Analysis: Proposed 2008-2010 biennial budget; changes to current budget for remainder of FY08

Note:  VML legislative staff compiled the following material from the proposed 2008-2010 biennial budget and amendments to the existing budget (FY08) submitted by Gov. Tim Kaine on Dec. 17.

With the backdrop of a slowing national and state economy, Gov. Tim Kaine introduced two budget proposals to the General Assembly’s budget and finance committees on Dec. 17 in Richmond.  The first proposal is a series of amendments to the current year budget (the caboose budget).  These amendments address the revenue shortfall that began in fiscal year 2007 as well as exigent spending in fiscal year 2008.

The second is his biennial budget proposal – a $36.2 billion revenue and spending package.

Economic assumptions

Withholding of individual income taxes and the general sales and use tax account for some 75 percent of total general fund tax revenues.  Kaine’s proposals recognize the impact of tightening credit conditions and the housing downturn have on state revenues.  As a result, withholding has been revised down from the special forecast done just four months ago in August.  Sales tax growth projections are pegged between 5.3 percent and 5.7 percent. 

Non-withholding of individual income taxes and recordation taxes are revenues that greatly fluctuate depending on the economy’s health.  In a robust economy, these revenues grow at significantly higher rates than withholding and sales taxes.  In a declining economy, these sources can plummet faster and deeper.  Because of declining sales prices and weaker collections this summer and fall, Kaine’s proposal revises recordation tax receipts downward from the August forecast.  In fact, the proposal does not expect a housing recovery until early 2009.

Revenue figures

In addition to economics, state revenues are affected by tax policy.  Recent tax policy changes remove $724.3 million from general fund revenue in the 2008-2010 biennial budget.  These policy changes include estate tax repeal, the transfer of one-third of insurance premium taxes to transportation, the diversion of a portion of the state recordation tax to transportation, increasing the filing threshold/personal exemption, and sales tax holiday for hurricane and energy efficient equipment.

Based on these economic and tax policy assumptions, the general fund revenue forecasts in fiscal years 2009 and 2010 are $16.6 billion and $17.7 billion, respectively.  The governor’s budget assumes a revenue growth rate of 3.3 percent in FY09 and a 6.7 percent growth rate in FY10.

In addition to tax revenues, Kaine’s budget proposal assumes another $1 billion and $822.1 million in FY09 and FY10, respectively, will be available for spending  from end-of-the-year balances, lottery proceeds, and transfers.  Thus, total general fund resources available for appropriation are $17.7 billion in fiscal year 2009 and $18.5 billion in FY10.

Overview of FY08 budget (HB/SB 29)

In October Kaine announced a three-part plan to close a projected $641.1 million general fund (GF) budget shortfall.  The plan included agency-based budget reductions, the reversion of unexpended appropriations from fiscal year 2007 to the general fund, and transfers from the Revenue Stabilization Fund (“Rainy Day Fund”).

His budget proposes spending reductions of $463.6 million.  Most of the amount ($272 million) derives from spending cuts disclosed in October.  The remainder ($191.6 million) results from updates to Medicaid, public education programs, and other items.  For public education, the reductions are related to fewer numbers of students compared to earlier student enrollment projections, revised sales tax estimates for public education, and fewer slots filled for incentive and categorical programs.

Kaine’s budget amendments also include additional spending of $173.5 million for the final quarter of fiscal year 2008.  Local governments will be most interested in the spending which addresses deficits in existing programs.  These include $54.3 million for Comprehensive Services Act programs, $15.0 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, $3.9 million to maintain child welfare services, and $300,000 for payments in lieu of taxes and rent costs.

Concerning the Rainy Day Fund, the proposal includes a withdrawal of $261.1 million, which is the maximum amount permitted by law.  The administration forecasts the end-of-year balances for the Rainy Day Fund at $1.1 billion in FY08, $1.2 billion in FY09, and slightly over $1.2 billion in FY10.  The fiscal year 2008 figure assumes that the General Assembly will approve the withdrawal and transfer. 

If the legislature accepts the governor’s proposal, an unappropriated balance of $28.9 million would be available for the 2008-2010 budget.

Overview of FY08-FY10 budget (HB/SB 30)

Kaine proposes a $78 billion spending package for the 2008-2010 biennium.  Nongeneral fund programs comprise some $41.8 billion or 54 percent of the package.  These programs depend on revenues dedicated by law for specific spending purposes such as college tuition, gasoline taxes, and federal grants.  As a matter of law and policy, these dollars cannot be diverted and used to supplant programs paid from the general fund including public education, public safety, or mental health.

The general fund portion of the proposed budget is $36.2 billion.  Of this amount, $2.2 billion is designated as “new money,” meaning it is the amount calculated by the Governor’s Budget Office as the difference between total projected general fund resources of $36.2 billion less the “base budget” of $34 billion.

