eNews March 4, 2022Friday, March 04, 2022 - 05:27pm
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In this issue
- Budget negotiators announced with much work to be done (and only one week to do it!)
- The Grocery Tax and the budget: A revenue replacement recap
- K-12 Education items to support
- Health and Human Resources items to support
- Natural Resources item to support
- Public Safety items to support
- Transportation items to support
- Scam alert: Fake invoices being sent to local governments
- New episode of VML Voice podcast: “The City of Radford and the Case of the Missing Councilmember”
Eminent Domain bill will significantly increase costs for state and local governments
Tell Senators to reject the House substitute to SB694
SB694 (Obenshain) was dramatically altered Monday in the House Courts Subcommittee, with the result that taking or impacting land for road, water, sewer and other public projects can become significantly more expensive. It overturns years of Supreme Court decisions and creates an imbalance of the rights of the public and individual landowners.
The House substitute does the following:
- Allows a landowner to be paid for damages where no land is taken – such as a street festival, parade, or temporary water line project that closes a street for a few days. The fiscal impact of this same provision in the introduced SB666 predicted more than $700,000 in annual increased costs. SB666 was amended to reduce this concern.
- Since at least the 1970s, the Virginia Supreme Court has ruled that a landowner is not entitled to payment for a change in access to his property unless there is a “material impairment of direct access” and so long as the landowner retains reasonable access. Line 48 strikes 50 years of court decisions, by allowing a suit for any “change of vehicular access” where there is ANY decrease in value.
- The current law protects direct access to a road. The bill does away with that limit so that property not adjoining a road can sue for damages. Lines 157-158 and line 48.
- Requires a landowner to be paid for loss of access or profits even if the benefits to the landowner are greater than the losses. The substitute does not require any offset for benefits from the amount owed the landowner. Example: a small shop on a rural road with little traffic and the road is improved into a major thoroughfare that increases business tenfold. The bill would require paying for damages, despite the increased value the landowner will enjoy. Lines 163-170.
- Under current law, if the landowner is impacted in the same way as all other property owners in the area of a project, there is no compensation. The substitute does away with that restriction. Lines 163-170.
These same provisions were in the introduced SB666. The patron, Senator Petersen, agreed to remove all through negotiations with local governments and others.
The effect of the current SB694 will be to make public projects much more expensive to carry out, due to the increase in suits that will be filed by landowners. The bill upsets a decades-long balance between the needs of the public and the interests of landowners.
Please contact your Senator by Monday to ask them to reject the House substitute and to send the bill to the Senate Judiciary Committee for further study.
VML Contact: Mark Flynn, email@example.com
Budget: Big Picture
Budget negotiators announced with much work to be done (and only one week to do it!)
On March 2, the House and Senate rejected each other’s proposals for HB/SB 29 and HB/SB 30, the budgets for FY 2022 and FY 2023-2024, respectively, and named conferees for these bills.
The conferees are:
- Barry D. Knight (R – Virginia Beach)
- Terry L. Austin (R – Botetourt)
- Robert S. Bloxom, Jr. (R – Accomack)
- Emily M. Brewer (R – Isle of Wight)
- Luke E. Torian (D – Prince William)
- Mark D. Sickles (D – Arlington)
Senate Finance and Appropriations
- Janet D. Howell (D-District 32)
- Richard L. Saslaw (D-District 35)
- Thomas K. Norment, (R-District 3)
- Emmett W. Hanger, Jr. (R-District 24)
- Louise Lucas (D-District 18)
- Stephen D. Newman (R-District 23)
- George L. Barker (D-District 39)
- Mamie E. Locke (D-District 2)
The conferees have begun their work and will likely work through the weekend. The hope is that the conference report will be available for a vote by the General Assembly before March 12, the scheduled day for adjournment.
Sharpening “the clause”
During Senate Finance and Appropriations Committee (SFAC) hearings this week, Chair Howell criticized the House chamber for approving bills that HAC did not fund in its version of the state budget. In response to the House actions, Howell noted that SFAC would amend any House bill presenting this problem to add “the clause”, language stipulating that it will not go into effect at all unless it is also authorized in the state budget.
This is a reminder that tax bills, first and foremost, set the terms of debate because they determine how the General Assembly can pay for items in the state budget. Chair Howell’s decision to bring back “the clause” will remind Delegates that the fate of their bills will be determined by the actions taken by their own budget conferees.
Let the negotiations begin!
The Grocery Tax and the budget: A revenue replacement recap
Governor Northam’s outgoing budget, released in December 2021, eliminated the 1.5 percent state sales tax on groceries. Northam’s proposal continued a bipartisan legislative effort that is decades old. In 1999, the G.A. and Governor Gilmore reduced the state sales tax on groceries from 3.5 percent to 3 percent; in 2005, Governor Warner and the G.A. reduced that rate to 1.5 percent where it stands today.
