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Legislative Newsletter - July 25, 2011

Number 11

FY11 Revenue Surplus Exceeds $300 Million

            Governor Bob McDonnell has pegged an FY11 year-end surplus in state revenues of about $311 million more than budgeted, thanks in large part to greater than anticipated individual and corporate tax receipts. The preliminary numbers show that total revenue collections rose by 5.8% in FY11, ahead of the forecasted growth of 3.5% growth. The positive growth follows two years of state revenue collections that ended the year in the red. This $311 amount will get larger in the coming weeks, as final tabulations are made that include savings in the operation of state government; those savings could reach another $100 million. However, the budget surplus is not keeping bond rating agencies at bay; last week, Moody’s Investors Services announced Virginia’s Aaa government bond rating (along with those in several other states) will be reviewed for possible downgrading, as they are the most vulnerable to changes in the U.S. government bond rating, which also could be in jeopardy depending on the result of federal negotiations over raising the debt ceiling.

At this point, the excess revenue is expected to be targeted as follows: Nearly $147 million for the Revenue Stabilization (“Rainy Day”) Fund; $32.2 million to the Water Quality Improvement Fund; $23 million to pay transportation for its share of the accelerated sales tax; $8.9 million for interest on the Unemployment Compensation Trust Fund; $4.3 million for tornado relief; $7.5 million for Base Realignment and Closure (BRAC) obligations; and $7.4 million in additional funding for Sheriff’s Offices. The governor also indicated he’ll target additional contributions to the Virginia Retirement System and to transportation projects. He will brief the General Assembly money committees on the official end-of-the-fiscal-year revenue picture at a joint meeting on August 18.

Despite decreases in state aid to localities, along with the continued $60 million across-the-board reduction in local aid that was included in the FY11/12 state budget, no mention was made of any additional dollars for public education or other services provided by localities. A model resolution that supports the elimination of this across-the-board reduction program, as suggested by VACo and VML, has been sent to all localities for consideration and action (it also is an agenda item for the TJPD Commission next week).

Devolution Among Policy Options Laid Out in Study on Secondary Roads
            A study commissioned by the Virginia Department of Transportation (VDOT) on the state’s secondary road system discusses historical aspects of secondary roads policy, current issues facing secondary roads in Virginia, and potential policy options for the state’s secondary roads, including imposing devolution on some or all counties. The study, titled Policy Options for Secondary Road Construction and Management in the Commonwealth of Virginia, was authored by a professor at the George Mason University School of Public Policy.
The study identified 10 findings related to the secondary roads program:

  1. The secondary road system as currently configured is not an appropriate administrative apparatus for maintenance and operations of the roads it contains;
  2. The condition of the secondary system is deteriorating;
  3. In  recent years, the VDOT secondary construction program has provided minimal funding support for constructing new roads in the secondary system;
  4. The current budget allocation process for maintenance funds gives relatively low priority to the secondary system;
  5. The current “devolution mechanisms” for construction and maintenance are not attracting county participation;
  6. County officials generally agree that state payments will not cover all the costs of a local road program for maintaining secondary roads;
  7. Many counties have limited capacity to assume secondary maintenance responsibilities;
  8. Local control over local roads and streets affords significant opportunity to integrate decision making over transportation and land use and improve development outcomes;
  9. Local option transportation taxes have been used throughout the country to generate revenue for local road construction and maintenance programs; and
  10. Current secondary road acceptance procedures have and may continue to add roads to the secondary system in ways that exacerbate the maintenance budget shortfall. 

The report also discusses several policy options that could be considered by policymakers:

  1. Maintaining the current policy on construction and maintenance devolution;
  2. Maintaining the current policy with enhanced budgetary priority for secondary road construction and maintenance;
  3. Restructuring the secondary road system;
  4. Using performance-based maintenance contracting on the secondary system;
  5. Empowering counties to raise revenues;
  6. Imposing devolution on all counties; and
  7. Imposing devolution on select urban counties.

Secretary of Transportation Sean Connaughton responded to the study, “Our secondary road program is facing an enormous array of challenges. VDOT’s current resources are sufficient to do a few missions well or many missions inadequately. This study looks at every option to adequately address future secondary road system needs.” The TJPD Legislative Program makes the following statement on devolution: We urge the state to maintain its responsibility for road maintenance and construction, and not shift that responsibility to localities.

Commission on Local Government Begins Mandate Review
            The Commission on Local Government has begun its annual review of selected state and federal mandates. The Virginia Code requires state agencies to conduct an assessment of all mandates imposed on local governments administered by the agency to determine which mandates, if any, may be altered or eliminated. Sixteen mandates are being reviewed during the FY12 assessment period; the following will be assessed in the coming months:

For the July 1 to August 31 period:
Local governments with populations over 3,500 that accept cash proffers on new developments are required to make an annual report to the Commission on Local Government concerning the amount received and expended from cash proffers and the purpose of such expenditures.

For the August 1 to October 31 period:

  1. Local animal control officers shall inspect commercial dog breeding locations at least twice annually, and additionally upon receipt of a complaint or their own motion, to ensure compliance with state animal care laws and regulation (became effective January, 2009).
  2. Localities must generally design new plants, expansions, and upgrades so that the facility has the capacity to treat septage from all onsite sewage disposal systems within the facility’s service area. This is part of Sewage Collection and Treatment Regulations (DEQ) last assessed in 2002.
  3. School divisions shall require any individual who accepts a position of employment to undergo fingerprinting and a criminal history records check (last assessed in 2003).
  4. All police and sheriff’s departments shall establish an arrest policy and procedures for domestic violence and family abuse cases (newly identified for assessment).

Local governments may offer comments on the mandates to the Commission through the Commission’s website at Comments are requested to be submitted with the first 30 days of any assessment period; state agencies responsible for administering the mandates will have access to all documents provided by local governments and will consider them when preparing their mandate assessments.

Supreme Court Examining Judicial Boundaries
The Supreme Court of Virginia has been asked by the Senate Courts of Justice Committee to review and recommend changes to the existing boundary lines for Virginia’s judicial circuits and districts, including the number of judges designated to serve in each proposed judicial circuit and district.  This past session, HB 1990 and SB 1240 would have established new boundaries and reallocated the number of judges serving such circuits and districts. The bills were not approved in deference to the Supreme Court study.  A Judicial Boundary Realignment Study Committee, comprised of judges, clerks, attorneys and a chief magistrate, has begun meeting and held a series of public hearings in different parts of the state over the last several weeks. It will be making recommendations to the General Assembly for realigning the boundaries of the judicial circuits and districts in a report due by November 1.



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