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Legislative Bulletin

February 5, 2007

House, Senate release budget amendments

The House and Senate presented their proposed amendments to the 2006-2008 state budget on Feb. 4. Details of these plans will be released on the afternoon of Feb. 6.

Each year, the state provides a mid-session revenue update, and if times are good, the budget committees have available some additional revenue with which to fund budget initiatives. That was not the case this year. In their opening remarks at Sunday's meetings, both House Appropriations Chairman Vince Callahan and Senate Finance Chairman John Chichester talked about the lack of new revenue with which to work. Callahan said that state finance officials would not know if the lack of revenue growth was the result of new federal rules that would just delay payments to the government, or if there was "trouble." He said this would not be determined until later this spring.

As a result, each chamber crafted its budget amendments by taking savings from delayed projects and initiatives, re-thinking funding allocated last spring or otherwise shifting funds from one program to another, and by changing or rejecting proposed amendments presented by Gov. Tim Kaine in December.

The budgets will now move to the floor of each chamber. After each chamber passes its version of the budget and rejects the other's proposal, conferees will be appointed to meet and work out the differences.

What follows is a brief description of the plans as they affect local government. VML will present a more detailed description of proposed amendments once all of them are released to the public.

Direct aid to K-12 education

The House rejected most of the governor's amendments for K-12 education; more of them survived in the Senate. Overall, the House budget decreases direct aid to education by $6 million in FY 08. The Senate budget decreases state funding in FY07 by $1.4 million and increases funding by $8.7 million in FY08.

Teacher salaries. Both chambers accepted Kaine's proposal to pay the state share of a 3 percent salary increase for teachers, effective Dec. 1. The total cost to the state is $63.9 million.

Teacher retiree health care credit. Both chambers raise the credit from the current $2.50 to $4 a month per year of service, effective in FY08. The House includes $5.6 million; the Senate includes $11.9 million to pay for the changes.

Cost of competing for Winchester & Frederick. The House adds $1.6 million to include these localities in the cost of competing. The phase-in would be 25 percent in FY08. The Senate did not address this.

SOL Algebra Readiness. Neither chamber accepted Kaine's proposal to extend services under this program to sixth graders.

Early Reading Intervention. The Senate accepted, and the House rejected, Kaine's proposed $4.1 million to expand the early reading intervention program.

Start Strong pilot programs. Both chambers rejected Kaine's proposed $4.6 million to establish pilot programs for the expansion of pre-kindergarten services. The Senate, however, put $3.4 million (of the $4.6 million) in expansion of the existing Virginia Preschool Initiative, thereby extending the program to an additional 1,000 students.

Career and technical education. The House adds $3 million in FY08 for three $1 million grants to innovative public school programs that address the needs of at-risk students through academic programs that stress high academics and career and technical education. The Senate did not address this issue.

SOQ Workgroup. The budget currently establishes a workgroup of staff from Senate Finance, House Appropriations, Department of Education and JLARC to study the cost of re-benchmarking of the SOQ. The Senate proposes a legislative workgroup of three members of Senate Finance and House Appropriations to study the issue; retains the same staff input; and authorizes the committee to contract for consulting services. The House budget did not address this issue.

Health and Human Resources

Both chambers made additional investments in this arena, some to cope with reduced federal funding participation or changes that shift more costs to states and localities. Other major proposals would help catch up with waiting lists for services to vulnerable Virginia residents of all ages, or better fund the providers of these services to ensure that the services don't go away.

Of greatest interest to local governments was the attempt by both chambers to address the issue of mental health services to children who are not mandated under the Comprehensive Services Act (CSA) but enter the foster care system (either non-custodial or custodial) to receive publicly-funded mental health treatment because their families' do not have health insurance, or their coverage is capped, and they are ineligible for Medicaid (the issues in HB 2150 (Fralin) and SB 1332 (Devolites Davis). The House proposed language to give these children priority for funding currently allocated to the Department of Mental Health, Mental Retardation, and Substance Abuse Services for non-mandated children. Local governments do not, by design, pay a match on these funds in order to encourage their use. In contrast, the Senate proposed transferring a portion of the non-mandated funding at DMHMRSAS to CSA, and requiring local governments to pay the same match as they do for mandated children (up to 55 percent per case).