Kaine proposes to spend the preponderance of “new money” on mandates (SOQ, Medicaid, new jails, debt service, etc.), cost increases tied to retirement rates and inmate costs, caseload adjustments (CSA, FAMIS, S-CHIP, etc.), and transportation.  In other words, $2 billion or 90.9 percent of the new money is assigned to maintaining current services.

To pay for his spending initiatives, Kaine has available some $200 million of “new money.”  He boosts this amount by continuing or in some cases increasing most of the agency spending reductions from fiscal year 2008 into 2008-2010.  These base budget savings amount to $600.8 million. 

Although addressed by legislation other than the Budget Bill, Kaine proposes a $1.7 billion general obligation bond package for higher education.  The package includes 75 projects of which $728.3 million is related to the sciences and technology, $896.2 million is tied to classroom and administrative space, and $27.5 million is for infrastructure.  To be implemented, the General Assembly would have to enact the legislation.  And, the voters would have to ratify it by referendum in November 2008. 

Also, Kaine will propose a 48-item, $493.4 million package to be financed through the Virginia Public Building Authority (VPBA) and a 27 item, $214.4 million package financed through the Virginia College Building Authority (VCBA).  While both packages must be approved by the General Assembly, neither is subject to voter referendum.  The VPBA package includes $50 million to preserve open space and historic resources and another $20 million to repair various state park and Soil and Water Conservation District dams. 

Summary of proposed budget actions

The following is a summary of proposed budget initiatives and amendments in the 2008-2010 state budget of interest to local governments.  All funds are state general funds (GF) unless otherwise noted as non-general funds (NGF).

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State aid to local governments

VML staff contact:  Janet Areson

Assistance to local police departments (HB 599).  Freezes payments to local police departments at $205 million each year.  The 2007 General Assembly appropriated $215.8 million for the program.  Kaine’s October reduction plan lowered the amount to $205 million.

ABC Net Profits and Wine Liter Tax Collections.  Eliminates the portion of these revenues allocated to cities and counties.  Retains $260,000 each year of ABC profits and $260,000 each year of wine taxes for towns.  The 2007 General Assembly allocated $8.5 million of these revenues to cities, towns and counties.

DMV Revenue Collections.  Continues funding at $42.8 million (NGF) each year of revenues allocated to localities from mobile home, vehicle rental, and abandoned vehicle taxes.

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Education

VML staff contact:  Mary Jo Fields

Direct Aid to Education

Total proposed spending is $6.2 million in GF and $1 million in NGF, an increase of $400 million GF and $91 million NGF. The budget rebenchmarks the SOQ and other educational programs, including the incentive funds and the at-risk programs.  Average daily membership, while still increasing, is growing at a slower rate than originally projected.  The budget assumes a lower retirement contribution rate than certified by the VRS board.  These factors helped bring down the cost of rebenchmarking to less than $1 billion for the biennium.  A modest expansion to the Virginia Preschool Initiative is proposed, and some strings are attached to at-risk funding.

Update costs of the Standards of Quality (SOQ).  Increases funding by $433.5 million in FY09 and $456.8 million in FY10 to rebenchmark the Standards of Quality for the next biennium.  These increases do not reflect changes in policy but adjust the cost of continuing current programs with the required data revisions. This includes $80.3 million in FY09 and $80.5 million in FY10 as the state’s share of the cost of textbooks, based on a per pupil amount of $119.39 in FY09 and $119.39 in FY10 (adjusted by the composite index).

Calculation of local effort.  Language change revises the calculation of local effort in the SOQ funding methodology.  The methodology is to determine total local expenditures, and then deduct several items -- such as capital outlay, state sales tax, tuition receipts, etc. -- to determine total local expenditures.  The change would deduct all federal funds.  Under the current methodology, federal funds for non-regular school programs, Impact Aid funds CFA 84.040 and 84.04 and Forest Reserve are not deducted.  The effect would be to decrease the total local expenditure figure.  This may have an effect on localities that barely meet their required local effort.  VML is attempting to gather additional information on the magnitude of the change, and the rationale for proposing it.

Lottery proceeds.  Lottery revenues are expected to total $450 million each year.  Of the $450 million, the state will keep $284.3 million each year to help pay the state share of the cost of basic aid and the state share of the cost of some remediation programs. $165.7 million in FY09 and $165.6 million in FY10 will be returned to school divisions distributed on the basis of a per-pupil amount (based on ADM).  The per pupil amount is $246.48 in FY09 and $245.57 in FY10. Local governments must match funding based on the local composite index.  At least 50 percent of the funds must be used for non-recurring costs.

Adjust sales tax revenues for public education.  Increases sales tax revenue projections, which in turn decreases state basic aid payments, for a net increase in state funding of $7.8 million in FY09 and $37.9 million in FY10. 

