eNews Feb 26 2016 – Budget AnalysisFriday, February 26, 2016 - 10:00am
Legislative Budget Analysis
The House of Delegates and the Senate passed on Thursday their respective budget packages, setting up a conference to resolve the differences between the two. The budget conferees have been announced and include:
|Co-chairman Tommy Norment||Chairman Chris Jones|
|Co-chairman Emmett Hanger||Kirk Cox|
|Steve Newman||John O’Bannon|
|Frank Ruff||Steve Landes|
|Frank Wagner||Tag Greason|
|Janet Howell||Luke Torian|
Local government interests were the most hotly contested items in each chamber. In the House, an amendment approved by the Appropriations Committee to forbid traffic tickets issued on the Interstates by local law enforcement to be written to local ordinances was pulled on the House floor and passed by. An attempt on the Senate floor to challenge the taking of local fines for state purposes fizzled. This issue will be a matter for the budget conferees to decide.
Another issue to be resolved by the conferees concerns the Airbnb legislation (HB 812 and SB 416). The Senate adopted by a razor-thin margin of 21 to 19 a budget amendment requiring that any legislation passed this session relating to the collection of taxes and the preemption of local authority regarding limited residential lodging cannot become effective until it is reenacted by the 2017 Session and the Virginia Housing Commission completes a study and reports its work to the chairmen of the Senate and House Finance Committees.
It is expected that the two sides will begin their work as early as this weekend. The Speaker of the House, Bill Howell, promised his fellow delegates that they would have two days to review the work of the budget conference before voting. The session is scheduled to adjourn sine die on Saturday, March 12.
Both the House and Senate scuttled several of Gov. Terry McAuliffe’s most prominent budget and legislative initiatives. Expanding Medicaid coverage to uninsured Virginians under the Obamacare program was summarily rejected by both chambers. This meant the budget savings tied to the proposal died, forcing the House and Senate to eliminate the various spending items which relied on the savings, or drastically reduce the spending, or find the money elsewhere. For example, budget savings from Medicaid would have been used to reduce the corporate income tax by ¼ of a percent and to increase the amount of personal tax exemption. Not having the confidence that the economy can produce sufficient revenue to make up for the lost savings, the governor’s bills to lower taxes failed to pass either body.
The governor’s K-12 budget also came in for some rough treatment. McAuliffe’s initiative to hire 2,500 instructional positions at $139.0 million for the biennium was defunded by the House Appropriations and Senate Finance Committees. The money committees also inserted their respective amendments in place of Gov. McAuliffe’s recommendations on teacher salaries, At-Risk children services, and Hold Harmless supplements.
Legislators even gave the governor’s economic development initiatives a hard look. Both chambers zeroed out the $60.0 million for biotechnology spinoff companies. Both reduced the proposed increases for the Virginia Housing Trust Fund. And, both scaled back more funding for the Virginia Biosciences Health Research Corporation. The money committees also approved language amendments to examine methods to evaluate the effectiveness of state incentives.
House and Senate Initiatives
The House and Senate budgets rejected the Governor’s $139 million initiative that would have paid the state share of 2,500 new instructional positions in favor of other initiatives that do not require a local match and that allow some additional flexibility in how school divisions could use the money.
The House redirected funding for the new positions-as well as from some other initiatives-to reinstitute sharing of lottery proceeds with school divisions. The House budget sends a portion of lottery profits-$105 million in FY17 and $167.2 million in FY18-to school divisions on a per-pupil basis. There is a local maintenance of effort provision but no local match. At least 50 percent of the funds would have to be spent on non-recurring items; the rest could be spent on other items so there is broad discretion on how the funds could be used. The House also added language that would allow salary increases granted to teachers in FY17 to count toward meeting the match requirements for the 2 percent teacher salary increase included in the introduced budget.
The Senate used the funding included in the introduced budget for the 2,500 new positions in two ways. The first would move the effective date for the 2 percent salary increase for teachers from the July 1, 2017 date in the introduced budget to Dec. 1, 2016, at a cost of $51.1 million. For FY18, the Senate budget allocates $96.4 million as flexible, additional support for classroom needs of school divisions. Each school division’s share would be calculated in the same manner as the proposal in the introduced budget but no local match would be required. At least one-half of the funds would have to be used for non-recurring expenses. Further, the Senate budget includes an additional $24.2 million in one-time funding in FY18 that could be used only for non-recurring expenses.
The best explanation of the proposals will be in a forthcoming memorandum from the Superintendent of Public Instruction. That memo will outline state and local required shares for education. The memorandum will be posted either later today, or more likely early next week, at this web address: https://www.doe.virginia.gov/administrators/index.shtml.
The education funding included in the introduced budget as well as in the House and Senate packages is greatly welcome, and each version recognizes that local governments are paying a disproportionate share of the cost of public education. But it’s too early to break out the Champagne; state education funding continues to lag historic levels as shown in the charts below.
Economic Development amendments
But not all of the House and Senate amendments in economic development cut spending. The most significant spending increase affects the GO Virginia initiative with the House calling for a $7.0 million increase and the Senate a $12.9 million increase for the Virginia Growth and Opportunity Fund.
CSA budget amendments
VML sought amendments in both chambers to increase administrative funding for local governments that administer the Children’s Services Act (CSA) program. The House budget provides $500,000 each year. The Senate did not add any funding, so this item will be on the budget conference agenda.
Public Safety amendments
The House, citing an anticipated decrease in the rate of growth in Virginia’s revenues, reduced the funding for state assistance to local police departments (HB 599 program) in Gov. McAuliffe’s introduced budget by $1.55 million each year of the new biennium. No changes were made to the current biennium. The Senate maintained the level of funding proposed in the introduced budget ($179.12 million each year).
Also in public safety, VML sought amendments in both chambers to fully recognize the cost of per diem payments to local and regional jails in the coming biennium because the introduced budget left a gap of more than $10 million each year. The House amendment furnished funding in both years of the bieniuum ($10.4 million in FY17 and $11.13 million in FY18); the Senate provided $11.3 million in FY17 only. Because of the different approaches taken by the House and Senate, this will be an item for consideration by the budget conferees.
Fines & Forfeitures
There’s more work to be done on fines & forfeitures issue with the budget conferees. Despite efforts by VML and its local partners to get multiple amendments introduced and considered with the single purpose of removing the budget language authorizing the state’s taking of local fines and forfeitures, both the House and Senate budgets continue the practice. The House actually proposed an amendment, which was ultimately not considered and therefore died, that would have required every ticket written by any local enforcement personnel on any Interstate highway in the state to be drawn to a state statute. Since the amendment was withdrawn, the language reverts back to the introduced budget, which continues the taking of fines and forfeitures in 33 localities statewide, include 18 VML member localities.
The Senate made a technical amendment to the language but it did not change the bottom line, which is that the state will take increasing amounts of local fines and forfeitures each year.
Localities will need to quickly weigh in with their House and Senate members and the budget conferees on this and other issues. View the table, which provides detailed information on specific budget item numbers, and contrasts the differences between the introduced budget and the House and Senate budget packages.