Other proposals of interest to local governments include:

Transfer adult services. The House requests that the Secretary of Health and Human Resources to develop a plan to transfer adult services and services licensing from the Department of Social Services to the Department for the Aging (House).

New MR and DD waiver slots. The House proposes and funds 160 new mental retardation waiver slots (in addition to 170 slots in the proposed budget) to reduce waiting lists for critical services; adds 100 more waiver slots for individuals with developmental disabilities to be served in communities.

Substance abuse community services. The Senate proposes $2.4 million to provide community services to individuals with substance abuse disorders, include opioid or methamphetamine addiction, to stave off higher cost treatment options, such as hospitalization.

Natural Resources

Water Quality Improvement Fund. The House proposes $50 million for the Water Quality Improvement Fund for grants to local governments to install nutrient removal technology at wastewater treatment plants. This is in addition to the $3.8 million that will be deposited into the Fund from the 2006 year-end surplus. The Senate supports the governor's budget actions, which recommended an appropriation of $7.5 million to the WQIF; this includes the $3.8 million that is the remainder of the mandatory deposit required by statute. The governor also supports a separate bill authorizing the appropriation of up to $250 million in bonds and general funds for nutrient removal technologies at wastewater treatment plants in the Chesapeake Bay. Among the Senate recommendations is language transferring $17 million from the WQIF for a program to target communities outside the Chesapeake Bay watershed to eliminate straight piping of household waste into waterways.

Land conservation. The governor's budget significantly increased funding for land conservation. Both the Senate and House cut back land conservation proposals. The governor's funding includes $13.7 million in FY07 in grants to the Virginia Land Conservation Foundation, and $5 million in FY07 to the Office of Farmland Preservation. Finally, the governor's proposal provides operating support of $950,000 to the Virginia Outdoors Foundation for FY07 to provide assistance to landowners with placing property under conservation easements. The Senate package instead includes $8 million to support various land conservation programs and $1 million to support state parks. The House recommends that $5 million be provided to support farm preservation through local purchase of development rights, as well as the $1 million for state parks proposed by the Senate.

Combined Sewer Overflow projects. The governor's budget provided $9.1 million for additional funding for the Cities of Richmond and Lynchburg CSO projects: $3.1 million for Lynchburg in FY07, and $3 million for each city in FY08. The Senate supports those recommendations. The House deletes the entire $9.1 million.

Commerce and Trade

The House cuts the governor's proposed $4 million to the Department of Business Assistance for Workforce Services. It also cut out the proposed $1.6 million for Eastern Shore Broadband, the $1 million proposed for the Newport News Carrier Integration Center, and $2 million for the Virginia Housing Partnership Revolving Fund. The Senate endorses the governor's actions to increase the workforce training program by $4 million and the Enterprise Zone program by another $4 million. The Senate would cut the Housing Partnership funding proposed by the governor by $1 million. The Senate also endorsed the funding for Eastern Shore Broadband.

Public Safety

Of great interest to local governments is the differing approaches taken to HB 599 funding. Both chambers retained the proposed level of funding for this program, while rejecting Kaine's 60/40 proposal. The Senate would provide a hold harmless provision in FY08, so no locality would receive less than it had the previous year; the additional growth for FY08 would be distributed according to the current formula. Chart outlining the distribution of 599 funds under Senate proposal.

The House does not provide a hold harmless, and distributes the funding according to the current formula. This could mean some localities would get less money than they had in the previous year. No chart with the proposed House distribution is available at this time.