Update benefit contribution rates for Standards of Quality related positions.  Decreases state funding for fringe benefits by $29.3 million in FY09 and $29.5 million in FY10 based on a contribution rate of 9.35 percent for retirement, a retiree health care credit rate of 1.12 percent, and an employer rate for group life of .36 percent.  There is also an employee rate (paid by many school divisions on behalf of their employees).  The retirement rate reflects an 8 percent return rate and a 24-year amortization period. 

Recalculation of the composite index.  Recalculation of local composite indexes results in additional state funding of $4.9 million in the first year and $5 million in the second year.

Salary increase for public school teachers.  No state funding for teacher/instructional salary increases for FY09.  Adds $132.4 million in FY10 for a three percent salary increase for all local school staff and an additional half percent increase for teachers and instructional staff, effective July 1, 2009.

Virginia Preschool Initiative.  Adds $15.1 million (GF) in FY09 and $15.1 million (GF) and $14.9 million (NGF) in FY10 to expand access to preschool for at-risk four year olds by changing eligibility from free-lunch (130 percent of the federal poverty level) to free-and-reduced-lunch (185 percent of federal poverty level). Localities would be able to claim a state match between the current per-pupil rate of $5,700 and $6,790.  A local match based on the composite index, but capped at .50, is required.  Localities may use local expenditures for existing qualifying programs to meet the local match.  In-kind contributions of local funds may be applied to meet up to 25 percent of the required local match.  Private funds contributed for the program qualify as local funds toward meeting the required local match.  At least 10 percent of the new slots have to be provided through the private sector through a public-private partnership.  School divisions or local governments are required to serve as the fiscal agent for the private provider, and are required to monitor and oversee the provider.  If school divisions or the local governments do not participate funding may be provided directly to private providers by the state DOE.  A Quality Rating and Improvement System is initiated. Full-day or half-day programs for at least the school year are allowed. Each locality is allotted at least one preschool classroom. Funding sources in FY09 include $16.3 million in rebenchmarking costs and $1.9 million in new general funds.  For FY10 the funding includes $17.5 million in rebenchmarking costs, $5.8 million in new general fund dollars and $14.9 million in TANF funds. 

Use of new at-risk funds for data coordinators.  Adds $2.1 million in the second year to fund a state share of the data coordinator positions in the 54 high schools that are currently not fully accredited or that have not achieved adequate yearly progress.  Language encourages school divisions to use any new at-risk add-on funding that exceeds the amounts received in FY08 to place data coordinators in at-risk schools throughout the school division.

Literary Fund transfers to general fund for teacher retirement.  Increase transfers from Literary Fund to pay teacher retirement resulting in a decrease of $55.0 million in GF and an increase of $55 million in NGF for FY09; for FY10, an increase of $25 million (GF) and a decrease of $25 million (NGF).

Update costs of categorical programs.  Adds $2.6 million (GF) and $797,656 (NGF) in FY09 and $7.3 million (GF) and $1.7 million (NGF) in FY10 to update the cost of continuing the categorical programs and increase funding for the adult literacy program.  State or federal statutes or regulations mandate most categorical programs. 

Update costs of incentive programs.  Adds $2.8 million in FY09 and $9.2 million in FY10 to update incentive programs.  Funding for these programs is primarily formula-driven and subject to changes in fall membership, participation rates, and test scores. Incentive programs include the at-risk add-on, K-3 class size reduction, alternative education, Virginia Preschool Initiative, compensation supplements, early reading intervention, enrollment loss, Governor’s schools, ISAEP, mentor program, NCLB, K-3 class size reduction, Project Graduation, school breakfast, SOL algebra readiness, some special education programs, supplemental basic aid and the hold harmless sales tax.  Unlike in some previous budgets, the introduced budget does not propose eliminating any of these programs.

Remove one-time funding for career and technical education.  Reduces funding by $500,000 in each year to remove funding to purchase secondary career technical education equipment.

Increase funding for a federal special education grant.  Increase of $100 million (NGF) to annualize funding to reimburse school districts for special education.

Increase funding for Project Discovery.  Level funds Project Discovery programs in the first year and increases by $100,000 the funding for the programs in the second year.  There are 25 Project Discovery Programs, including programs in These monies are to fund approximately one-half of the cost of the program in Abingdon, Alexandria, Amherst, Arlington, Charlottesville, Danville/Pittsylvania, Lynchburg, Newport News, Norfolk, Richmond City, Roanoke City, and Williamsburg/James City.  DOE determines funding distributions to each community action agency.

Increase funding for Communities in Schools.  For FY10, adds $500,000 for the Communities in Schools program.

Cost of competing.  The budget includes cost of competing funding for school divisions in Planning District 8, and a 25 percent cost-of-competing factor for Stafford, Fauquier, Spotsylvania, Clarke, Warren, Frederick, and Culpeper counties and the Cities of Fredericksburg and Winchester.

School construction grants program. Program funding will remain at $27.5 million each year.

