Delegate Scott’s Richmond Report

Each year about this time, the House Appropriations Committee and the Senate Finance Committee hold two-day retreats to review the state budget in some detail before the Governor submits his update recommendations for the second year of the two-year cycle.

Typically, in the House, the Finance Committee is invited to attend and participate in the sessions, along with Appropriations Committee members. The staff puts a great deal of time into preparing presentations on programs areas that have particular relevance that year.

Because of the timing of biennial budget being out of step with the terms of the Governor, each incoming Governor is inclined to favor a change in the process to allow the Governor to submit a full two-year budget in mid-December, usually slightly more than a month after the election. Usually governors wish they had more time to review the past Governor’s second biennial budget presented to them days before the new Governor takes office. Frequently in-coming Governors express a desire to change the cycle so they will have the initiative

This biennial budget has been unusually difficult because the in-coming governor disagreed with some of former Governor Kaine’s priorities. For example, Gov. Kaine recommended an income tax increase to balance the budget. Governor McDonald quickly expressed his opposition to any tax increase, and the General Assembly agreed with him.

Because of that disagreement, the Governor was faced with an immediate shortfall that he had to remedy. And the resulting budget cuts were large and potentially harmful to major portions of the budget: public education, higher education, Medicaid, and the Virginia Retirement Systems (VRS) for state employees.

Fortunately, Federal aid helped to offset some of the larger revenue shortfalls, particularly in education and in Medicaid. But Federal aid increase is not permanent, and therefore neither is the increase in education funding. Significant reductions in state revenues became inevitable-more than $4.2 billion.

One important method of reducing the state’s obligations was a change in funding of state employee retirement system, which cover public school employees. Years ago the state agreed to pay employee costs of that system. The response of the Governor and the General Assembly was to reduce the state’s commitment to funding new state employees’share of the cost of the retirement system and to give localities the option of paying the that share of the retirement system cost attributable to those new employees.

Most localities declined to make the new employees pay a portion of the VRS costs, but the state did reduce its current and future commitment for new staff while continuing its share of the system then-current employees. It is not clear how long localities will continue to pay that share of the retirement system for incoming employees.

Delegate Scott represents the 53rd District in the Virginia House of Delegates. He may be emailed at deljscott@aol.com