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Legislative Bulletin

Jan. 9, 2008

General Assembly convenes for 2008 session

Legislators convening today for the 60-day 2008 General Assembly session face two new realities as they tackle a number of potentially contentious issues: a budget shortfall and a number of new faces, including a Democratic majority in the Senate. 

 Local officials, who often find themselves at the center of many of these legislative issues, will need to be in touch with their delegates and senators during the session to ensure that their interests are protected.

 In addition to the budget, the General Assembly is likely to focus on: the constitutional amendment dealing with homestead exemptions, impact fee legislation expected to be introduced on behalf of the Home Builders Association of Virginia, abusive driver fees, immigration, mental health, the Comprehensive Services Act, and more.

 Stay tuned to the Legislative Bulletin and Action Calls for more information as the session progresses.  In addition, VML and the Virginia Association of Counties conduct a meeting of local legislative liaisons every Wednesday at noon at the liaison office in the basement of Old City Hall adjacent the Capitol.  Please let VML staff know if you have issues that need to be brought to the group.

 

State budget outlook overview

Gov. Tim Kaine introduced his two budget proposals on Dec. 17.  The first proposal (HB/SB 29) is a series of amendments to the current year’s budget – the so-called “Caboose” Budget.  These amendments address the revenue shortfall the governor announced last August, as well as emergency spending through June 30, 2008.

 The second proposal (HB/SB 30) is his biennial budget.  This biennial proposal includes $78 billion of operating and capital expenses from all funds.  Of this amount, $36.1 billion is for general fund operating expenses.

 About half of all general fund operating dollars are appropriated either directly or indirectly for services provided by localities as mandates or in partnership with the state.  Public education alone comprises one-third of the general fund budget. 

 HB/SB 29.  In October the governor announced a three-part plan to close a projected $641.1 million general fund budget shortfall.  HB/SB 29 proposes $463.6 million in spending cuts and a transfer of $261.1 million from the “Rainy Day Fund.”  In addition, the governor proposes $173.5 million in additional spending, including $54.3 million for CSA, $15 million for the Criminal Fund, $14.9 million for local and regional jail per diems, $12.3 million to correct funding for the Compensation Board’s retirement contributions, and $3.9 million for child welfare services.  For the most part, the spending addresses deficits in existing programs.

 HB/SB 30.  Of the $36.1 billion proposed for general fund activities, $2.2 billion is “new money,” meaning it is the amount calculated by the governor’s Budget Office as the difference between total projected general fund resources of $36.1 billion less the “state base budget” of $34 billion.

 More than 90 percent of the new money would go to mandates (SOQ, Medicaid, new jails, debt service, etc.), uncontrollable cost increases tied to retirement rates and inmate costs, workload changes (CSA, FAMIS, S-CHIP, etc.), and transportation.

 The governor boosts the funding pool for new initiatives by continuing or in some cases increasing most of the agency spending reductions from fiscal year 2008 into 2008-2010.  For example, the reduction in ‘599’ law enforcement spending is carried over into each year of the new biennium.  These actions produce $600.8 million.  Thus, he has some $800.0 million ($200.0 million “new money” + $600.8 million in base budget savings) for new spending.

 Although not part of the budget proposals, the governor does have a $1.7 billion general obligation bond package for higher education, which would have to be approved by referendum in November.  He also has a $493.4 million capital program to be financed through the Virginia Public Building Authority (VPBA) and a $214.4 million package financed through the Virginia College Building Authority (VCBA).  Neither of these packages has to be approved by the voters.  Staff contact: Neal Menkes (nmenkes@vml.org)

 

Budget information available on line

Detailed information on Gov. Tim Kaine’s amendments to the FY08 budget and his proposed budget for 2008-2010, including an executive summary and the governor’s budget presentation speech, are available at http://www.dpb.virginia.gov/.

 HB 29 (FY08 budget amendments) and HB 30 (2008-2010 biennial budget) are posted on the State Budget page: http://leg2.state.va.us/MoneyWeb.NSF/sb2008.  The budget analysis developed each year by the House Appropriations and Senate Finance Committee staffs should be posted at this site as well. Direct aid to education information is available at: http://www.doe.virginia.gov/VDOE/suptsmemos/2007.

 The House Appropriations and Senate Finance committees will hold their final public hearing on the budget at 1 p.m. Monday, Jan. 14, in House Room D of the General Assembly Building in Richmond.  VML will keep local governments apprised of the latest budget and other legislative developments through the Legislative Bulletin. Staff contacts: Neal Menkes nmenkes@vml.org), Janet Areson (jareson@vml.org), Mary Jo Fields (mfields@vml.org) and Denise Thompson (dthompson@vml.org).

 

Homestead exemption amendment up for final passage

As the 2008 session commences, members from both the House of Delegates and the Senate have introduced homestead exemption legislation.

