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Everybody seems to be writing the governor these days. Their theme is often retirement, but the tone is anything but retiring.

The Virginia Municipal League and Virginia Association of Counties have become regular correspondents with Gov. McDonnell, who has a little pile of papers on his desk called the 2010-2012 budget. The local government advocates already have written the governor with some of their gripes about the document, ranging from the way it redefines a “state-responsible prisoner” to shift jail costs to localities to language that appears to make the Communications Sales and Use tax part of the general fund.

But the latest letter from localities is all in favor of a budget provision that would give school boards, city councils, and boards of supervisors the power to reverse themselves on who pays the annual cost of local employee pensions. Right now, local governing bodies and school boards pay the employee’s share of the pension contribution in most cases, but the budget adopted by the General Assembly last month would give them a new option.

That doesn’t set well with police officers, sheriff’s deputies, and school teachers, who worry that the local option could become a personal pay cut. And they’re letting the governor know what they think about it.

Read more about it in the Times-Dispatch in the next few days.

Local government advocates were mostly relieved as Senate and House budget negotiators today released the details of the deal made on a two-year budget.

“It could have been much worse,” said Mary Jo Fields, a budget analyst for the Virginia Municipal League after a Senate Finance Committee briefing this afternoon.

True, state aid for K-12 education would be cut an additional $253 million over the next two years, but’s a far sight less than the $685 million in cuts recommended by the House. Funding for sheriff’s and police departments was mostly restored from deep cuts sought by both houses. The state restored much of the aid for constitutional officers—commonwealth’s attorneys., treasurers, commissioners of revenue, and finance directors.

Most important to localities, the proposed budget won’t raid the Communications Sales and Use Tax Fund, created four years ago out of a myriad of taxes charged on phone bills by local governments. The House treated the fund as state tax revenues, while local governments and telecommunications companies insisted that the money be kept for localities. On the other hand, the money for the positions will come from state cuts in direct aid to localities, but local governments prefer it that way.

One provision that’s already stirring opposition among anti-tax groups is a $2 increase in the so-called Four for Life Fund fee charged on motor vehicle registrations to pay for various emergency medical service training programs, equipment grants, and local rescue squad recruitment. The increase will raise the fee to $6.25 from $4.25, which is part of the $38.75 registration cost for most vehicles. It will raise about $12.6 mllion a year, allowing the state to restore money taken from the EMS funds, support the State Police medical helicopter operation, and generate money for the general tax fund. Opposition already is arising from organizations that regard the increase as a tax that has little to do with the services it would finance.

The House of Delegates is abandoning a proposal to require local governments to pay back a portion of the state money they would receive next year for public education.

One of the architects of the proposal, House Appropriations Committee Staff Director Robert P. Vaughn, said today that he doesn’t think the payback proposal will be necessary to avoid violating federal rules for accepting stimulus money for K-12 education.

Vaughn expects the budget that emerges from a conference committee of the House and Senate not to drop state spending on K-12 below the 2006 level of $5.2 billion. That was the threshold for the stimulus law’s requirement that the state maintain its level of effort in supporting public education as a condition for receiving hundreds of millions of dollars for K-12.

“I don’t think we’re going to have that issue when we finally settle the budget,” he said.

Vaughn and Del. Kirk Cox, vice chairman of House Appropriations, delivered the same message yesterday in a meeting with Chesterfield County Administrator Jay Stegmaier, who said he welcomed the news.

Under the plan, Chesterfield would have received about $13 million for teacher retirement and health care credits next year, and then would have had to repay almost $9.5 million. With a school budget hole of more than $42 million, Chesterfield officials weren’t relishing the idea of returning money to the state, Vaughn said.

“We talked about the confusion of money coming in and having to be sent back,” Stegmaier said today.

The late Hunter Andrews used to tell state senators in an election year to welcome the opportunity “to be refreshed by the will of the people.” I thought about that when I drove back to Richmond on Thursday night from Cartersville, where I witnessed a lively Town Hall meeting about a likely increase in real estate taxes to deal with a budget shortfall of more than $2 million. It was the third Town Hall held on the subject in about a week, and Sheriff Darrell Hodges said the earlier meetings were a lot rougher.

