The House and Senate budgets were officially placed in conference on February 13 and conferees will be working to resolve differences between the two proposals in advance of the session’s scheduled adjournment on Saturday, February 23. Both proposals contain elements of interest to local governments; a short list of priority items is provided below. Amendments labeled “h” are in the House budget; amendments labeled “s” are in the Senate budget.
ACTION REQUIRED – VACo encourages members to contact budget conferees and members of your delegation about the following items. VACo would appreciate receiving copies of your correspondence if you contact your legislators in writing.
House Conferees: House Appropriations Chairman Jones; Delegate Landes, Delegate Peace, Delegate Knight, Delegate Garrett, Delegate Torian, Delegate Sickles
Senate Conferees: Senate Finance Co-Chairman Norment, Senate Finance Co-Chairman Hanger, Senator Saslaw, Senator Howell, Senator Newman, Senator Ruff, Senator Wagner
Items VACo Opposes
Machinery and Tools Tax Workgroup (Item 255 #1s): Language in this amendment directs the Secretary of Finance to convene a workgroup of stakeholders to develop a proposal to eliminate machinery and tools taxes on new equipment for its first five years, and reimburse localities for up to $50 million per year in foregone revenues. VACo and VML proposed amendments to the language to allow for other options to be considered, but thus far the amendments have not been accepted; approaches that would leave the tax in place but allow for the taxpayer to be compensated by the state would be preferable.
ACTION REQUIRED – Please contact conferees and request that the language be eliminated.
KEY POINTS
- The language of the amendment is prescriptive and contemplates no alternatives to its proposed model of tax relief.
- Under the current language, the proposal to be developed would leave localities reliant on the state to maintain its commitment in future years to reimburse localities for lost revenue associated with eliminating machinery and tools taxes for new equipment.
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Diversion of Communication Sales and Use Tax Funds (Item 3-1.01 #1s): VACo strongly opposes this amendment, which would override the statutory provisions governing distribution of funds from the Communications Sales and Use Tax Trust Fund by diverting $2 million per year to the General Fund. The diversion of funds originally occurred in the 2018 Appropriations Act, reflecting savings in costs for the telecommunications relay services contract, which is funded through the Trust Fund before the remaining revenues are distributed to localities. VACo objected to this transfer and requested that the Governor eliminate it in his introduced budget. The introduced budget eliminated the transfer in FY 2020, an action VACo welcomed. The Senate budget reverses the Governor’s action. In the House budget, the Governor’s action is also reversed, and the budget proposes to transfer the $2 million per year to the Virginia Telecommunication Initiative (rather than the General Fund). (Item 3-1.01 #6h)
ACTION REQUIRED – Please contact conferees and request that the transfer be eliminated.
KEY POINTS
- When localities agreed to the restructuring of telecommunications taxes in 2006, there was an understanding that the revenues generated by the new statewide Communications Sales and Use Tax would be held in trust for localities.
- Taking these funds for general state purposes is not in keeping with this agreement and sets a troubling precedent for future diversions from the Trust Fund.
- Although VACo strongly supports state funding to enhance broadband access in unserved and underserved areas, the state removing funding from the Trust Fund and redirecting it to a priority determined by the state still sets a worrisome precedent, as there is no guarantee that future diversions from the Fund will be used to support local priorities.
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Items VACo Supports
Staffing for Commonwealth’s Attorneys’ Offices (Item 70 #1h): Funding provided in this amendment, paired with funding provided in the introduced budget, would address 20 percent of the unfunded positions in Commonwealth’s Attorneys’ offices.
ACTION REQUIRED – Support the inclusion of this funding in the conference report.
KEY POINTS
- Staffing standards determined by the Compensation Board have not been fully funded since FY 2008.
- State support for existing unfunded positions is particularly important given language in the Senate budget (Item 73 #1s) (reflecting a workgroup report prepared in accordance with 2018 Appropriations Act language) that would provide for localities to fund new positions in accordance with a specified ratio to address workload issues resulting from the use of body-worn cameras, unless an alternative arrangement could be worked out with the local Commonwealth’s Attorney. Before localities provide additional staff at local expense, the state needs to meet its obligations to fund positions in accordance with its own staffing standards.
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Additional lottery per-pupil funding (Item 136 #11h): Funding provided in this amendment provides an additional $27.4 million in FY 2020 for the Supplemental Lottery Per Pupil Allocation to bring that allocation to 45 percent of lottery funds.
ACTION REQUIRED – Support the inclusion of this funding in the conference report.
KEY POINTS
- Lottery Per Pupil Allocation is allocated by student and gives school divisions total flexibility as to how the funds may be budgeted. There is no local funding match required.
- The Governor’s introduced budget proposes an increase to the Supplemental Lottery Per Pupil Amount in fiscal years 2019 and 2020, from $336.08 per pupil to $364.15 per pupil in fiscal year 2019, and from $341.96 per pupil to $367.44 per pupil in fiscal year 2020. This proposal adds additional funding to increase the Per Pupil Amount by almost $40.00, from $367.44 to an estimated $406.90 in FY 2020.
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At-Risk Add-On funding: The Governor’s introduced budget proposes an additional $21.1 million in fiscal year 2019 and $14.3 million in fiscal year 2020 in at-risk add-on funding. This increases supplemental state funding to support services for students from low-income families up to 1-16% more per student eligible for free lunch.
ACTION REQUIRED – Support the inclusion of this funding in the conference report.
