of local government taxation, including text and graphics, also is included.
To order Virginia Local Tax Rates, 2010 open this link: http://bit.ly/fMJJLE.
 |
 |
 |
|