In addition to being an old idea, exempting groceries from sales taxes is also an expensive idea – a reason behind its slow progress over the decades despite its simple policy and political appeal. Today, Virginia is one of only 13 states to apply sales taxes to groceries.
Virginia’s Department of Taxation (TAX) estimates that groceries comprise about 20 percent of total sales in Virginia. Thus, Northam’s proposal to eliminate the remaining state sales tax on groceries was forecast to reduce annual sales tax revenues by about $400 million.
The revenue cut would affect a vital source of funding for public schools: the 1 percent state sales tax distribution to localities for K12, a core revenue source for public education since the days of Harry Byrd, Sr. To prevent the funding cut to public schools, Northam included in his outgoing budget a proposal to distribute full replacement revenue to school divisions. The replacement funding would follow the current method of funding distribution that is based on the proportion of the local school-aged population of the school division to the school-aged population of the Commonwealth as a whole.
In his outgoing budget, Northam did not replace the $140 million per year cut to transportation caused by exempting groceries from the 0.5 percent state sales tax for transportation, which was enacted by the 1986 Special Session of the General Assembly.
Enter the 2022 Senate and House budgets
The Senate of Virginia endorsed Northam’s approach, exempting groceries from the 1.5 percent state sales tax. At the encouragement of local governments, the Senate Finance and Appropriations Committee (SFAC) reported a grocery tax repeal bill (SB451-Boysko) that would also codify the K12 revenue replacement distribution in state law (again, based on school-aged population as currently required).
The House of Delegates shared the Senate’s support for exempting groceries from the state sales tax, but the House passed legislation that went further and eliminated the application of the local 1 percent sales tax to groceries (another revenue reduction of about $275 million annually to local governments).
How much local revenue will be lost? Aye, there’s the rub.
A tricky but fundamental piece of creating a revenue replacement method is forecasting the lost revenue amount that will need replacing. It is relatively easy for the state to estimate the statewide ratio of groceries to total taxable sales and utilize that ratio to pay back local school divisions based on their school-aged population. Largely, that is what you see contained in HB90 and SB451 and VML supports this method being codified in state law as well as the budget.
It is trickier to replace lost grocery revenue from the local 1 percent sales tax because the ratios of groceries to total local taxable sales vary by locality across the Commonwealth, and likely the local ratios change over time as consumer behavior and the economy changes.
This means the General Assembly will be making over 130 educated guesses on behalf of local governments across Virginia if it chooses to exempt groceries from the local 1 percent sales tax.
VML supports exempting groceries from sales taxes so long as local budgets are repaid. If the G.A. chooses to act on the local 1 percent sales tax, VML asks that it commit in the legislation to annually reviewing the repayment distributions to ensure their continued accuracy, particularly on behalf of Virginia’s fiscally distressed local governments.
VML Contact: Carter Hutchinson, firstname.lastname@example.org
Budget: Items to Support
Below are some items up for conference consideration that are of interest to local government. We urge you to review the items and talk to your delegation members about those items of particular interest to your local government, even if your delegation members are not on House Appropriations or Senate Finance and Appropriations.
K-12 Education items to support
Data collection tool for K-12 school facilities (Item 135 #1s)
Both SB238 and HB563 would create and establish a data collection tool to accurately determine the relative age and maintenance needs of every public K-12 school in the Commonwealth. While there are bills on both sides, only the Senate budget includes funding for the Virginia Department of Education to perform the data collection process. ($132,932 for both FY23 and FY24).
The funding would help VDOE:
- Create a data reserve bank
- Determine the actual need of school facilities across Virginia
- Help the State allocate funds to the division most in need
Instructional aide positions (Item 137 #2s)
Instructional aide positions are critical for helping students and teachers in K-12 public schools. During the Great Recession, a “temporary” support cap was placed on instructional aide positions in an effort to save the state money.
More than 10 years later, this “temporary” support cap is still in place, so currently only 17.5 instructional aide positions per 1,000 ADM are funded by the Standards of Quality (SOQ). The need for instructional aide positions has grown, not decreased over these years. Without adequate state funding, localities are paying significantly more than they should be for a position covered by the SOQ.
Item 137 #2s in the Senate budget would provide $109.45 million in FY 2023 and $162.42 million in FY 2024 to adjust the ratio of instructional aide positions per 1,000 ADM from 17.5 to 20 per 1,000 ADM in FY2023 and 21 per 1,000 in FY 2024. This would begin the process of slowly eliminating that “temporary” support cap placed in FY 2010.