Four constitutional amendments have been introduced thus far – Del. Robert Brink (HJR 3), Del. David Albo (HJR 4), Del. Paula Miller (HJR 56), and Sen. Mary Margaret Whipple (SJR 6) -- to authorize the General Assembly to enact legislation that will allow localities by ordinance to exempt from real property taxes, or defer real property taxes on, up to 20 percent of the value of residential or farm property that is the owner- occupant's primary dwelling and lived in continuously.

These measures are identical to one another and to the measure (SJR 354) that passed the General Assembly in the 2007 session.  (There is a two-part test to amend Virginia’s constitution:  (1) the General Assembly must pass a measure identical to SJR 354 and (2) if an identical measure is passed, the voters must approve it this November.)

In anticipation of the General Assembly passing such a measure, four bills have been introduced to put the proposed constitutional amendment before the voters this November.  These are HB 6, HB 11, HB 272 and SB 9.

If the two-part test is met, SB 10, patroned by freshman Sen. Ralph Northam, implements the proposed constitutional amendment.

The Senate bills have been referred to the Senate Committee on Privileges and Elections.  The House bills have not yet been referred.  It is likely that other bills will be introduced.

Why this is important - VML supports a real estate homestead exemption, on a local option basis, granting local elected officials maximum authority to establish fiscal policies specific to their jurisdictions, provided that such state legislation could be implemented consistently with these principles.  Staff contacts: Neal Menkes (nmenkes@vml.org); Mary Jo Fields mfields@vml.org).

Machinery and tool tax phase out proposed

Del. Bob Purkey, chairman of the House Finance Committee, presented to the Manufacturing Development Commission his bill (HB 124) to reclassify certain machinery and tools placed in service on or after Jan. 1, 2010, as intangible personal property.  This reclassification would exclude such property from local taxation.

 In addition, the bill exempts certified pollution control equipment and facilities, placed in service on or after Jan. 1, 2010, from state and local taxation pursuant to Article X, Section 6 (d) of the Constitution of Virginia.  Currently, local governments have the option to exempt such machinery from taxation.

 In FY06, Virginia’s cities collected about $83.5 million from taxes on machinery and tools.  The table below identifies those VML cities, counties and towns with collections of more than $1 million.

Fiscal Year 2006
Locality Amount ($ million)
Richmond $14.7
Newport News $11.9
Norfolk $8.5
Henrico $7.1
Alleghany $6.1
Lynchburg $5.0
James City $4.9
Manassas $4.5
Covington $4.3
Hopewell $4.0
Chesapeake $2.8
Salem $2.8
Roanoke City $2.6
Petersburg $2.5
Portsmouth $2.3
Waynesboro $2.3
Hampton $1.8
Danville $1.7
Harrisonburg $1.6
Suffolk $1.6
York $1.4
Virginia Beach $1.1
West Point $2.5
Loudoun $1.2
Williamsburg $1.1
Roanoke County $1.1
Bristol $1.0

 

Staff contact:  Neal Menkes (nmenkes@vml.org)

 

Impact fee legislation would eliminate cash proffers

The major push of the Home Builders Association of Virginia this session will be to eliminate cash proffers and replace them with an impact fee system coupled with a grantor’s tax.  For years, the homebuilders have fought against impact fees.  The combination of increasing dollar amounts for cash proffers and the housing slump led to a change in direction.

 The impact fee bill will allow the fee to be charged for roads, schools and public safety buildings for residential units.  For commercial development, it will exclude schools.  The bill has not surfaced yet, but it will have absolute dollar amount caps for the impact fee, varying by region: Northern Virginia, Tidewater and the rest of the state.  All cities are eligible under the bill, and higher-growth counties will be eligible.

 The grantor’s tax would not apply where the 2007 transportation bill enacted an additional grantor’s tax, so it would apply only outside the Northern Virginia and Tidewater tax districts, which were created by last year’s bill. 

 VML adopted a legislative position supporting impact fees in general.  The contest will be over the caps the homebuilders association bill would impose.  The Virginia Association of Realtors is likely to oppose the grantor’s tax. 

 Initially, if the bill becomes law in some form, the effect will be on counties.  However, in the long run, a switch to impact fees from cash proffers should greatly benefit towns and cities, for two principal reasons.  First, with an impact fee system, a county can more readily zone high density near the adjacent town or city, keeping the growth in the urban areas, where it belongs.  Second, once the system is adopted, the county can better defend refusals to rezone for residential growth in the hinterlands – thereby reducing sprawl. Staff contact: Mark Flynn (mflynn@vml.org).

Mandatory November municipal elections proposed

HB 328, introduced by Del. Christopher Saxman, requires that all municipal elections be held in November.

Why this is important: Cities and towns have the authority to move their elections to November. They should retain that authority in order to have an electoral arrangement that best meets the needs of their jurisdictions.  Staff contact: Mary Jo Fields (mfields@vml.org).

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