Jeremy Slayton and I have a package of stories about the budget fallout in rural Virginia that is scheduled to run in Sunday’s print edition of the Times-Dispatch. Jeremy looks at small school systems, which are taking a big hit from cuts in state aid for education. I contribute a short sidebar about the resentment among local officials over having to contemplate significant tax increases to make up for cuts in state aid for services that the state requires them to provide.

The situation is particularly gruesome in Cumberland, where residents are proud of the progress they’ve made in improving a rural school system that is among 21 in the state that meets both state accreditation requirements and federal standards for annual improvement in educational quality. Part of that pride is a new school complex for middle and high school students, replacing old buildings that in one case had been condemned as unsafe.

But the new complex is a big part of the problem, too. Debt service on the project is coming due in the next fiscal year, accounting for about $2.5 million of the county’s overall debt service of $4 million.
Cumberland has been counting on revenue from the new regional landfill that Republic Services was supposed to open last year. Now, the landfill might not open until next year, taking a big chunk of tax revenue away that was supposed to cover the debt on the new complex.

The school system already has cut $1.6 million out of its budget for the next school year, eliminating about 13 percent of its work force. Superintendent Jim Thornton says the county could face an additional $800,000 in cuts to make up the $2 billion car tax hole in the state budget. State legislators say it shouldn’t be nearly that bad because of a proposal to hold localities harmless from losses from a change in the funding formula, and local savings expected from steep reductions in contributions to teacher pension plans. We’‘ll see.

In the meantime, the school system and county government are looking at a possible increase in the real estate tax rate of up to 26 cents per $100 just to pay the debt service, keep local funding for schools level, and enable the sheriff’s department to continue providing law enforcement coverage around the clock (which it began doing less than two years ago). To make matters even tougher for taxpayers, this is the year that Cumberland reassessed its property values for the first time in four years, resulting in an overall increase of 12 percent.

Taxpayers are yelling, but parents are worried about what will happen to their schools if the county doesn’t find the money.

Sometimes, it pays to get out of Richmond and be refreshed by the voice of the people, and not just in election years.

Thanks for insight

If “Four for Life” doesn’t raise enough money for emergency services in Virginia, members of a key Senate committee think maybe “Six for Life” will.

The Senate Finance Committee proposes to raise the fee for registering a vehicle in Virginia by $2 to $6.25, which would raise money both for local fire and rescue squads, and the State Police emergency medical helicopter service, Med-Flight.

And it would generate more than $10 million for the state’s beleaguered general fund.

The proposal presents a new wrinkle in what has been a spirited fight involving rescue squads and fire departments trying to fight off gubernatorial raids on the “Four for Life Fund.”

The Senate proposal faces a tough audience in the House of Delegates, which already has voted to strip $145 million in proposed fees from the two-year budget proposed by Kaine. The House budget proposal makes no change in Kaine’s proposal to divert additional money from the rescue squad fund.

Check out tomorrow’s print edition for details.

Sure, raise the fee, raise everything we pay fees for by $2, it sounds better than raising the taxes, and no body breaks their campaign promises. It is truly a shame how stupid our elected officials think we are.

i think it sounds like a good idea. As long as the money doesn’t get secretly funneled into gubernational hands

What matters most to local school divisions at this point is how much state aid they are likely to lose for the budget that takes effect on July 1 for fiscal 2011. That’s why we focused on those numbers in a front page story today about estimates compiled by the Virginia Education Association based on the likelihood that the Senate Finance Committee will propose an additional $723 million in cuts to state aid for education on Sunday.

But it’s important to note that’s a two-year number, so the VEA is estimating a comparable but not exact impact on schools in the 2011-12 budget year. For Chesterfield County, that’s an estimated $17.7 million, for a total impact of $39.2 million over two years. That total includes the $3.4 million the county will lose if the General Assembly agrees with Gov. Bob McDonnell that the update of the funding distribution formula should change immediately instead of being frozen for a year.  It does not reflect the $42 million shortfall that Chesterfield already is projecting in its school budget, based on reduced state funding in the budget introduced by then-Gov. Tim Kaine, falling local property tax revenue, and increased costs for teacher retirement and health benefits, among other things.

