Virginia’s Money Committees Wade In:

Differing Budget Priorities in the Spending Pool

Executive Summary

In a sea of numbers, bills and amendments, it can be difficult to sort out the different proposals set forth by the two houses of the General Assembly. By delving into recently released budget reports, the priorities of each become clearer, and spending pools become more transparent.

• The House Appropriations and Senate Finance Committees released their budget bills on Sunday, Feb. 4, 2007. These bills outline how each body would amend the current budget. The respective “money committee” reports reflect different priorities, not only on the hot topic of transportation funding, but also on other key items such as pay raises for state employees, education initiatives, and health care spending.
• The transportation knot of the last few sessions has only tightened in recent days. The House and Senate have taken different approaches to increasing funding for transportation. A plan that passed the Senate Finance Committee last week and is reflected in many of the budget assumptions built into the Senate budget released Sunday, faced possible opposition on the Senate floor, and so was removed from consideration this week. That plan would have allowed a 5 percent sales tax to be levied on fuel distributors and provided for an optional 1 percent tax for the Hampton Roads and Northern Virginia regions.
• The committees differed on what pay increases to provide for public employees, with the House providing 3 percent to public school employees, but a 4 percent increase to state employees, college professors, sheriff’s deputies, and local social service workers. The Senate provided 3 percent increases for teachers and other public employees. Three percent is what was recommended both last year and in the Governor’s Budget amendments proposed in December.
• The Governor’s pre-Kindergarten proposal to establish pilot programs for expansion and a quality rating system for pre-K providers was reduced by the Senate committee, and not funded by the House.
• The two competing budgets must be reconciled by the time the General Assembly session is scheduled to end on Feb. 24.

Overview

The General Assembly’s “money committees” – The House Appropriations and Senate Finance Committees – released their amendments to the current two-year budget on Feb. 4. The Governor proposed his changes to the budget in December, and now the General Assembly must offer their own amendments to reflect their priorities. A lot of work must be done to finalize the budget, including floor debate and holding a conference committee to resolve differences. Given that the transportation debate is once again raging and a solution is not readily apparent, the remaining weeks until the scheduled Feb. 24, end of the legislative session, should prove interesting.

Virginia Revenues

Both the Senate and the House have kept close to the revenue projections provided in the Governor’s budget, which forecast sustained strength in the Virginia economy and continued growth in state revenues. The Governor’s budget anticipated a slowing of that growth, and the committee actions also reflect that forecast. In particular, the House Appropriations Committee notes that Secretary of Finance Jody Wagner recently expressed concern over the pace of estimate tax payments (one of the more volatile sources of revenue for the state). Since final figures on actual revenue will not be known until May, the House Appropriations Committee recommends setting aside $50 million in a “reserve” to accommodate any reduction in revenue that might occur after the General Assembly completes its business in February. If not needed to offset a reduction in revenue, the committee proposes to use the funds to “moderate” tuition increases at Virginia colleges and universities.

The Spending Plan

The following sections highlight the committees’ recommended spending changes that will most heavily impact low- and moderate-income Virginians.

Health and Human Resources. Overall, the money committees provided smaller increases than requested by the Governor in some areas, but more in other areas such as mental health. In his comments to the committee at the release of the recommendations, House Appropriations Committee Chairman Del. Vincent F. Callahan Jr. noted that the need for more state support to provide mental retardation waiver slots “was by far the number one priority for those that spoke” at the committees’ public hearings around the state.

In addition, the committees provided General Fund dollars (Senate: $54 million; House: $54.8 million) to the Health Care Fund to cover a shortfall in revenue due to lower tobacco taxes and reduced payments from the Master Settlement agreement with tobacco companies. The Governor has requested $58.2 million.

Other proposals include (funding from the General Fund):

• Pediatric Physician Services. The Senate agrees with the Governor’s proposal to increase the amount of money Virginia pays to doctors who treat children enrolled in Medicaid by a total of 15 percent instead of the 8 percent currently planned, but to delay that implementation by six months. The House only makes a10 percent increase and essentially uses the remaining funding to provide a 3 percent increase to all physicians (not just those who treat children).
• Prenatal Coverage. The Governor proposed and the Senate agreed that Medicaid eligibility be expanded for prenatal coverage of women from 166 to 200 percent of the federal poverty level. The House proposes to only increase coverage to 175 percent of the federal poverty level.
  
• Meals on Wheels – The House provided the same amount requested by the Governor to increase funds that allow Virginia’s Area Agencies on Aging to provide meals to the elderly. The Senate raised the Governor’s requested increase from $700,000 to $1 million.
• Education. The committees provided funding for K-12 education mostly to meet the formulas that govern the level of state funding for public educations, which is based on overall enrollment and the size of the needy student population. Some programs of interest are:
  • Pre-K Pilot. The Senate reduced by $1.2 million new funding proposed by the Governor for preschool pilot projects. The remaining $3.4 million in new funding would provide the state's share of the need-based, Virginia Preschool Initiative per pupil amount of $5,700 for an additional 1,000 students, plus $300,000 for start-up funding. The House did not support the Governor’s proposed expansion.
  • Algebra Readiness Program. Neither committee supported the Governor’s request to expand this program to include sixth graders.

The Governor proposed $13.7 million in increases for higher education financial aid in order to offset recent significant tuition increases at Virginia’s colleges and universities. The Senate supports the Governor’s requested increases. The House, however, adopted a different stance on tuition increases and reduced the proposed increase to $9.5 million, which was based on a change in assumptions in the financial aid model. The State Council of Higher Education (SCHEV) assumed a nearly 15 percent increase in the cost of attendance at public colleges and universities. The House committee argued that average costs have increased by less than 10 percent in recent years. They also stated that higher education funding has increased by more than $550 million, or more than 16 percent, in this biennium, with the expectation that tuition increases would begin to moderate. Therefore, they used a smaller assumption for average cost increases and provided less funding in this area.

Public Safety. The Governor proposed increases to improve indigent defense, which remained mostly in tact in the Senate committee. The House, however, recommended changes to the Governor’s proposals.

• Indigent Criminal Defense Attorneys. The Governor requested and the Senate agreed with a $9 million increase in order to waive the current fee caps on court-appointed attorneys for atypical, involved, and costly criminal cases. The House provided $7.5 million of that request and added language that does not waive the fee caps, but rather would essentially create a second tier within the reimbursement structure for court-appointed attorneys. So, for example, in certain cases an attorney could receive twice the normal reimbursement rate.
• Indigent Defense Commission. The Governor requested and the Senate agreed with an increase of $3.6 million to provide more personnel and higher salaries for public defenders. The Commission currently has a great number of vacancies and difficulty recruiting qualified staff. The House committee did not provide this increase, and instead rescinded the commission’s current unused funds.

Housing. Action on housing-related proposals includes:

Virginia Housing Partnership Revolving Fund. The Governor requested $2 million to provide for the affordable housing needs of the state through this fund. The House provided no funds. The Senate reduced the request by $1 million. In its place, the Senate proposal would establish a pilot program to create new affordable housing. Funds would be used as capital subsidies to reduce the debt on housing development and make it more affordable. The subsidies could be interest rate reductions, low or no-interest loans or equity participation in a development.

Conclusion

The lightening pace of this stage in the legislative calendar means that many of the actions taken by the committees will be altered as the two chambers and the Governor seek to find agreement on the budget. The transportation debate rages on, so final resolution of the many other pieces of the state’s budget will be contingent on any final agreement that may be reached in that area. Hopefully, in the process, the needs of vulnerable Virginians will not drown beneath the flood of transportation demands.