Library funding

Preservation of circuit court records.  Funding will remain at $3.5 million (GF) a year.

Local library aid.  Level funds (from October level) library aid ($17.3 million GF in FY09 and $17.4 million GF in FY10), and earmarks an additional $100,000 in FY10 as a supplement for the Fairfax County Library System.

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Community and Economic Development

VML staff contact:  Neal Menkes, Denise Thompson

Governor’s Opportunity Fund.  Provides $15.1 million the first year to attract economic development prospects to locate or expand in Virginia.  Funds are often used by localities for site acquisition and development and other infrastructure improvements.

Emergency Shelters and Homeless Prevention.  Provides $7.8 million the first year and $7.9 million the second year and $7.1 million (NGF) each year to support emergency shelters and housing for population with special needs and for local homeless prevention programs.

Base Realignment and Closure Assistance.  Includes three separate budget items: (1) a specific appropriation of $921,653 for the state’s share of the Fort Monroe Federal Area Development Authority’s operating costs; (2) appropriations of $7.5 million the first year and $17.5 million the second year for the Military Strategic Response Fund, which can be used to match local and other funds for infrastructure, environmental clean-up, workforce training, and related non-recurring costs.  Budget language gives first priority to any locality with a U.S. Navy Master Jet Base located within its jurisdiction; and (3) an appropriation of $484,500 each year to operate the Virginia National Defense Industrial Authority.

Enterprise Zone Program.  Continues funding for the grant program at $15.4 million each year.  The program’s purpose is to induce private investment in economically distressed areas.

Workforce Investment Act.  Transfers $47.2 million (NGF) each year and 38 positions from the Virginia Employment Commission to the Virginia Community College System (VCCS).  Also transfers an additional $1.7 million (NGF) tied to the Workforce Innovation in Regional Economic Development grant program from VEC to VCCS.  The proposed transfer is part of the Governor’s initiative to reorganize the delivery of workforce services.  The VCCS will become the grant recipient and fiscal agent for the federal Workforce Investment Act funding.

Tourism Development.  Continues funding for local and regional tourism authorities at $425,000 each year.  The governor also proposes $2.5 million (NGF) each year for tourism marketing and advertising initiatives.  These funds could be used to promote local and regional efforts.  The appropriation for this item assumes the continuation of the $1.00 registration fee collected by DMV for the Jamestown 400^th anniversary.

Financial Assistance to Cultural Organizations.  Provides $5.8 million the second year for local educational, cultural, community, and artistic items.

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Constitutional Officers - Compensation Board

VML staff contact:  Mary Jo Fields

Require localities to fund one-half of retiree health credit premium payments.  Decreases state funding by $402,725 in each year by requiring localities to fund 50 percent of the retiree health care credit for constitutional officers and their employees.

Require localities to pay one-half of liability insurance and bond premium payments.  Reduce funds by $1.6 million a year by requiring localities to fund 50 percent of the liability insurance and bond premiums for constitutional offices.

LEOs coverage.  Adds $2 million in the first year and $4 million in the second year to provide funding for additional reimbursement to those jurisdictions that include their sheriffs' deputies and regional jail correctional officers in the Law Enforcement Officers Retirement System (LEOS), which provides expanded retirement benefits for certain local public safety employees.  The funding would be only for those positions funded by the Compensation Board and would be distributed on the basis of the fiscal stress index.  Under SB 1166 enacted in the 2008 session, local governments are required by July 1, 2008, to provide LEOS benefits with the 1.7 percent benefit multiplier and the annual supplement to deputy sheriffs. Localities may ask VRS to phase in payment of the additional employer contribution costs.  LEOS coverage for deputies will cost about 11 percent of deputy salaries.  However, because the costs are spread across all the employees for the jurisdiction, the cost in terms of the percent of payroll depends on mix of the covered group to all employees.  State funding does not cover the cost of the additional LEOS coverage.

Continue savings related to vacancies.  Reduces funding by $1.3 million (GF) in each year by requiring clerks, treasurers, finance directors, and commissioners of the revenue to maintain positions vacant for 90 days prior to filling. These constitutional offices would not be allowed to expend accrued vacancy savings.  This is continued from the budget reductions taken in October 2007. 

Continue 2008 budget reductions.  Decreases funding by $909,567 in FY09 and $909,567 in FY10 as a continuation of the budget reductions announced in October 2007.

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Employee compensation and benefits

VML staff contact:  Mary Jo Fields

Salary increase for state-supported local employees.  No funding for a salary increase in the first year.  Adds $29.7 million in the second year for a three percent increase in the salaries of state-supported local employees on July 1, 2009.  These include constitutional officers and full time employees of constitutional officers, social services, election boards, health departments, community services boards, Centers for Independent Living, secure detention centers, juvenile delinquency prevention and local court service units, local pretrial services act and comprehensive community corrections programs. 

