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Legislative Newsletter - October 24, 2011

Number 14

State Revenue Update

    State revenue collections increased 3.9% in September, and through the first quarter of FY12, revenue collections were up 6.7%, ahead of the forecast of 3.7% growth. On the rise last month were individual nonwithholding tax payments, along with sales and corporate income taxes. Individual income tax withholding, which makes up nearly two-thirds of general fund revenues, decreased by 3.7%.  

    The September increase was less than half what it was in August, when collections rose 7.8%. Despite the continuing upward revenue trend, Governor McDonnell stressed the need for caution in upcoming budget discussions, saying "Virginia's economy continues to show modest growth and signs of improvement that surpass those of the nation's economy as a whole, but the fragile national economy, persistent uncertainty regarding federal funding decisions and our economy's vulnerability to upheaval due to national and world events prompts economists and elected officials to take a cautious, conservative fiscal approach."

    Similar to actions taken in recent years, Governor McDonnell recently asked state agencies to suggest spending reductions of two, four and six percent over the next two fiscal years, as he prepares to submit a proposed two-year state budget in December. Agencies also are being asked to more closely examine programs that spend state funds to match federal dollars, to determine if the use of those funds is achieving high priority outcomes, and to suggest program or service eliminations even if they currently are required by law.

Mandates Task Force to Begin Work
    The work of Governor McDonnell’s Task Force for Mandate Review is getting underway. Recall that legislation from the 2011 General Assembly session (SB 1452) directed the Commission on Local Government to assist a five-member task force appointed by the Governor to review state mandates imposed on localities and to recommend temporary suspension or permanent repeal of such mandates. Fluvanna County Board of Supervisors Vice-Chairman Shaun Kenney was appointed to that group, along with two other elected officials, a school board member, and a city manager. TJPDC staff met with Mr. Kenney to discuss the group’s work and provide input; in a follow-up letter, staff noted the frustration localities have with the lack of funding, underfunding, or subsequent shifting of costs for programs/services from the state to localities. Mr. Kenney will meet with the TJPDC Commission later this fall.

    In a letter to local government officials just after his appointment of Task Force members, Governor McDonnell urged localities to provide a list of mandates they believe should be modified or eliminated. The governor noted that he was particularly interested in areas “where the burden can be lifted entirely and both local government and the state can live without the mandate in order to save money.” The Task Force has a website at Mandates Task Force.  Comments can be submitted through this site. The group holds its first meeting on November 7.

CTB to Continue Local Maintenance Examination
    The Commonwealth Transportation Board (CTB) last week decided not to move forward with plans to redistribute local maintenance payments. Instead, it agreed that an analysis and comparison of road needs should be done before recommending any legislative changes. Specifically, the CTB Subcommittee on Evaluation of Local Maintenance Payments reached the following consensus:

  • Lack of available data on local system condition and performance limits further analysis.
  • The most equitable approach to distribution of scarce maintenance funding may be a formula that incorporates a prioritized needs-based factor along with a commitment to maintain our statewide assets, regardless of maintenance responsibility.
  • Reconvene the local government working group (in partnership with VML and Virginia First Cities Coalition) to advance the collection and analysis of system condition and performance data on the locally maintained system.

    Secretary of Transportation Sean Connaughton also recommended that the CTB take a close look at the overall state maintenance budget early next year. A presentation to the Board showed that while maintenance program expenditures through September were more than 50% higher than the same period last year, spending also was below budgeted amounts so far in FY12. It is anticipated that maintenance spending for the fiscal year will be more than $100 million below budget. The Secretary questioned continued transfer of construction dollars to maintenance if the state was not spending what it had allocated for maintenance.

