eNews March 26, 2018
Monday, March 26, 2018 - 02:16pm
In this issue
- The budget stalemate: What can local governments do?
- Northam draws line in the sand
- Congress and President Trump team up to avoid another government shutdown
- Policy committee nominations due April 18
- Emergency response seminar rescheduled for May 4
The budget stalemate: What can local governments do?
Your delegates and senator are home. This is your opportunity to talk with them, reminding them that a state budget needs to be finalized at the special session that starts April 11. Tell them the General Assembly and Governor Northam need to work together to resolve the Medicaid Expansion issue.
Salaries and pay increases for teachers and state-supported local employees are at risk. Funding for local law enforcement through “599” is at risk. Funding for health and human resources services, economic development, and environmental cleanup and protection are all at risk.
Local governments must have their FY 2019 budgets in place before July 1. Localities never fail to pass their budgets on time. That’s a lesson the state should learn.
VML contact: Neal Menkes, nmenkes@vml.org and Janet Areson, jareson@vml.org
Northam draws line in the sand
“State budget needs Medicaid expansion”
In a conference call March 22 to local elected officials and their administrative staff, Gov. Ralph Northam hammered home the importance of expanding Medicaid to include almost 400,000 medically uninsured Virginians. These men and women make too much money to qualify under the current Medicaid program but not enough to be eligible for the premium subsidies provided through the insurance exchanges.
Northam told the listening audience that he introduced on March 21 two budget bills (HB 5001 and HB 5002) for the Special Session. The two measures cover the remainder of Fiscal Year 2018 and the upcoming 2018-2020 biennium. These bills envision a “clean Medicaid Expansion” that does not include any of the work requirements adopted by the House of Delegates in early March. If Medicaid is expanded, the governor’s budget team estimates general fund savings to soar above $400.0 million for the biennium. (The savings are generated by supplanting general fund money now spent for healthcare with federal Medicaid dollars.)
In fact, the two bills are identical to the budget bills submitted in December by former Gov. Terry McAuliffe. Gov. Northam said he deliberately chose not to include amendments that would address other issues to keep the budget conferees focused on resolving Medicaid Expansion.
The governor did announce, however, that he would introduce a single budget amendment. This language amendment would commit a major share of any surplus revenues above the December 2017 revenue forecast to a cash reserve fund. The cash reserve fund’s objective is to protect Virginia’s Triple-A bond rating. Standard and Poor’s has expressed doubt about the state’s credit worthiness because the state’s operating budget is structurally unbalanced, meaning Wall Street is put off by the budget strategy of pulling dollars out of the Rainy Day fund to balance the state budget during periods of economic growth.
The amendment also has strategic political value. Both the governor and House Speaker Kirk Cox agree that a new revenue forecast is not needed. By placing excess revenues into a reserve fund, the proposed amendment would make it difficult for the Senate to appropriate the money and close the $500.0 million spending gap between the Senate and House positions. The Senate’s budget did not include Medicaid Expansion, meaning their budget package had fewer resources to pay for K-12 education and public safety, particularly salaries for teachers and state-supported local employees. The House budget did include a modified version of the program, giving the delegates access to most of the general fund savings.
Will there be a revenue surplus on June 30?
Finance Secretary Aubrey Layne reported on March 13 that for the first eight months of FY18 total revenue collections rose 6.2 percent above last year’s collections and are well ahead of the official revenue forecast of 3.4 percent.
Total general fund revenue collections rose by 10.9 percent in February, driven by strong payroll withholding payments. In this fiscal year, individual income tax withholding, which accounts for over 60.0 percent of all general fund revenues, is up 5.6 percent. The official estimate recognizes growth of 3.5 percent.
Individual income tax non-withholding makes up 16.0 percent of general fund revenues. It is a volatile revenue, which is sensitive to federal tax actions as well as the ebb and flow of stock market prices. State budgeteers predicted a 4.3 percent increase in fiscal year 2018. Collections from July 2017 through February 2018 increased 19.0 percent compared with the same period last fiscal year.
Sales tax collections account for roughly 18.0 percent of the general fund. On a year-to-date basis, sales tax revenues have increased 3.2 percent, just above the official 3.0 percent estimate.