State employee salary increases.  No funding for a salary increase in the first year.  Adds $65.9 million for a three percent salary increase in the second year, effective July 1, 2009.

State employee contribution rates.  Sets a 6.68 percent retirement contribution rate for state employees, an increase from the current 6.15 percent.  Because of this change, the budget adds $1.6 million in each year for a state share of the retirement contribution costs for constitutional officers and their employees.  Localities are reimbursed for a portion of the costs of retirement for constitutional officers and their employees based on the lower of either the state employee contribution rate or the local retirement contribution rate.

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Health and Human Resources

VML staff contact:  Janet Areson

Comprehensive Services Act for At-Risk Youth and Families

CSA service pool of funds.  Adds $65.4 million in the first year and $93.2 million in the second year as the state share of costs for CSA services.  This increase takes into account the growth in existing program costs, as well as estimated costs as a result of the state increasing the number of mandated children in the program.  Localities pay a match for services to all of these new children as well.

CSA community based services match rate.  In the first year, reduces the local match for services provided to children and families in the community by 50 percent; in January 2009 and beyond, reduces the match by another 5 percent to make it 55 percent lower than the FY07 base rate. (The local match is on a sliding scale, ranging from 16 percent to 53 percent, with an average local match of 38 percent.) 

CSA residential services match rate.  In the first year, increase the local match for residential placements and services by 24 percent above the current (FY07) base rate; on Jan. 1, 2009, increases the local match again to 40 percent above the FY07 base rate; in the second year, increase the local match to 50 percent above the FY07 base rate.  For FY09, a decrease of $1.5 million; in FY10, a decrease of 11 million.

Administrative costs.  There is no change in the state’s share of administrative costs of this program.  Localities pay more than 80 percent of CSA’s administrative costs.

Local foster care services match rate.  In the first year, reduces the local match rate for foster care services by 25 percent.

Local infrastructure grants.  Maintains $500,000 each year for competitive grants to localities to help pay for start-up costs associated with building community-based services for children placed in residential services outside of their community or who are at risk of such placements.

Additional items regarding foster care and foster care payments are listed under Department of Social Services below.

Department of Health

Area health education centers.  Eliminates state support of the eight community Area Health Education Centers (AHEC) in Greater Richmond, Southside, South Central, Blue Ridge, Southwest Virginia, Rappahannock, Eastern Virginia and Northern Virginia.  This program places medical students as interns in family practices in areas that otherwise would be medically-underserved.  Reduction of $400,000 each year.

Community-based health services.  Adds $5 million each year for community-based “safety net” health providers, such as local health departments, free clinics, health centers, and other organizations providing care to the uninsured.

Emergency Medical Services.  Projects a 4 percent increase, ($4.2 million in additional funds each year) in the “four for life” fund (gathered as a part of vehicle registrations).  These funds are used to pay for training and education of EMS personnel, purchase equipment and supplies, and to support local EMS operations.

Well and septic fee increases.  Increases fees for onsite sewer and water services, as well as restaurant, hotel, campground and summer camp permit applications that help fund local health department functions.  In FY09, an increase of $2.5 million (Non-general funds).  In FY10, an increase of $3.5 million (NGF), offset by a decrease in general fund support of $1.1 million, for a net increase of $2.4 million.

Drinking water programs. Adds $250,000 each year to fund salaries of currently-vacant positions in the Office of Drinking Water that support federal primacy requirements under the Safe Drinking Water Act.

Department of Medical Assistance Services

Community mental retardation waiver slots.  Adds 75 new mental retardation (MR) waiver slots in the first year and 75 new slots in the second year. Each slot costs approximately $35,000 (GF) per year. These slots are for individuals in communities who are on the urgent waiting list. For 2009, $2.3 million (GF) and $2.3 million (NGF). For 2010, $4.9 million (GF) and $4.9 million (NGF).

Mental Retardation and Developmental Disability waiver slots for the Money Follows the Person demonstration.  Provides authority to increase the number of Mental Retardation waiver slots by 220 and the number of Development Disability waiver slots by 30 over the two years of the biennium. These slots are necessary to implement the federal "Money Follows the Person" demonstration, which requires dedicated slots in the community to ensure that people can be moved from the facilities to earn the enhanced federal match the grant allows.

Department of Mental Health, Mental Retardation and Substance Abuse Services

Expand monitoring and accountability of community services boards. Adds $300,000 in FY09 and $575,000 in FY10 to create and fund four positions to develop core standards and service improvement plans related to services provided through local community services boards.  These positions will provide oversight and monitoring of recent community-based service expansion.

Jail diversion services.  Adds $3 million each year for the continuation and expansion of the goals of a pilot program for jail diversion services funded in the 2006-08 biennial budget.  These funds will provide diversion and wraparound services and supports for an estimated 300-500 persons. 

Crisis intervention training.  Provides $300,000 each year to implement and expand a training program related to crisis intervention and jail diversion services.  This training will enable law enforcement to respond to crisis situations involving individuals with mental illness.