The totals are similarly ugly for other localities in the region: an additional $14 million cut to Henrico schools for a two-year total of $29.7 million; an additional $7.3 million in Richmond ()which was hit particularly bad by the formula update) for a total of $26.7 million; and an additional $5 million in Hanover for a total of $10.9 million.

Here’s something else we didn’t have room to explain in our print story today. The updating of the funding formula, or Local Composite Index, will cost the state an additional $29 million, which McDonnell plans to get from a variety of sources. While Kaine’s proposal to freeze the update for a year was good news to most school divisions, especially in Hampton Roads and the Richmond area, it was too much for Fairfax and other big Northern Virginia localities that were going to benefit from the formula for a change because it showed their loss of wealth in property values in the recession. The VEA estimates show what a big difference that makes. Fairfax would get an extra $61.8 million, so it would still stand to receive a net increase in state funds of more than $34 million in the first year of the budget even after the potential cuts by McDonnell and the legislature. Same thing in Loudoun, which would receive an additional $34.5 million under the formula for a net gain of $22.7 million after the cuts. It’s a little different in the second year, with VEA estimating a loss of $31.6 million for Fairfax and $14.5 million for Loudoun.

On the other end of the spectrum, Virginia Beach (McDonnell’s old constituency)  would get the worst of it: a total estimated loss of almost $57 million in the biennium, including almost $15 million in the first year because of the governor’s decision to “undo the freeze.” It’s no surprise that Hampton Roads legislators have been far less docile than many Richmond-area representatives in accepting the governor’s decision.

Michael:  Again, RRHA is negotiating with a Property Developer who is foreign to the Richmond Community.  There is no regard to HUD Section 3 (Community Block Grant Funds). The requirement (Master Developer for the Dove Street Area RFQ No. RRHA-RFQ-2010-01) only had two firms responding. One of which is Kushman Institution LLC (HUD Section 3 “Business Concern”) which is a local Property Developer.  The local firm has never been interviewed regarding the submittal(12/15/2010).

In 2004, the Town of Ashland voted to raise its meals tax by a penny on the dollar, for a total of 5 percent. Later that year, voters in Hanover County rejected a proposed 4 percent meals tax by a resounding margin, while in New Kent County, the voters adopted a 4 percent meals tax.

That, in a nutshell, presents the arguments both for and against legislation pending in the General Assembly to give counties the same authority as cities and towns to levy a meals tax. Hanover doesn’t have the same power as Ashland (or Richmond, which raised its meals tax a penny by City Council action in 2003) to impose a meals tax without a public referendum. On the other hand, voters have been known to approve meals tax referenda, as New Kent proved in 2004 and little King William County did last year. So, why not leave it up to the people?

Virgil Hazelett has an answer for that question. As county administrator in Henrico County, he helped engineer a referendum in 2005 to issue about $349 million in bonds to build schools and libraries, buy parkland, and construct roads. The voters approved the bonds, but they voted down the meals tax that was proposed to pay for them. As a result, Henrico delayed dozens of projects to spread out the costs an extra year.

This is not a new debate for the General Assembly, but the political environment has changed because of the recession and the great gulf that local governments have to fill in their budgets. Since half of the state general fund represents aid to localities and the state has to cut more than $4 billion from the next two-year budget, there is no relief coming to local governments from that direction. That leaves local real estate taxes, based on property assessments that have been falling, in some cases precipitously, in the economic calamity that began about two years ago. So, some state lawmakers reason that this is a good time to give localities another tool to raise revenue, even though they’re not willing to raise taxes themselves.

To wit, the state Senate approved a bill that would allow counties to levy a meals tax without referendum and remove a 4-percent cap on the rate. The debate may be moot because the measure is heading for what looks like sure death in the House Finance Committee, which already has disposed of a similar proposal this year.

Still, the debate is important even if the outcome is predictable. My story in tomorrow’s print edition of the Times-Dispatch will give you a little more to chew on.

“Taxation without representation” should never be allowed. What’s next a tax on the air we breathe?