Other proposals of interest to local government include:

Health care in jails. The House proposes language to allow local and regional jails to pay the same rate for health care services for inmates as paid for individuals covered by Medicare or Medicaid. Currently, jails must contract for health care for inmates, at rates higher than paid by individuals covered under Medicare or Medicaid. This would be a savings to the jails and the localities that help fund them. A similar amendment is proposed for state correctional facilities.

Mental health services in juvenile detention. The Senate provides $900,000 for additional mental health services in local/regional juvenile detention centers. The funding could not supplant current local funding for such purposes.

Planning for mentally-ill jail inmates. The Senate proposes language to require the Board of Corrections to consider current and projected numbers of mentally-ill offenders when approving new jail construction projects, and requires reports from the Board on required capital and operating expenditures when projects are approved.

Community reentry programs. The Senate provides $100,000, to evaluate the effectiveness of programs for offenders re-entering communities after confinement. The House eliminates the originally-proposed $50,000 for a study of the implementation of local re-entry councils, as well as $792,000 in grant funding proposed to support operations of, and services provided by new local re-entry councils.

Inmate telephone systems. The House proposes language to limit the amount of profit that state or local government agencies can make off the operations of inmate telephone systems entered into, renewed, or amended on or after July 1, 2007 to no more than 10 percent more than the cost that persons using the service pay.

Transportation

The House allocates $339 million from the general fund that was dedicated to transportation last session, but not allocated at the time.

The money would be used for projects including:

The House proposes an additional $227 million from the general fund to support transportation. Of this amount, $163 million would be deposited into a Commonwealth Transportation Capital Projects Debt Service Fund, to be used as a reserve for debt service. The remaining $64 million would be run through the existing formula as well as for airports, ports, and transit.

Funding for these proposed uses would be a variety of sources such as dedication of $250 million each year from the state general fund, dedication of insurance premiums, a $10 increase in motor vehicle registration fees, abusive driver fees, diesel tax, heavy truck fee, as well as half any nonrecurring general fund surplus, estimated to be about $64 million per year.

The Senate recommends appropriation of $339 million for a series of rail, transit and road projects, including the Route 164 median rail relocation and design work for Craney Island. Also included in this figure is $130.4 million for the Transportation Partnership Opportunity Fund. In addition, the Senate would deposit $161 million into the Priority Trust Fund to help pay debt service. The Senate also provides $125.4 million for the state's Highway Maintenance and Operating Fund. The fund is to be financed through a 1-cent increase in the sales and use tax and through establishment of toll roads.

Salaries for state employees and state-supported local employees

The House adds $16.9 million to increase to 4 percent (from 3 percent) the salary increase for state classified employees as well as state-supported local employees. The Senate budget funds the 3 percent salary increase.

State supported local employees. Kaine's budget had proposed included employees of local community corrections programs and pre-trial services programs in the list of state-supported local employees, and the House and Senate accepted this amendment.

Enhanced retirement benefits for sheriffs' deputies. Kaine had included $11.5 million in FY 08 to reimburse localities for additional costs resulting from including deputies in the Law Enforcement Officers Retirement Systems. The state funding would have ranged from $600 to $1,825 for each state-funded position, based on the local fiscal stress index.

The House budget allows localities that have not already extended these enhanced benefits to their deputies to have the option of putting deputies under either LEOs or the less expensive Virginia Law Officers Retirement System (VALORS), which up until now has been available only to state employees. The House budget also increases the maximum retirement contribution rate reimbursed by the Compensation Board from 5.74 percent to 7.77 percent for deputies included under LEOS or equivalent programs.

The Senate retains the $11.5 million, but spends it so as to implement SB 1166. That bill requires (not encourages) localities to put deputies under LEOS, provides state funding for each deputy position based on the local stress index, establishes an increased multiplier for sheriffs with the amount increasing for each year of service beyond the age of 55, and allows localities to increase the multiplier in the same way for other public safety officers. Deputies under regional jails are not covered by the Senate funding.

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