LEGISLATIVE CONNECTION

February 19, 2010

SAVE THE DATE

THE CHAMBER'S ANNUAL LEGISLATIVE WRAP-UP
April 1, 7:30 to 9:00 AM
Holiday Inn - Valley View
3315 Ordway Drive (Map)
For more information or to register, click here.

Budget Cuts Unveiled!!

After several weeks of increasingly vociferous criticism over his lack of specificity, Governor McDonnell delivered a comprehensive outline of how to mend Virginia's historic $4.2 billion budget shortfall at a Wednesday morning press conference. While many legislators, school administrators, and state and local officials have been bracing for a worst case scenario since the opening of this year's session, the potential implications of McDonnell's proposals were still quite jarring. Simply put, Virginia's unprecedented budget situation requires an unprecedented response. With the budget plan released Wednesday, the size and scope of state government would be effectively restructured.  

A quick summary of budget cuts can be found here.

A comprehensive list of cuts with descriptions can be found here.  

For a tutorial on how Virginia's budget is structured, click here. 

In crafting his budget blueprint, Governor McDonnell had to find an additional $2.2 billion in cuts on top of the $2.0 billion in cuts proposed by former Governor Kaine in December. Because K-12 education and many health and human services programs had previously escaped the budget scalpel, they became prime targets under McDonnell's austerity plan. Under the budget scenario released Wednesday, K-12 education would be cut by an astounding $731 million. This figure includes savings of $226 million by returning the state to 2008 funding levels and $130 million in reductions for school personnel who provide support for extracurricular/athletic activities like coaches. The budget would also eliminate state support for the school breakfast program (also funded through a federal program)  and extend the life cycle of school buses by three years. Health care related services would also be trimmed by $316 million, including cuts to Medicaid and a freeze in enrollment for the Family Access to Medical Insurance Security (FAMIS) program. McDonnell also proposed a furlough plan that would require state workers to take 10 unpaid days off over the next two years. This plan would result in an estimated $180 million in savings. However, the state would offset lost wages with a 3% bonus for state workers in December 2011. Some legislators are reportedly cool to the furlough proposal claiming that furloughs can be quite disruptive. Finally, McDonnell proposed steep cuts in state contributions to state and teacher pension plans by more than $600 million. 

The McDonnell plan does restore some of Kaine's recommended cuts to public safety,  including funding for a new state trooper training school and changing the deputy funding ratio to 1 per 1,650 people. In Kaine's final budget plan, the deputy funding ration was reduced to 1 per 2,000.

In describing how the process will likely unfold, McDonnell stated "I expect some of these ideas will be accepted, and some of them will not." On Sunday, the House and Senate budget committees will release their competing budget blueprints. According to this article in The Free Lance Star, the Senate is not likely to eliminate the state car tax reimbursement payments to local governments, an idea originally proposed by Governor Kaine that would have saved the state $950 million. Over the next few weeks, House and Senate budget writers, along with the McDonnell administration, will redefine the core priorities and responsibilities of  government.

House Budget Conferees

When the House and Senate begin negotiations to reconcile their budgets, the House side will have two new representatives. Chris Jones (R-Suffolk) and Steve Landes (R-Augusta) are expected to be named as House conferees. See more here.   

A Glimmer of Hope?

This week, Virginia's Secretary of Finance, Ric Brown, provided state budget writers with an overview of Virginia's ailing revenue collections. According to Secretary Brown's figures, total general fund revenue declined 6.5% in January with collections in net individual income taxes, sales tax, and recordation taxes declining.  However, as Brown pointed out, when adjusting for the proposed accelerated sales tax and a shift in insurance refund issuance, the actual revenue decline was closer to 4.0%. This is still below the revised annual forecast of 2.7%. On the bright side, the Tax Department did report that collections of corporate income tax payments were up significantly. Brown also stated that payroll withholding tax collections  posted a marginal increase. For a copy of Brown's briefing to the House Appropriations Committee, click here.

Other Notable Legislation

The "Amazon" Bill - Update

On Tuesday,  legislation (SB660) sponsored by Senator Emmett Hanger (R-Augusta) that would require on-line retailers to collect sales taxes from their customers in Virginia cleared the Senate on a 27-12 vote. During the debate on the Senate floor, supporters of this legislation claimed traditional brick-and-mortar retailers would be put on a equal playing field with large, on-line retailers. Opponents countered by pointing out that this legislation could lead on-line retailers to sever their ties with Virginia affiliates who refer Virginia shoppers the on-line retailers. The local affiliates typically receive a commission for their referrals. According to an estimate by the Virginia Retail Federation, this legislation could generate $17 million in revenue. This bill now moves to the tax-averse House of Delegates.
The Chamber supports equal playing fields for on-line and bricks-and-mortar retailers. 

Autism Mandate

Senate legislation (SB464) that would   mandate that insurers provide coverage for the diagnosis and treatment of autism spectrum disorder emerged from the Senate Commerce and Labor Committee on Monday on an 11-4 vote. On Tuesday, the bill was approved by the full Senate on a  27-13 vote. This legislation mandates coverage for children between the ages of 2-6 and had an annual cap of $35, 000.00. The mandate also would not apply to the state's employees' health insurance plan until July 1, 2015. In an attempt to scuttle this legislation, Senator Frank Wager (R-VA Beach) tried to add a floor amendment requiring that the state plan immediately include the autism mandate  His motion was defeated. The bill will likely be referred to a House subcommittee that failed to advance a similar House version of this bill earlier in the session. The Chamber opposes additional mandates. 

Offshore Drilling Resuscitated?

In a somewhat surprising move, the Senate Finance Committee voted to report legislation that would allow the Commonwealth to collect future revenues and royalties from offshore natural gas and oil resources. The same Senate Committee had previously reported a similar Senate bill (SB601) but the legislation was referred back to the Senate Finance Committee last week to be carried over until next year. The House version of this bill (HB756), sponsored by Delegate Chris Stolle (R-VA Beach) would allocate a majority of future offshore revenue and royalties to the Transportation Trust Fund Unlike the earlier Senate version, this legislation emerged without an amendment that would direct potential revenue to the state's general fund. There is a good chance this bill could be amended on the Floor to direct future monies  to the general fund. Opponents of the legislation reiterated that this legislation is "an attempt to allocate mythical revenue" because a change in federal law is required to set up a revenue sharing agreement between the federal government and Virginia.  Supporters pointed out that both Senator Jim Webb and Senator Mark Warner recently pushed the Interior Department to begin a  lease sale in 2011. The Interior Department has indicated that more environmental studies could delay the lease sale until 2012. Virginia would become the first state on the East coast to pursue offshore drilling  since a congressional ban and presidential moratorium on offshore exploration were  lifted in 2008.  

Important Session Dates 

February 21 - Senate Finance Committee, House Appropriations report Budgets

March 13th - Adjourn Sine Die

Video

To view live video or hear live audio from the House and Senate floor sessions, click here.

This format allows you to check bills and their status at a glance, by category. If you have questions along the way, please feel to contact or Tori Williams at twilliams@roanokechamber.org or 540.983.0700 x 229 or 540.819.7713. 

Click here to contact your legislators.

We’ll be sending out ACTION ALERTS! to enlist your help when needed. Please respond when requested. Your voice counts! If there are bills or topics you'd like us to include, let us know. We appreciate your feedback.

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