House, Senate Reveal Their Hands in Budget Talks

By Amber Lester Monday, February 22, 2010

The Virginia House and Senate’s budgets were unveiled Sunday, hinting at a future tug of war over funding for education and public health care.

Three days after Gov. Bob McDonnell revealed his plans to address a two-year, $4.2 billion state revenue shortfall, the General Assembly showed their plans, which would adopt several of his spending ideas but rejects many of his proposed cuts. Still, the General Assembly’s proposed budgets accepted more cuts than originally proposed by former Gov. Tim Kaine in his introduced budget, released in December.

To make up for a $2 billion gap in the budget, Kaine suggested cutting $1.9 billion in car tax relief payments by eliminating personal property tax and adding a 1 percent tax surcharge to go directly to localities. The House of Delegates swiftly and unanimously rejected Kaine’s suggestion on Jan. 21, leaving the $2 billion gap to address.

In preparing the budgets, the appropriations committees for both the House and Senate conducted public hearings across the state. On Thursday, the House and Senate will vote on the budget plans and then attempt to craft a joint budget by March 13.

Senator Charles Colgan (D-Manassas) explained the Senate’s budget goals in his opening remarks: “This committee has put in long, hard hours to achieve two central goals – first, to minimize the negative impact of budget cuts on jobs in the Commonwealth. We can’t return to prosperity unless we keep people working. Our second goal was to minimize the negative impact of this budget on services that we provide for children and our most vulnerable citizens.”

Both the Senate and House budgets restored some of the money cut from public education and health and human services by McDonnell’s budget. McDonnell suggested $730 million worth of cuts from education in Virginia, but the Senate’s proposal would cut $133 million and the House’s proposal would cut $620 million. The Senate’s cuts to health and human services, totaling $344 million, are steeper than cuts proposed in the budgets by the House and McDonnell.

Both budgets would also reduce the amount of money the state pays to the Virginia Retirement System for state employees and teachers by not funding the system’s unfunded liabilities. Future state employees would be required to contribute to retirement plans, as well. Under the House budget, changes to the retirement plan would save $803 million; the Senate budget would save $508 million by underfunding the pension system.

The budgets also would assist localities that would be negatively affected by a change to the local composite index formula that determines how much state funding a locality receives for education. Both Williamsburg-James City County and York County schools stand to lose some funding if the composite index is updated as planned. The Senate’s plan would provide a full “hold harmless” for all school divisions in both years of the biennium.

Both bodies recommended no further cuts to public colleges and universities, where cuts were commonplace in the last decade.
The House and Senate proposals also rejected Kaine’s suggestion to trim money from law enforcement; the House wants to restore approximately $41.2 million each year of the biennium to Sheriffs’ Departments and fully fund the departments to have one officer per 1,500 residents.

The House would also restore $7.5 million each year for Commonwealth Attorneys and about $7.5 million over the biennium to reestablish two state police academies.

While both proposals still recommend cuts to health and human services, the House plan is more closely aligned with McDonnell’s proposal. The House budget proposes reducing the eligibility limit for the children’s health insurance program from 200 percent to 175 percent of the federal poverty level; McDonnell had suggested freezing enrollment to the program, which serves children and pregnant women. The House budget also proposes reducing Medicaid eligibility and payments to nursing homes and hospitals, which Putney called “an extremely difficult decision.”

The Senate’s plan would restore funding for free clinics, community health centers and the Virginia Health Care Foundation.

Both budgets also offered some ideas for the state to generate more revenue in the biennium. Del. Lacey Putney (I-Bedford County), representing the House, said, “I believe in the old adage in business that says, ‘You have to spend money to make money.’” The House’s package includes $53.8 million to expand Virginia’s economy through economic development program support and business incentives to create new jobs. This includes increasing money for tourism promotion by $3.6 million each year to market “natural and historic treasures.”

The Senate would like to invest $72 million into economic development incentives. It would also like to endorse McDonnell’s proposal of a 3 percent bonus for state employees.

Despite the challenge that lies ahead in crafting a state budget, McDonnell was pleased to see the General Assembly was able to agree on so many items. “I have laid out three major priorities for this budget: it must be done on time, not contain any general tax increases, and invest, even in a difficult fiscal environment, in job creation and economic development measures imperative to a successful recovery. The budget amendments from both bodies advance two of these priorities, and I am pleased by the common ground our partnership has produced.”