KEY POINTS
- VACo supports efforts to increase at-risk children’s access to high-quality, enriching learning environments. At-Risk Add-on funding can be used flexibly to attract and train teachers, reduce class size, emphasize math and reading, prevent students from dropping out and offer after school wrap-around services.
- The House version does not include this increase and the Senate proposal provides $10.7 million in General Funds to increase the at-risk add-on percentages to 14.5 percent in FY 2019 and 15.5 percent in FY 2020.
- The House and Senate proposed funding version may increase through the budget conference process in an effort to promote more funding that addresses equity issues.
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Literary Fund School Construction interest Rate Subsidy (Item 136 #8s): Funding provided in this amendment increases maintains $70.0 million in the Literary Fund for school construction support from the introduced budget funding level of $80 million.
ACTION REQUIRED – Support the inclusion of this funding in the conference report.
KEY POINTS
- The Literary Fund is a permanent and perpetual school fund established in the Constitution of Virginia. The Literary Fund provides low-interest loans for school construction among other provisions, but currently has 18 projects pending on a priority waiting list due to lack of funds.
- Of the $70 million reserved for this purpose, $32.5 million will be used for Literary Fund loans for projects on the First Priority Waiting List. Another $32.5 million will be used for an interest rate subsidy program for projects on the First Priority Waiting List, and $5 million will be used for an interest rate subsidy program based upon the provisions in SB 1093 (Ruff). SB 1093 offers a 100 percent interest rate subsidy for school divisions with a Composite Index of 0.2500 or below, and a 50 percent interest rate subsidy for school divisions with a Composite Index greater than 0.2500 but less than 0.4000.
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School Resource Officer (SRO) Incentive Grant Program (Item 395 #2h): Funding provided in this amendment adds $3 million in FY 2020 to the SRO Incentive Grant Program which provides funding to place school resource and security officers in K-12 schools where none currently exist.
ACTION REQUIRED – Support the inclusion of this funding in the conference report.
KEY POINTS
- This amendment brings the total funding for the program up to $4.7 million in FY 2020 and should cover the cost of 44 additional positions funded through the grant.
- This is a recommendation of the House Select Committee on School Safety.
- VACo supports dedicated state funding that serves as an incentive for school divisions to hire additional Resource Officers.
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School Security Grant (Item 136 #13h): Funding provided in this amendment increases the School Security Equipment Grant annual allocation from $6.0 million to $12.0 million in FY 2020.
ACTION REQUIRED – Support the inclusion of this funding in the conference report.
KEY POINTS
- School Security equipment may include but is not limited to: Intercom systems, Hurricane or Ballistic Security window film, Electronic access control systems, Surveillance equipment and cameras, and Classroom security door locks among other items.
- HB 2720 (Gooditis) would further expand eligible security upgrades.
- VACo supports dedicated state funding to improve school security for both capital and operational costs.
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Grow Your Own Teachers (Item 141 #3h): Funding provided in this amendment provides ~$0.2 million in fiscal year 2020 for the Grow Your Own Teacher pilot program.
ACTION REQUIRED – Support the inclusion of this funding in the conference report.
KEY POINTS
- Virginia currently has approximately 1,000 unfilled K-12 teaching positions across the Commonwealth.
- VACo supports strategies that address the teacher shortage in the Commonwealth and programs aimed at reducing student debt for teaching in public schools.
- This amendment directs the Virginia Department of Education to establish a process by which local school divisions may apply for grants to provide scholarships no greater than $7,500 to high school graduates that attend a Virginia state institution of higher learning and subsequently teach in a high-need public school within their division of residence among other conditions.
- This budget language mirrors HB 1724 (Krizek).
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Impact of Medicaid Expansion on Community Services Boards (Item 310 #2s): The Senate budget contains language requested by VACo, VML, and the Virginia Association of Community Services Boards that adjusts provisions in the introduced budget that would allow the Department of Behavioral Health and Developmental Services (DBHDS) to make funds available from certain balances to CSBs whose Medicaid billings for newly-insured clients fall short of their General Fund reductions incorporated in the 2018 Appropriations Act.
ACTION REQUIRED – Request that this language amendment be incorporated into the conference report.
KEY POINTS
- Some CSBs are concerned that their Medicaid billings for previously-uninsured clients will not make up for the reductions in General Fund support, particularly in the current fiscal year, when CSBs and managed care organizations have needed to develop and perfect billing processes and an influx of newly-eligible people must be enrolled in Medicaid.
- From VACo’s perspective, the Senate language improves on the introduced budget by allowing the funds to be made available prior to the end of the fiscal year, and requiring reporting on how the expected General Fund savings compare to actual Medicaid payments for FY 2019 so that adjustments may be made for FY 2020.
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Stormwater Local Assistance Fund (SLAF) (Item 368 #1s): The Senate budget provides $10 million for SLAF in FY 2020. The Governor’s introduced budget included an additional $50 million in FY 2020 for SLAF, but the House and Senate both initially struck this funding from their budget proposals, with the Senate ultimately opting to include $10 million for SLAF in FY 2020. This new $10 million would be in addition to the $20 million already in place for FY 2019.
ACTION REQUIRED – Support the additional SLAF funding.
KEY POINTS
- VACo has historically supported robust funding for SLAF, which provides dollar-for-dollar matching grants to local governments for the planning, design and implementation for stormwater management improvement projects.
VACo Contact: VACo Legislative Team