Local Governments Working Together Since 1905

Legislative Bulletin

February 6, 2008

Special edition of Legislative Bulletin

This is a special edition of the Legislative Bulletin prepared for the Feb. 7 VML/VACo Legislative Day, for which more than 550 local officials are registered.  Here's the schedule of activities:

11 a.m. Registration (box lunches available at 11:30 a.m.) - Greater Richmond Convention Center, Room B 21-C, the Grand Ballroom located directly across from the Marriott. Bordered by 5th Street, Broad Street and Marshall Street.

Noon Welcome / introductions

12:15 p.m. Keynote address: Gov. Tim Kaine

12:45 p.m. VML/VACo staff briefing on priority issues

2 p.m. Local officials go to the General Assembly Building to meet their legislators and lobby on priority issues

5:30-6:30 p.m. Reception (cash bar), Salons B/C/D Room, the Richmond Marriott (NOT the convention center). Please plan to attend. Gov. Tim Kaine will be coming by the reception, as will some senators and delegates.

Localities should brace for additional budget cuts

State revenues continue downward spiral; legislature will close shortfall with cuts

 The slumping national economy is increasingly reducing the collection of state revenues, a trend that will force the governor and General Assembly to make even deeper budget cuts than previously announced for the remainder of the current fiscal year and in the upcoming 2008-2010 biennium.

Cuts that will affect the current state budget will be included in HB/SB 29; the proposed state budget for 2008-2010 is HB/SB 30.

When talking to delegates and senators, especially those on the House Appropriations and Senate Finance committees, local officials should tell them:

  • In HB/SB 30, 53 percent of all general fund operating dollars are used either directly or indirectly for services provided by localities as mandates or in partnership with the state.
  • The downward revision of the revenue forecast will almost certainly result in more spending cuts.  Core services such as re-benchmarking of public education, law enforcement, jail operations, and health and mental health care must be protected.
  • If these core services are not protected, local taxpayers must pay more taxes, suffer reduced services, or both.

Back in August, Gov. Tim Kaine announced that revenue collections in FY07 were $234 million less than official revenue projections. He attributed the revenue drop to a struggling housing industry and slower personal income growth. To manage spending in the current year, the governor ordered state agencies to work on strategies to reduce their operating budgets by 5 percent.

By October, Kaine was ready to implement a plan to close a projected $641.1 million General Fund budget shortfall in FY08, including some $300 million in service reductions, fund swaps, personnel reductions and dollar cuts. The "599" local law enforcement program was cut by 5 percent. In his December budget proposal (HB/SB 29), the governor included $463.6 million in cuts and savings plus a transfer of $261.1 million from the "Rainy Day Fund" to cover $173.5 million in more spending for CSA overruns, jail per diems and other costs.

For his "legacy" budget in 2008-2010 (HB/SB 30), Kaine assumed revenue growth of 3.3 percent in FY09 and 6.7 percent in FY10 to produce $34.3 billion. In addition to tax revenues, Kaine's budget proposal assumes another $1.8 billion will be available for spending from end-of-the-year balances, lottery proceeds and transfers. Thus, total general fund resources for appropriation are $17.7 billion in FY09 and $18.5 billion in FY10.

The estimated base budget is $34 billion, leaving $2.2 billion for addressing mandates such as SOQ and Medicaid, cost increases tied to retirement rates and inmate costs, caseload adjustments like CSA, and transportation. More than 90 percent of the $2.2 billion goes for these activities. To pay for mental health, economic development, Pre-K, and other initiatives, Kaine continued most of the agency spending reductions from this year into 2008-2010, producing savings of $600.8 million.

The slumping economy, however, has forced Kaine to call upon the Department of Taxation to prepare yet another revenue forecast. There is no doubt that the forecast used to develop both HB/SB 29 and HB/SB 30 will be significantly revised downward. The Tax Department is reviewing general fund revenue sources, particularly sales tax, personal and corporate income taxes, and recordation taxes. The bottom line is that the revision will be substantial and still may contain uncertainty.

Upon receiving the new information, the House Appropriations Committee and the Senate Finance Committee will probably have roughly one week to put together their respective budget amendments.

Budget cutters may take another aim at law enforcement funding.

 Some 65 percent of all Virginians depend on local police departments for public safety services.  The "599" program provides state funding assistance for this core service program at $205.0 million in fiscal year 2008.  The officers of every participating police department – 39 cities, 9 counties, and 128 towns -- must meet the minimum training requirements set by the state Department of Criminal Justice Services.