We will be starting a meal tax next year. While not popular, larger classrooms are a larger concern so it looks like the debate will quickly pass.

As a parent, it’s a trade I’m willing to make.

Local school divisions in the Richmond region are feeling like a rattlesnake bit them twice.

First, Tim Kaine cut state money for K-12 education by $83.3 mllion for eight Richmond area localities in the budget year that begins on July 1. Ouch!  Then, Bob McDonnell discarded his predecessor’s one-year shield from changes in the state formula for distributing school money—another $17.6 million bite for seven of the localities. Double-ouch!

Local government leaders were rubbing their shins yesterday at the Richmond Regional Planning District Commission, where they were seeing exactly how bad the swelling is around their state budget wound. The biggest bite came from a chart prepared by fiscal consultant Jim Regimbal, a former state budget analyst who’s been doing some work for the Virginia First Cities Coalition. Regimal’s chart adds up the double education cuts, as well as decreases in funding for police and sheriff’s departments, and other constitutional officers.

And then he let local leaders know exactly what it would mean to their local real estate tax rates.

“I tried to dramatize to people what the local governments are facing from the state,” said Regimbal, who didn’t attend the commission meeting himself.

In Richmond, which led yesterday’s regional insurrection, the cuts add up to $32.6 million, or 17.3 cents on the local tax rate, For education alone, the cuts add up to about $24.9 million, or about 13 cents on the tax rate. “That is something we cannot do to our residents,” Mayor Dwight C. Jones said in a two-page press release yesterday.

The city has a particular bone to pick with the Local Composite Index, which changes every two years to reflect a locality’s ability to pay for education. Normally, Northern Virginia doesn’t get much help from the state because its wealth puts its local school divisions high on the index. This time, the recession and real estate collapse brought the Northern Virginia localities down in the index, meaning they would get more than $128 million in additional state money for K-12.

Except Kaine, a former Richmond mayor and councilman, proposed to freeze the formula change for a year instead of trying to make it up elsewhere for the localities that would lose money. Northern Virginia erupted as a regional force that no good politician can ignore. So McDonnell torched the freeze, leaving both the Richmond region and his home turf, Hampton Roads, feeling snakebit. It’s true that the state has been using the index to divide education money for 40 years, but Richmond has been complaining almost as long that it is portrayed as affluent while its school system is overwhelmed by the effects of poverty. The latest change shows Richmond as second only to Goochland County in affluence in the region.

“I love our surrounding counties, but I don’t believe we’re more affluent than them,” said Suzette Denslow, the mayor’s chief of staff and a former state deputy secretary of education.

Not everybody in the region hates the Composite Index, but nobody likes losing more money, especially with other state cuts hanging in the balance.

Here’s what Jim Regimbal’s chart shows for the rest of the region in terms of cuts to education, aid to police, and state money for constitutional officers (ie.,sheriffs, treasurers, commissioners of revenue, and commonwealth’s attorneys):

Chesterfield: $37.7 millon, or 12.3 cents on the tax rate;

Henrico: $32.5 million, or 9.7 cents;

Hanover: $12.3 million, or 10.6 cents;

Powhatan: $3.1 million, or 9.1 cents;

New Kent: $1.9 million, or 9.6 cents;

Goochland: $1 million, or 2.4 cents;

Charles City: $781,244, or 13.4 cents.

The formula should be revised and updated to allow more state funding to go to the poorer and less populated counties. Henrico, Chesterfield are wealthy enough to fund more of their school budgets. Instead they use their local money to build empires of administrative staff and non-essential personnel in the schools themselves.

It’s true that the state has been using the index to divide education money for 40 years, but Richmond has been complaining almost as long that it is portrayed as affluent while its school system is overwhelmed by the effects of poverty. The latest change shows Richmond as second only to Goochland County in affluence in the region.

That is a real drama

I think it is ridiculous for any american to allow a reduction in our kids education.

The Virginia Retirement System sure is popular at the State Capitol these days.