This amendment would:
- Work towards eliminating the support cap
- Help alleviate the burden on local budgets
- Show the state’s commitment to fund instructional aide positions in the SOQ
Bills in both the House and Senate would establish a School Construction Grant Fund and funding mechanism. Both the House and Senate budgets contain funding in their budgets: Item 137#19h and Item 137 #5s.
The School Construction Grant Fund as established would receive revenues from the Gaming Proceeds Fund, which will receive future tax revenues from casinos. Casinos in Virginia were established on the basis that 98 percent of the state tax revenues would be appropriated for school construction. This amendment would move this process closer to implementation by creating the fund to receive the casino revenues.
The Fund would also establish a loan rebate program for localities to use for school construction in which the State would provide a 30 percent rebate: 30 percent loan rebates are for $1 billion in construction projects with an interest buydown grant to zero interest financing for another $1 billion in construction projects. Localities would pay the remaining 70 percent of the funds, which could have been constructively addressed through the legislation to allow for local option one percent sales tax.
In the House budget $291.7 million (GF) and $250 million from the Literary Fund would be placed in the Fund in FY2023. In the Senate budget, language stating that eligible school construction needs would not include parking lots or school facilities used predominantly for extracurricular athletic activities.
We support both the House and Senate amendments because together they would:
- Provide an essential funding source for localities and their school districts
- Establish a fund for the dedicated revenue from Casino gambling proceeds
- Set reasonable parameters on funding use
We would prefer that the 70 percent local share be more constructively addressed by the General Assembly, either by allowing localities to pursue the optional one percent sales tax or through additional state support.
VML Contact: Josette Bulova, email@example.com
Health and Human Resources items to support
CSA Local Administrative Funding (Item 284#1s)
VML and VACo sought an increase in the state administrative funding to local governments that administer the Children’s Services Act (CSA) on behalf of the state. Such funding had not been increased since FY2017, and before that, in FY2006.
The Senate budget includes an increase of $1.0 million each year of the biennium for local administrative costs. We support this budget proposal because:
- CSA is a highly complex program and local program coordinators and teams must comply with complicated federal and state laws and policies across multiple agencies.
- A state workgroup recommended that the state provide additional administrative funding to ensure each local program receive at least $50,000 a year, including local matching dollars.
- Localities provide $8.8 million in personnel costs and an additional $1.1 million in non-personnel costs to support local CSA efforts.
The issue of alternative transportation and custody for individuals with a temporary detention order (TDO) or emergency custody order (ECO) was widely discussed and debated this Session. The House and Senate budgets include items to fund efforts to relieve local law enforcement of carrying out some of these extended custody situations and to provide other means to help individuals with a TDO or ECO receive transportation to either evaluations or inpatient placements as well as accompaniment in emergency rooms during the often-prolonged wait for evaluation and assistance.
The House added funding in FY2023 to implement an alternative custody program for individuals subject to a TDO who are awaiting transport to an inpatient bed ($2.0 million in FY2023); the Senate added funds and language authorizing DBHDS to use funds to supplement its current transportation contract ($1.68 million each year). It also provides $1 million each year to reimburse local law enforcement agencies for use of auxiliary police for alternative custody options.
It is unclear where legislation related to this funding items will end up, so the amounts in these proposals may change.
- Local governments support efforts by both the House and Senate, including these budget items, to address issues with use of local law enforcement in TDO and ECO situations where other options could be safety used
- Local governments support funding to help address ways to increase use of alternative transportation and custody.
VML Contact: Janet Areson, firstname.lastname@example.org
Natural Resources item to support
Both the House and Senate budget reduce the amount proposed in the introduced budget ($100 million), but still offer significant new capital funding for the Stormwater Local Assistance Fund (SLAF) in FY2023.
- SLAF provides grants to localities for capital projects addressing stormwater best management practices, wetlands restoration, and other projects intended to mitigate stormwater impacts.
- SLAF funding represents a recognition by the state that capital intensive projects to mitigate stormwater impacts in communities of all sizes requires significant state resources to prevent further impacts from stormwater damage to properties, waterways, and water quality.
- The House provides $25 million in FY2023; the Senate provides $50 million.
VML has consistently requested increased funding for SLAF in recent years and appreciates the General Assembly’s commitment to provide resources for localities.
VML Contact: Mitchell Smiley, email@example.com
Public Safety item to support
Both the House and the Senate included funding in their budget proposals to help restore jail per diems to the FY2010 level when funding was reduced due to the Great Recession. VML has been trying for several years to get funding restored and worked on amendments as a part of a coalition of public safety/local government partners this year.