 The "599" dollars can only fund local public safety services, and cannot be used to supplant local money.  Local governments must certify to DCJS that this requirement is met.

 As part of his October budget reductions, Governor Tim Kaine cut 5 percent or $10.7 million from the "599" program.  In his new budget, he proposes to continue the cuts and to maintain the spending level at $205.0 million for each year.

 Amendments have been introduced in the House of Delegates and the Virginia Senate to restore the Governor's cuts, fund the program according to the statutory formula, or to express legislative intent to have the Governor restore the program.  Thirteen Senators and 24 Delegates have sponsored or co-sponsored these budget amendments.

 There is concern that "599" will be subject to additional spending cuts after the Governor releases his latest revenue projections for FY 2008 and the 2008-2010 biennium.  Some General Assembly members have talked about either abolishing the program or designating the funds for specific purposes such as enforcement of federal immigration laws.

Local officials need to explain importance of rebenchmarking

 Every two years the state updates the calculation of the cost of public education.  The governor's introduced budget includes an additional $900 million in state funding for FY09-FY10 just to cover the increased costs associated with maintaining existing K-12 programs.  The process, referred to as rebenchmarking, reflects no additional programs or initiatives and does not move the state forward toward meeting new educational goals.  It does not even adequately reflect what educational services will cost in the upcoming biennium.  What it does is recognize, in part, the costs of K-12 public education already being delivered at the local level.  The state should fully rebenchmark education programs despite the performance of state revenues because these costs are already being incurred.

There is a good chance that the General Assembly will try to hold down the state's share of rebenchmarking, thus shifting costs to local governments and ultimately to local real estate taxpayers.

 Legislators in the House Appropriations Committee, but also some in the Senate Finance Committee, are becoming increasingly more vocal in their dissatisfaction with the cost of rebenchmarking.  Some legislators claim that local salary increases that exceed state salary increases are responsible for the high costs of rebenchmarking and that local expenditures are "the tail wagging the dog."  Others claim that funding directed at low income children-in particular, a program known as the at-risk add-on-is not effective and should be eliminated.

Talking points for all delegates and senators, especially those on House Appropriations and Senate Finance 

Homestead exemption constitutional amendment moving forward

 Before crossover, both houses will act on a constitutional amendment authorizing local governments to grant annual residential homestead exemptions and/or deferrals of up to 20 percent.  The amendment is not submitted to the governor for approval, although Gov. Tim Kaine supports its passage.  If the amendment is approved by the General Assembly, it will be submitted to the voters in November 2008. 

 The General Assembly and governor must enact a stand-alone enabling statute before localities may implement a voter ratified amendment.  There are two enabling statutes at this point: HB 1118 (Miller) and SB 496 (Northam). They mirror the constitutional amendment and grant governing bodies the discretion to tailor programs to local needs. The bills also would allow localities to enact ordinances as of January 1, 2009, assuming the voters approve the amendment in November.

 While the Senate appears ready to approve the constitutional amendment and enabling statute, the House apparently is intending to approve only the constitutional amendment this year. If that is the case, localities will have to wait for the General Assembly and governor to adopt an enabling statute, presumably in 2009. 

 It is of paramount importance that the General Assembly enact implementing legislation providing localities with the authority and flexibility to design a program that bests suits the needs of each locality rather than approving a prescriptive measure that withholds the flexibility to make the program work.  VML and VACo support the constitutional amendment and prefer that enabling legislation be enacted this session. 

Talking points for all delegates and senators

 Bill would eventually repeal machinery and tools tax

 The Virginia Manufacturers Association's harmful machinery and tools tax proposal, HB 124 (Purkey), awaits action by the House Appropriations Committee.  VML and VACo oppose the bill.

 HB 124 eventually repeals the local machinery and tools tax by classifying it as intangible personal property, which is exempt from taxation.  The bill also exempts certified pollution control equipment and facilities placed in service on or after Jan. 1, 2010, from the local machinery and tools tax.  Local governments currently have the option of exempting this equipment from taxation.

 Local governments collected more than $192 million in machinery and tools tax revenues in FY 2006.  HB 124 does not provide any replacement revenues.

