The Shadow
RICHMOND, Va. (AP) – Funding cuts from the 2010 General Assembly, paired with declining local revenues, forced cities and counties to cut services, raise taxes or fees and, usually, both this past year.
When the 2011 legislature convenes in a little over a month, there’s no hope for recouping any of the more than $1 billion in total cuts or new spending obligations placed on localities last year, say advocates for city and town councils and county boards of supervisors.
It’s all about avoiding even more losses.
“We’re going to end up playing defense this session,” said Dean A. Lynch, the chief lobbyist for the Virginia Association of Counties.
Faced with the sharpest revenue drop-off in Virginia history the past three years, state government in 2010 was forced to reconcile a $4 billion state budget shortfall.
Part of that included staggering and unprecedented cuts in state support to public education, reduced general aid to localities and shifting expenses historically born by state government to localities.
“The question is how much will the General Assembly and the governor cut in the upcoming session and where are those cuts going to come from,” said Neal Menkes, director of fiscal policy for the Virginia Municipal League.
Besides cuts by both Republican Gov. Bob McDonnell and his Democratic predecessor, Tim Kaine, the General Assembly made use of federal stimulus cash, the state’s “Rainy Day” reserve fund and a record use of debt to reconcile the budget that ended June 30. McDonnell even claimed a $400 million surplus.
But stimulus support is about to run out. The Rainy Day fund is running on empty and, according to the Senate Finance Committee, state government can’t borrow more without increasing its debt capacity, an action that could harm the state’s perfect and never-blemished AAA bond rating.
The state must also start repaying $600 million in deferred contributions to the state and local government employees’ pension fund.
McDonnell and the General Assembly agreed to repay the Virginia Retirement System over 10 years, and the governor has said he will make the first installment on that debt a priority in the budget recommendations he presents Dec. 17.
Among the dangers awaiting local budgets already stretched thin are perennial efforts by legislative conservatives to repeal business taxes that now benefit localities.
Lawmakers will probably see more efforts to eliminate the Business, Professional and Occupational License tax, the tax on machines and tools used by manufacturers. The state’s business and manufacturing lobbies and advocacy groups also put their money and considerable influence behind their repeal each year.
Republican Speaker William J. Howell, while sympathetic to rolling back both taxes, said it won’t happen until the economy rebounds.
Sen. Charles J. Colgan, D-Prince William and chairman of the budget-writing Senate Finance Committee, said the two repeal measures would not survive the Democratic-controlled Senate should they win House passage.
“The BPOL and machine-and-tool taxes, I don’t think they will repealed,” he said. “That would put too big a dent in things.”
Colgan also said he wants the state to retain the considerable cost of care for emergency and law-enforcement personnel injured in the line of duty. Under the current budget, localities could assume that expense in July 2011.
“That’s a state responsibility. That should not be put on the backs of localities. I’d be willing to make a move to put it back where it belongs,” Colgan said.
The cuts came as primary revenues for local governments – taxes on the value of real estate and personal property – are declining, or are, at best, flat. Local governments have cut hours for offices, libraries and recreation centers. Some have closed school buildings. Employees have lost jobs.
The state also cut millions in support for local offices that Virginia’s Constitution mandates – sheriffs, commissioners of the revenue, treasurers – and left local taxpayers to pick up the difference.
If local revenues erode further, cuts will be even more painful and conspicuous, crippling core services, Menkes said. The alternative, he said, will be higher local taxes.
About 30 Virginia localities increased their tax rates this year in response to the fiscal crisis, he said.
“There will be more pressure on the revenue side,” Menkes said. “The options on the spending side will be for really significant reductions in staffing, and for most localities, that staffing is in public safety and education.”
Still, with spiraling costs for Medicaid and other mandated expenses, more cuts are likely, said Howell, R-Stafford.
“It’s going to be another tough year,” Howell said. “The state, we had to cut back to 2006 (spending) levels, and maybe that’s what the localities need to do. It’s going to be an austere time.”
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Bob Lewis has covered Virginia government and politics since 2000.