Revised  Biosolids Regulations Approved
    The State Water Control Board has approved final regulations pertaining to the land application of biosolids.  The amendments affect three regulations (Virginia Pollution
Abatement Permit Regulation, Virginia Pollutant Discharge Elimination System Permit Regulation and Fees for Permits and Certificates Regulation) that make up the requirements for land application of biosolids. Here are highlights of the approved changes:

→Stipulates that a physician must request or supply a patient note for approval of extended setbacks from homes and property lines of land application. Requests for an extension after biosolids have been delivered to a site must be made at least 48 hours before application.
→Establishes a minimum setback requirement around schools and hospitals of 400 feet.
→Requires notice of no more than 24 hours prior to biosolids being delivered or applied at a permitted site.
→Requires notification signs posted at land application sites not be removed for 30 days after application.
→Setback from surface waters is set at 100 feet unless a 35 foot vegetated buffer is present.
→A requirement for PCB sampling at the time of initial permit has been added.
→Staging (short term placement of biosolids on any field ready to be land applied) can be no longer than seven days. Biosolids must be covered if conditions do not allow application by the end of this time. Biosolids cannot be staged within 400 feet of an occupied dwelling or 200 feet of a property line, unless waived through owner consent.
→DEQ must notify adjacent residents whenever acreage is added to a permit.
The regulation now enters a final executive branch approval phase, to be followed by a final 30-day adoption comment period.

VRS Approves Teacher Retirement Contribution Rates
     The Virginia Retirement System (VRS) last week approved retirement contribution rates for public school teachers and state employees. The new rates are forwarded to the governor and General Assembly for inclusion in the next two-year state budget, which will be crafted during the 2012 General Assembly session.
The VRS certified a teacher contribution rate of 16.77%, a rate nearly two-and-a-half times the current rate:
→Given that each additional percentage point increase in the retirement rate carries a $70 million pricetag, total costs of funding the VRS-certified rate stands to be around $700 million.
→Given that the share of local costs for retirement are nearly 70%, the end result is a nearly half billion dollar in costs for localities statewide.   
→The Board had certified a 12.91% teacher rate for the current biennium, but the General Assembly approved rates of 3.93% for FY11 and 6.33% for FY12. The General Assembly has typically funded a lower rate than approved by VRS. The VRS estimates that the unfunded long-term liability of the retirement system is about $20 billion.

APA Reports on Local Fines, Suggests Further Questions to Address
    A language amendment in the current biennial state budget directs the Auditor of Public Accounts to determine the extent to which localities are collecting fines on the basis of local ordinances which parallel state statutes.

    According to the report released late last month, localities assessed just over $152 million in fines and costs on local ordinances, and collected just over $95 million in FY10. The report posed a number of policy options that the General Assembly could consider, including whether counties and cities should continue to be authorized to adopt ordinances that parallel state statues and retain the fines, fees, and costs in local treasuries; whether towns could continue to assess and collect fines and fees; whether the state should continue to fund a portion of the circuit court clerk functions for the recordation of land fees; and whether clerks of the court should continue to receive a commission for depositing state and local collections with the treasurers.

    If authorized by the General Assembly, a local governing body can enact an ordinance that parallels a state law. Then, law enforcement officers can choose between a local ordinance and a state statute when issuing a uniform summons. Collected fines and costs for summons issued on a state statute are deposited in the Literary Fund, while fines and costs issues on a local ordinance remain with the locality.

JLARC Releases State Spending Report
    The Code of Virginia requires the Joint Legislative Audit and Review Commission (JLARC) to annually review and report on overall state spending. JLARC staff recently reviewed state spending with the Commission. The state spending report again noted that growing population, increasing state agency workloads and costs, policy decisions to alter state programs and activities, and inclusion of non-general funds in the state budget were the primary drivers behind state spending increases over the past decade (FY2002-FY2011). While Virginia’s total operating budget increased 66% the last 10 years, just 29% of the increase was in the general fund. Federal funds have more than doubled over the past decade, boosted by the receipt of more than $1 billion in federal stimulus funds during the last two fiscal years. In all, 10 state programs accounted for nearly three-quarters of the general fund appropriations over the ten-year period.


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