 Talking points for all delegates and senators, especially delegates on House Appropriations

 Proposed bills alter assessing, taxing and budgeting process

 Several bills before the House Finance Committee propose to alter local government processes for assessment, taxation and budgeting.  The measures affect current timetables, processes and in some cases, legal procedures.  While local governments are willing to examine and consider changes to the current processes, VML and VACo are opposed to altering the legal presumption for assessments as well as artificial caps on assessments and tax rates.

 Several of the bills are an initiative of the Republican caucus; a press release dated Jan. 23 made these points:

 Before cross over, the House Finance Committee is primed to report several-if not all-of the House bills to the House floor.  The Senate Finance Committee has sent the Senate versions of the bills to a special subcommittee for review.  The subcommittee will meet prior to the 2009 legislative session.

 Talking points when meeting with delegates, especially House Finance Committee members

 Comprehensive Services Act changes proposed

The governor's introduced budget includes several policy and funding recommendations regarding the Comprehensive Services Act for At-Risk Youth and Families (CSA) program.  VACo and VML support several of these recommendations:

  1. Decreasing the local match rate for foster care services by 25 percent
  2. Raising payments for foster care and adoptive families
  3. Increasing funding to bolster foster care and adoptive family recruitment, support, training and retention
  4. Funding additional social workers to work with foster care families in communities

 VACo and VML oppose the recommendation changing the match rate local governments would pay for children who are placed in residential treatment.  As proposed, local governments would be penalized with paying a higher match rate for any children in a residential treatment setting (including a local group home) beginning July 1, 2008.  The penalty would increase again on Jan. 1, 2009, and again in the next year.

 Executive branch officials say that this higher match rate would be offset by a lower match rate that localities would pay for community-based services (also phased in over the biennium).  Local governments are concerned that many localities will not have sufficient local funding, staff, and access to willing private providers to develop and implement more community-based services.  The language as proposed does not address the:

  1. Immediate cost-shift to localities on residential care that would take place July 1;
  2. Lack of control localities have over children in special education who are placed in residential treatment through the federally-mandated Individual Education Plan (IEP) process;
  3. Children who are placed in residential treatment by the courts; and
  4. Additional children and families the state moved to the CSA mandated, sum-sufficient category for services in 2007, whose primary need is mental health treatment.

 VACo, VML, and local social services executives, working with legislators, have introduced budget amendments addressing the immediate cost-shift caused by the change in match rates.  Additional budget amendments would help local governments with this costly and complex program, including an overdue increase in the state's share of administrative funding to this program (localities currently pay about 90 percent of this program's administrative costs).

 In conversations and correspondences with legislators or their staff, local governments should focus on these budget amendments:

  1. Match rates:  Del. Terry Kilgore's (Item 283#9h) amendment to require the Secretary of Health and Human Resources to convene a workgroup with local representation to prepare guidelines for a system of financial incentives to localities to use community-based services while eliminating the budget language setting the new match rates.  (There is no companion item in the Senate.)
  2. Match rate exemptions/workgroup:  Del. Phil Hamilton's (Item 283 #2h) and Senator Edd Houck's (Item 282 #1s) amendment also calls for a workgroup, and includes some exemptions from higher match rates for residential placements (for IEPs, court placements, and newly mandated mental health treatment).
  3. Administrative Process Act:  As large and complex as CSA is, this program is not covered under the Administrative Process Act (APA).  It instead operates under its own set of public participation guidelines that are less stringent than the APA.  Del. Bill Carrico (Item 283 #8h) and Sen. William Wampler (Item 283 #5s) have amendments to require that all proposed rules, regulations, and policies issued by the State Executive Council (CSA's governing body) would have to conform to the provisions of the APA. 
  4. Administrative funding.  Del. Harvey Morgan's (Item 283 #4h), Del. Bud Phillips's (Item 283 #5h) and Sen. Tommy Norment's (Item 283 #2s) amendments would increase by $2.5 million the state share of administrative funding for this program each year of the biennium.

 Talking points when meeting with delegates and senators:

Mental health bills move forward

 A record number of mental health-related bills have been introduced. The bills cover a host of issues, including involuntary commitment standards and timelines, outpatient treatment standards and requirements, and sharing of information  among health providers, law enforcement, and the courts.  Some of these bills affect the roles and responsibilities of community services boards (CSBs), which oversee publicly-funded mental health services at the local level. The introduced budget includes items to pay for some of these new responsibilities. 