The strong tax collections to date give every indication that there will be a revenue surplus by the end of June. However, the Virginia Department of Taxation has sounded a cautionary note by pointing out that there will be one less Wednesday payroll deposit day for the remainder of the fiscal year. Wednesday is typically one of the largest days of the week representing approximately $100.0 million in withholding deposits.
The Tax Department is also concerned about the impact tied to stock market gyrations. But, even with these caveats the Department concluded that the general fund is tracking for the remainder of the year at 3.5 percent, which is 0.1 percent above the official revenue forecast.
VML contact: Neal Menkes, nmenkes@vml.org
Congress and President Trump team up to avoid another government shutdown
Omnibus appropriations bill (H.R. 1625) funds federal agencies and programs through the remainder of fiscal year 2018, which expires September 30
The drama of a threatened last-minute presidential veto faded last Friday when President Trump signed into law a $1.3 trillion spending bill, avoiding a shuttering of the federal government.
The new spending boosts the defense budget by $80.0 billion over previously authorized levels and the domestic budget by $63.0 billion. The domestic spending emphasizes funding for infrastructure, medical research, and efforts to combat the opioid epidemic. Here are a few of the budget highlights from the more than 2,000-page appropriations bill.
- Community Development Block Grants would get a ten percent increase in funding. The Trump Administration had proposed to eliminate the program.
- Capital Investment Grants for transit, which the Trump budget wanted to phase out, will receive a $2.6 billion appropriation.
- The omnibus bill also reauthorizes several Federal Aviation Administration programs through September. The National Flood Insurance Program will be extended through the end of July.
- The Federal Election Assistance Commission will receive $380.0 million for payments to states to improve election security and technology.
- The Environmental Protection Agency, which funds clean water programs used by state and local governments, escaped serious budget cuts that were recommended by the White House.
Because of the November elections, it is unlikely that Congress will enact legislation as far reaching as this measure prior to that time.
VML contact: Neal Menkes, nmenkes@vml.org
Policy committee nominations due April 18
Please act now to submit your nominations to serve on VML’s six policy committees! Nominations are due April 18; you can download the form for submitting nominations here. Information on the role of the policy committees is also posted on this site. The six policy committees are 1) Community & Economic Development; 2) Environmental Quality; 3) Finance; 4) General Laws; 5) Human Development & Education and 6) Transportation.
The policy committees meet once during the year, in late July in the Richmond area. The date and meeting location are being confirmed; that information will forward this information to committee members and local government managers and clerks.
Please email or call Janet Areson at VML with any questions (jareson@vml.org; 804-523-8522).
VML contact: Janet Areson, jareson@vml.org
Emergency response seminar rescheduled for May 4
Register here to attend the May 4 seminar on emergency responses at the local level to natural or man-made disasters. The discussion will focus on emergency management procedures, a review of tactical operations, outside support available and, post-event, the process for federal and state financial reimbursement.
This panel discussion will be led by Dr. Tonya Neaves, the managing director for the Centers on the Public Service with George Mason University Schar School of Policy and Government. Panelists will include Maggie DeBoard, chief of police in Herndon, and other invited speakers.
The seminar will be held May 4, 10 a.m. to noon at the VML Insurance Programs, 11243 Nuckols Road, Glen Allen, VA 23059. The fee to attend is $50.
VML contact: Mike Polychrones, mpolychrones@vml.org
VML legislative staff and assignments
Michelle Gowdy – Local government authority, planning and zoning, legal matters, housing, Freedom of Information, telecommunications and technology. mgowdy@vml.org; 804-523-8525
Janet Areson – Health and human services, and the state budget. jareson@vml.org; 804-523-8522
Mike Polychrones – Environment, land use, natural resources, elections and transportation policy. mpolychrones@vml.org; 804-523-8530
Neal Menkes (under contract) – Taxation and finance, the state budget, transportation funding, retirement, education funding and community and economic development. nmenkes@vml.org; 804-523-8523
Roger Wiley (under contract) – Courts, criminal law, civil law, and procurement. roger@heftywiley.com; 804-780-3143
Chris LaGow (under contract) –Insurance and workers’ compensation. chris@lagowlobby.com; 804-225-8570