Autism spectrum disorders manager.  Provides $100,000 each year to fund a community resource manager to support autism spectrum disorder services.  The new position will be responsible for coordinating with families and community resources to determine the statewide availability of and need for autism spectrum disorder services.

Additional outpatient clinicians and therapists.  Adds $1.5 million in the first year and $3 million in the second year to add 40 outpatient clinicians and therapists at community services boards (CSBs). Each community service board to hire one additional clinician to help address significant delays in accessing outpatient mental health services.  The positions will be phased in during the first year, and are fully funded in the second year.

CSB emergency services capacity.  Provides $5.3 million in the first year and $9.3 million in the second year to fund emergency mental health services, including around-the-clock emergency psychiatric consultation, emergency clinicians and crisis stabilization.  Each CSB would receive $50,000 to provide 24/7 psychiatric consultation, as well as $70,000 for emergency clinicians.  An additional 36 new crisis stabilization beds would be funded as well.  The increase in funding will assist community services boards with mandated emergency services.  Services will be phased in during the first year, and are fully funded in the second year.

CSB case management.  Adds $3.5 million in the first year and $5.3 million in the second year to fund 106 new CSB mental health case managers.  Almost every board has an average caseload that exceed the nationally-recommended 25.  Each of the 40 CSBs would get at least one position, with the remaining positions being distributed based on capacity and need.  Services would be phased in during the first year, and fully funded in the second year. 

Outpatient services to non-mandated children.  Provides $2.8 million in the first year and $3 million in the second year to fund 40 clinicians specializing in children's mental health.  This funding is intended to serve children with mental health needs who are not eligible for services through the Comprehensive Services Act.

Department of Social Services

Additional social workers for foster care visitations.  Adds social workers in local departments of social services to carry out activities related to improving permanency for children in foster care.  These workers would manage the increased workload resulting from implementation of monthly visitations between social workers and foster care families.  Workers would evaluate foster families and ensure that children are receiving the needed services. For each year, $1 million (GF) and $125,000 (NGF).

Foster care and adoptive family payments.  Raises maintenance payments made to foster family homes on behalf of foster children by 15 percent in the first year and by an additional 10 percent in the second year.  The goal is to create stability in foster home placements, enable local departments to recruit families, and avoid placement in residential facilities.  This would also increase adoption subsidy funding to ensure that adoption subsidies keep pace with foster family rates.  For 2009, $6.7 million (GF) and $5.2 million (NGF). For 2010, $12.2 million (GF) and $8.4 million (NGF).

Child welfare worker training.  Adds $2.2 million (GF) and $1.4 million (NGF) each year and two positions at the state level to increase child welfare worker training throughout the state.  The emphasis would be on serving children more effectively and improving overall performance outcomes associated with permanency and repeat occurrence of neglect and abuse.

Recruitment and retention of foster parents.  Increases funding to help with foster and adoptive family recruitment, support, training, and retention efforts and improve permanent connections for older youth in foster care.  Funds would be used to implement the Finding Families best practices and provide standardized training using the Parent Resource Information Development Education (PRIDE) curriculum. For 2009, $3.4 million (GF), $1.1 million (NGF), and 17 positions.  For 2010, $3.6 million (GF) and $1.2 million (NGF).

Local early childhood systems.  Adds $500,000 in the first year and $1.5 million in the second year for the Virginia Early Childhood Foundation (VECF) to increase community capacity to develop early childhood development programs. VECF grants would help communities to develop school readiness councils to address the comprehensive needs of children from birth to school entry.

Child care services.  Adds $8.5 million in non-general funds each year for at-risk child care subsidies and Head Start wrap-around care. The added support would address about 25 percent of the current waiting list for childcare subsidies and provide Head Start parents with extended-day childcare.

Prisoner reentry pilot programs.  Provides $509,174 and six positions in the first year and $565,100 in the second year for five pilot reentry programs established by the Virginia Reentry Policy Academy in 2006.  Local social services directors coordinator these local programs.  This would fund a case manager for each pilot program, located in the department of social services.  It would also add a position at Virginia Department of Social Services to direct program activities and support program evaluation.

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Natural Resources

VML staff contact:  Denise Thompson

Department of Conservation and Recreation

Water Quality Improvement Fund (WQIF).  In the first year, provides $6 million (GF) and $14 million (NGF) for matching grants for controlling runoff pollution resulting from agricultural activities.  The nongeneral funds come from $9 million in interest earnings collected by DEQ on the WQIF and $5 million from the Water Quality Improvement Reserve Fund.

Capital outlay for open space and parks.  Provides $50 million over the biennium from the Virginia Public Building Authority for preservation of open space and historic resources.  Provides $20 million to repair various state park and Soil and Water Conservation District dams.  Provides $4.5 million to develop High Bridge State Park and $3 million for Powhatan State Park.