 Many of the bills introduced this year have a fiscal impact and have been reported and referred to the House and Senate budget-writing committees for further consideration.  The real challenge is going to be funding initiatives in a year when revenues are down, and continuing necessary funding in future years.

 There will be more initiatives and legislation likely to come forward in the 2009 session of the General Assembly.  The Chief Justice's Mental Health Law study group will finalize its work in the coming months.  This process is supposed to include public hearings later in the spring. 

 Talking points when meeting with delegates and senators:

Urge senators to carry-over impact fee bill

 The Senate Finance Committee on Feb. 6 reported legislation that deals a serious blow to local government's efforts to pay for growth.  The bill also will result in a major loss of revenue compared to the current cash proffer system.  SB 768 (Watkings) ends cash proffers for residential rezonings and allows an impact fee system, but the impact fees caps are too low and unworkable.  Senate Floor debate is likely Friday, Feb. 8 or Monday, Feb. 11.

 The bill:

 Talking points when meeting with senators:

 Overtime for law enforcement officers in Senate Finance

 The Senate Finance Committee on Feb. 6 stripped local governments out of legislation  expanding overtime requirements.  (SB 269-Deeds) now applies only to the State Police; in addition, it will become effective only if funding is included in the budget.  Local governments particularly should thank Senator Stolle, who made the motion to remove localities from the bill.

Legislation passed by indefinitely, carried over or tabled

 Local governments liked some of these, didn't like others, and didn't agree on whether they liked them or not. Nonetheless, these bills all met the same fate, and are no longer in play for this session.


VML/VACo Legislative Day

Feb. 7-8, 2008

Schedule of Legislative Meetings

(all meetings take place in the General Assembly Building, 9th and Broad Streets)

Thursday, Feb. 7

Time
Committee & Room
1/2 hour after adjournment of House House General Laws - House Room C 
1/2 hour after adjournment of House House Commerce & Labor - House Room DHB 532 presumes that any disease contracted by police/fire/etc. during a pandemic is work related and therefore a workers compensation claim
2 p.m. Senate Transportation - Senate Room BSB 453 adds a mayor of a town to the NVTASB 707 postpones towing regulationsSB 763 places a moratorium on electronic billboards
3 p.m. Senate Finance Education Subcommittee, 10th Floor Conference RoomTopics: Consolidation of the Schools for the Deaf & BlindBudget amendments
3:30 p.m. House Appropriations Subcommittee on Compensation and Retirement - 9th Floor Docket not posted on 2/6
4 p.m. Senate Finance - Senate Room ASJR 6-homestead exemption (possibly)SB 9-bill to put homestead exemption on the ballot
4 p.m. Senate Courts of Justice - 3rd Floor East Conference RoomS.B. 454 requires disclosure of stormwater detention facilities

Friday, Feb. 8

7 a.m. House Privileges & Elections Subcommittee on Elections - 4th Floor West 
7:30 a.m. House Counties, Cities and Towns - House Room DHB 202 allows local governing bodies to forego decisions on major land use actions after a general election until the time the new body takes office.HB 445 sets new limits on the locality enforcing overcrowding against a property owner during the time the owner is attempting to remove tenants for a lease violation.HB 1078 makes several changes to the vested rights and nonconforming use provisionsHB 1079 deletes language from provisions regarding variances that states that variances shall be treated as conforming uses.HB 1210 Provides for enhanced penalties for failure to register vacant buildings.  
8 a.m. Senate Finance Public Safety Subcommittee, 10th Floor Conference Room 
8 a.m. Senate Agriculture & Natural Resources Special Subcommittee-3rd Floor EastSB 423 on enforcement of air & water permits, duties of the DEQ director, State Water Control Board and State Air Pollution Control Board
8:30 a.m. Senate Rehabilitation and Social Services-Senate Room B 
9 a.m. House Militia, Police, and Public Safety-House Room C 
9:30 a.m. House Privileges & Elections-9th Floor 
10 a.m. Senate Rules Committee-Senate Room ASB 525 establishes a Uranium Mining Commission to assess the benefits and issues regarding uranium miningSJR 57 establishes a committee to study the organization of local government
(either 11 a.m. or at noon) House & Senate convenes, The Capitol
1/2 hour after adjournment House Appropriations - 9th Floor 
1/2 hour after adjournment House Courts of Justice; House Room C 

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