- The House and Senate approaches differ, but local governments are greatly appreciative that both proposals move us in a positive direction
- The Senate goes farther than the amendments we sought in that it includes an amendment to also increase the per diem for local responsible inmates with state charges by $1 a day (from $4 to $5).
- Appreciation should be expressed to House and Senate members for ending the 12 year drought on per diem increases.
The introduced budget included no increase in the State Assistance to Local Law Enforcement (HB599) program, despite the growth in state general fund revenue collections that would prompt an increase to HB 599 funding as required under the Code of Virginia (Sec. 9.1-165).
The House and Senate took different approaches to providing funding to local police departments, and VML would support the adoption of both approaches because they both address needs of local public safety.
The Senate increased funding to the HB 599 in the current year budget as well as both years of the new biennium ($2.35 million in FY2022; $19.1 million in FY2023; $27.9 million in FY2024).
The House directs that no less than $80 million in federal ARPA funds in FY2023 would be used for support of local law enforcement agencies (which could include sheriff’s departments as well as local police departments) to support training and purchase of equipment and supplies.
- VML supports the specific increase in HB 599 funding as proposed by the Senate
- VML supports the allocation of ARPA funds as proposed by the House
- Both measures would help bridge the continued lag in state assistance to local law enforcement.
VML Contact: Janet Areson, firstname.lastname@example.org
Transportation items to support
Street Maintenance Funding (Item 447.10#1s)
SB29, the Senate budget addressing the current fiscal year, includes funding of $30 million for street maintenance. This one-time funding would go to local governments that maintain their own roads and would increase maintenance funding between $20,000 and $3.5 million this fiscal year.
Both the House and Senate caboose (HB29 & SB29) and biennial budgets (HB30 & SB30) include language directing VDOT to conduct a study of locally maintained pavement conditions with VDOT, not local maintenance funding, as the source of funding for the study. The introduced budget would have taken the funds from local maintenance. While the House and Senate budget proposals take different approaches to holding localities harmless, the effect is the same. A study of locally maintained pavements stemmed from the Joint Legislative Audit and Review Commission’s Nov. 2021 report on transportation sustainability and funding which led to the study of local pavement conditions being included in the introduced budget. VML has worked this session to ensure that any study would not be funded through local maintenance funding.
VML Contact: Mitchell Smiley, email@example.com
Budget: Items to Oppose
Public Safety item to oppose
Require local funding for ASAPs (Item 3#1s)
The Senate budget proposal includes a language item directing local Alcohol Safety Action Program (ASAP) organization members (i.e., local governments) to contribute to the operating costs of the organization at a negotiated rate. VML would prefer that the language be changed to a study of the sustainability of the funding/structure of the program before any policy/funding decisions are made.
- ASAP programs are primarily funded through fees;
- The balance between revenues and expenditures for most ASAPs are increasing out of balance; this puts into question the sustainability of the current funding structure (see recent study of ASAPs conducted by VCU);
- The VASAP program has been around since the 1970s; a discussion or study of the VASAP program funding structure and potential new burdens on it (i.e., charges for marijuana-related driving impairments) could be helpful in creating the path forward for ASAPs.
Local Government Legislation
School construction bills head to conference
HB563 (O’Quinn) and SB471 (McClellan) have both made it through both the House and the Senate and are now on their way to conference to work out the differences between the bills. We will provide you with information on the outcome of the budget conference process as soon as it is available.
VML Contact: Josette Bulova, firstname.lastname@example.org
Increased jury per diems defeated in committee
The House Appropriations Committee has tabled SB730 (Lewis). This bill would have increased daily compensation for jurors in the circuit courts system from $30 to $50. A similar House measure met the same fate in a House Appropriations subcommittee earlier in the session.
VML Contact: Janet Areson, email@example.com
Scam alert: Fake invoices being sent to local governments
VML member localities should be aware of an existing scam in which localities receive a notice in the mail from the “International League of Cities” requesting membership dues. The organization does not exist. An example of one of the fake invoices can be viewed here >.
Thanks to the Town of Rocky Mount for bringing this to our attention.
In November of 2021 the City of Radford was missing a councilmember. Well, they weren’t really “missing” a councilmember; he had resigned before the end of his term to pursue a job opportunity elsewhere. But, missing or not, the remaining councilmembers had a vacant seat to fill. Normally, they would have appointed someone without too much fanfare to finish out the term. However, this time the City of Radford decided to bring the public into the process. It’s no mystery how this case was resolved, because the VML Voice – with some help from Radford Mayor Horton, Vice-Mayor Huntington, and Councilmember Harshberger – is here to tell you all about it!
VML Contact: Rob Bullington, firstname.lastname@example.org