Dam safety. Provides $1 million each year to capitalize the Dam Safety, Flood Prevention, and Protection Assistance Fund.  Funds will provide grants or loans to localities owning dams in need of renovation or repair, and loans to private dam owners.

Open-space preservation.  Provides $950,000 each year to the Virginia Outdoors Foundation to assist with open-space land preservation.  Also provides $6 million in matching grants over the two years to the Office of Agriculture and Forestry for local Purchase of Development Rights programs to protect farmlands from development.

Department of Environmental Quality

Richmond and Lynchburg CSO construction.  Provides $6 million for the cities of Richmond and Lynchburg for Combined Sewer Overflow construction projects.

Wastewater treatment plant upgrades. Provides $1.2 million to increase the state match funding (Water Revolving Loan Fund) for available federal grants (one state dollar matches five dollars in federal funding) to provide low-interest loans for local wastewater treatment plant upgrades.

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Non-state agencies

VML staff contact: Mary Jo Fields

Eliminates FY09 funding for nonstate entities.   Reduces funding by $26.7 million each year to eliminate funding for non-state agencies; then adds $5.8 million back in for FY10 for funding for 36 non-state entities.  Several hundred of these cultural and historic entities have received funding in the current biennium.

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Public Safety

VML staff contact:  Janet Areson

Jails (Compensation Board)

New jail funding & staffing.  Adds $3.5 million and 317 positions in the first year for completion of expansion projects at Riverside, Manassas/Prince Williams and Rappahannock Regional Jails and completion of bed conversion project at Newport News City Jail.  This funding is based on a three-month delay from the anticipated dates of completion.  No funding was included for any projects reaching completion at the end of FY09 or in FY10.

Additional planning standards.  Adds language to require that local governments that want state matching funds for any jail construction or expansion project meet the design criteria for facilities as set out by the Board of Corrections.

Per diems.  Adds a total of $14.8 million for the biennium to meet the state’s obligation towards funding state inmates in local jails.

Remove exemption from overhead recovery.  Decrease of $2.8 million each year to remove the overhead recovery exemption for the Alexandria, Northern Neck Regional Jail, Piedmont Regional Jail, and the Central Virginia Regional Jail.  This reduces the amount of state funding for per diem reimbursements to local and regional jails housing out-of-state or federal inmates.

Department of Criminal Justice Services

Regional training academies.  Adds $275,000 in non-general funds each year for the regional training academies to meet current obligations.

Department of Juvenile Justice

Virginia Juvenile Community Crime Control Act (VJCCCA). Adds language to accelerate the return of uncommitted Virginia Juvenile Community Crime Control Act (VJCCCA) funding by local governments.  This action also brings the existing language into conformance with the current budgeted amount for these funds, and initiates a pilot program to reappropriate prior year balances of this funding for short-term grants to localities. Localities will be solicited for programs and services which have been demonstrated to improve juvenile outcomes.  Continues the 2.5 percent funding reduction to this program taken in October 2007.

Local juvenile detention centers.  Continues into both years of the biennium the 2.5 percent reduction in state payments to local and regional juvenile detention centers that were announced in October 2007.

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Transportation

VML staff contact:  Neal Menkes, Denise Thompson

Department of Motor Vehicles

DMV Fees.  Proposes a $10 increase on all driver’s licenses, except commercial driver’s licenses, and a $5 increase of duplicate, reissue, or replacement licenses.  The current costs for a driver’s license and reissue are $20 and $10, respectively.  The new revenue is to be used to maintain the security of the state’s driver licensing system, and is projected to raise some $14.3 million beginning in FY09.  A related legislative proposal would increase the car inspection fee to $20 but alter the requirement from an annual to biennial inspection.  This proposal is to offset the driver’s license fee increase.

Jamestown 400^th Anniversary Registration Fee.  Continues the $1 fee on annual vehicle registrations, but proposes new uses: (1) the first $1 million to be used to modernize DMV information technology; (2) the next $2.5 million to be used for tourism marketing and advertising; (3) the next $2.5 million for DMV to improve security and reduce driver’s license fraud; and (4) any amounts in excess of the first $6.0 million collected to be deposited to the Virginia Land Conservation Fund.

Department of Rail and Public Transportation

Mass Transit Formula Assistance.  Includes $146.9 million (NGF) the first year and

$152.9 million (NGF) the second year for local and regional transit systems.  The FY08 appropriation was $98.6 million.  The increase can be attributed to the passage of the 2007 transportation funding bill.

Transportation Efficiency Improvement Fund (TEIF).  Proposes a policy change to the $4 million (NGF) per year program.  Under current policy, funds are restricted for projects reducing traffic congestion caused by single occupant vehicles.  The new policy would expand the program’s scope to include projects reducing freight on Virginia’s highway system.