Tim Kaine gave the state and local school divisions a fourth-quarter holiday from pension contributions to balance this year’s budget. Bob McDonnell wants to scale back a proposed pension plan increase by half in the first year of the biennium to raise $25 million he can spend on economic development.

And now, the Assembly’s money committee is playing around with assumptions about the system to use a major piece of legislation as a vehicle to save big money in the bleeding two-year budget. The legislation is the product of Del. Lacey Putney, chairman of the House Appropriations Committee and a major player in anything to do with the VRS’ $48.3 billion enterprise. His proposal, House Bill 1189, would make major changes in how much new employees would pay toward their pensions, how benefits are calculated and cost-of-living adjustments are made, and when state employees, teachers, state police, judges, and some other law officers become eligible for full retirement. He’s only talking about employees hired after July 1.

McDonnell promised during the gubernatorial campaign that he wouldn’t make current state employees pay a portion of their 5-percent share of pension contributions, now borne entirely by the state as part of a budget deal more than 25 years ago in exchange for no raises. Kaine proposed to break that deal by shifting 1 percent in the first year of the budget and 2 years in the second. Finance Secretary Ric Brown, who helped write the Kaine budget, told me more than two weeks ago that McDonnell had made no decision about the current employees’ share. 

“I don’t think he’s taken a definite position on that,” Brown said in an interview on Jan. 26.

In the long run, actuaries estimate that Putney’s proposed changes could reduce costs by $3 billion over 10 years because of the magnitude of state and local payrolls that would be affected. And the chief aim of the bill is addressing the long-term challenge of funding future obligations to retirees. The problem for budgetmakers is that VRS estimates a modest impact in the near term—$22.1 million in the first year and $52.7 in the second. So, it’s not clear how the state can save hundreds of millions of dollars in the next two years on a measure that applies only to people who may or may not be hired.

Here’s one scenario from a veteran budget watcher who asked not to be identified because he’s not a retirement actuarial expert. By greatly reducing the state’s long-term expenses, the legislature could rewrite budget assumptions to push some of its actuarial obligations into the future. Presto, chango! The commonwealth’s budget obligation for funding those potential liabilities also moves into the future, leaving more money to fill the $1.9 billion hole left in the budget from Kaine’s ill-fated attempt to scuttle the car tax once and for all by substituting an income tax surcharge.

We may see soon. The Putney bill is up for consideration by an Appropriations subcommittee tomorrow afternoon.

Tim Kaine never missed an opportunity as governor to appear before elected officials from localities across Virginia who gather every winter for Legislative Day in Richmond.  After all, he was a former Richmond mayor and councilman.
 
His successor, Bob McDonnell, is passing up his first chance as governor to appear at the event, scheduled at noon on Thursday at the Richmond Marriott Hotel by the Virginia Municipal League and Virginia Association of Counties.

Press Secretary Stacey Johnson said the governor won’t be there because a scheduling conflict.

McDonnell’s director of policy, Eric Finkbeiner, was supposed to go instead, but he cancelled late Friday afternoon, according to VACo Executive Director Jim Campbell. Instead, Attorney General Ken Cuccinelli will appear at the noon legislative briefing for the two organizations. (Lt. Gov. Bill Bolling isn’t available because he’s presiding over the Senate then.)

The substitution, which Johnson said she knew nothing about, matters to the hundreds of local officials who will gather for the briefing. They want to know how much state aid they are going to lose in the next two years as McDonnell looks for an additional $1.9 billion in cuts on top of the $2.3 billion that Kaine proposed cutting before leaving office. Finkbeiner is in a position to know the details of the administration’s budget plans, which it has held closely.

VML and VACo officials are being diplomatic about the substitution. After all, they are getting face time with McDonnell in a private meeting on Thursday afternoon. “We’re certainly going to talk about the budget while we’re in there,” said VML Executive Director Michael Amyx, who will be accompanied by Campbell and the local officials who currently are presiding over the organizations.

They regard the budget crisis as a challenge shared by state and local government, so they are a little mystified that McDonnell is passing up a chance to reach out to local officials directly. “We see this an an excellent opportunity to address 400 to 500 elected officials all trying to work to the same mission,” Campbell said. “To me, it’s a missed opportunity.”