Rail Enhancement Fund.  Provides $39.5 million (NGF) the first year and $39.8 million (NGF) the second year.  The FY08 appropriation was $25.4 million.  The increase can be attributed to the passage of the 2007 transportation funding bill.

Department of Transportation

Local Revenue Sharing.  Proposes $15 million (NGF) each year.  The Code of Virginia authorizes up to $50 million each year for this secondary road revenue sharing program.  The Commonwealth would make up the remaining match amounts from bond proceeds.  The 2007 Session of the General Assembly authorized $3 billion in bonds for transportation projects. 

2007 Transportation Fund Bill (HB 3202).  Proposes additional spending for VDOT of $197 million (NGF) the first year and $202.5 million (NGF) the second year.  The spending is based on increased vehicle registration fees, higher diesel fuel taxes, fines on overweight vehicles, and the new abusive driver fees. 

General Fund Support for Transportation.  In the 2006 session, the General Assembly appropriated $339 million for a series of road, rail, transit, and port projects.  In the next year, the General Assembly added another $161 million to this amount, increasing total general fund support to $500 million.  The governor proposes to revert  $180.0 million in the first year on the basis that the authorized projects will not need the cash in FY09.  The money can then be used for other general fund spending.  A separate amendment appropriates $180 million in fiscal year 2010 back to the same projects.  The governor’s Budget Office says the amendments improve cash flow in the general fund over the course of the biennium. 

Virginia Ports Authority

Financial Assistance for Port Activities.  Proposes $1 million (GF) each year and $2.1 million (NGF).  The general fund dollars are to be distributed by the Commonwealth Transportation Board for roadway maintenance activities in localities hosting Virginia Port Authority facilities.  The remaining dollars are to aid locally owned port facilities and to compensate host localities for payment in lieu of taxes.

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2008 Caboose budget items  (HB/SB 29)

 The following items are amendments of interest to local governments included in the governor’s proposed 2008 (current year) budget.

Community and Economic Development

Mortgage Counseling.  Provides $750,000 in the current fiscal year for statewide foreclosure counseling services.  Grants will be available to nonprofit organizations to support new or expanded foreclosure prevention counseling services targeted to areas of the state and populations at greatest risk.

Compensation Board

Provide funds for per diem payments.  Adds $14.9 million to reflect required per diem payments. Per diems are paid to localities for housing local and state responsible inmates in local and regional jails

Riverside Jail.  Adds $447,907 for five months of funding for the Riverside Regional Jail expansion project.

Education

Direct Aid to Public Education. Overall decrease of $45.6 million: a decrease of $54.4 million (GF), offset by an additional $8.8 increase from the Literary Fund.

Update Average Daily Membership (ADM) and Fall Membership.  Decrease of $31.6 million to reflect revisions in the projections of unadjusted and adjusted average daily membership (ADM) for fiscal year 2008.  Statewide basis, this results in a decrease in unadjusted ADM of 7,005 students.  While enrollment is still growing statewide, it is not growing as much as originally projected.

Update Sales Tax Projections.  Decrease of $17.9 million to reflect an estimated sales tax revenue decrease and the off-set for basic aid.  When sales tax goes down, both state and local required shares of basic aid goes up.

Lottery profits.  Lottery profits are projected to be $76.4 million higher than originally estimated in FY08.  Typically these profits are split on a 61 percent state/39 percent local basis, but the budget proposes that the entire $76.4 million be allocated to the state, to be used to help pay the state share of basic aid.  Were these funds allocated as lottery funds typically are, school divisions would have received an additional $30 million.

Virginia Preschool Initiative.  Decrease of $3.6 million to reflect participation. 

Special education categorical programs.  Decrease of $472,941.

Remedial Summer School program. Decrease of $515,279 to reflect enrollment

Governor’s Schools programs.  Decrease of $592,803 to reflect enrollment. 

School Breakfast program.  Increase of $337,280 to reflect participation.

Additional Literary Fund Support for Teacher Retirement.  Transfers an additional $8.8 million in fiscal year 2008, (transfer is increased from $116.1 million to $124.9 million for teacher retirement.  

Health & Human Services

Comprehensive Services Act  - state pool of funds.  Adds $54.3 million to the pool of funds used to pay for services to youth and families in the CSA program.  The additional funding is needed because of continued growth in program expenses and because of the state’s decision this year to expand the mandated population for this program this year.  This expansion will increase local costs as well.

DSS - child care services.  Adds $6 million (NGF) for at-risk child care subsidies for low-income families.

Public Safety

Jail Per diems.  Adds $14.8 million in state funds to meet the state’s obligation towards funding state inmates in local jails.

Transportation

2007 Transportation Fund Bill (HB 3202).  Proposes additional spending for VDOT of $112.6 million (NGF) in the current fiscal year.  The spending is based on increased vehicle registration fees, higher diesel fuel taxes, fines on overweight vehicles, and the new abusive driver fees.