Tuesday, May 27, 2014
VACo ALERT! Contact your legislators immediately for passage of a state budget
We have reached a critical juncture in the state budget process.
Mitigating local impacts will be devastating if a budget is not passed before July 1.
• How will counties fund services?
• How and when will counties begin their determination of essential versus non-essential services?
• Will your county have enough reserves to fund services?
• Will your county have to re-advertise your tax rates based on lack of state funding?
• How and when will counties begin to notify employees and school personnel of temporary furloughs or layoffs?
Also, VACo requests your attendance at a statewide conference call this Thursday. VACo staff will brief callers on the most recent developments in the state budget impasse.
Here’s more information.
Thursday, May 29
Conference Dial-In Number – 712.432.1500
Participant Access Code – 1036877
Potential local impacts of NO state budget by July 1
Virginia’s local governments are entering into “unchartered territory” should the Commonwealth end FY 2014 with no state budget for FY 2015-2016. VACo and many groups have advocated for approval of a state budget that will continue to fund core functions and services at the county level. These core functions include education, human services and public safety.
Failure to adopt a state budget leaves county governments responsible to fund and support state mandated services entirely through local revenues generated by real property, personal property and local business taxes.
VACo encourages all counties to advocate for passage of a state budget immediately— a budget that ensures core government services will continue without interruption.
Should the legislature fail to act, the following is a sample listing of local impacts. The impacts on each county varies depending on respective reserves, tax rates and revenue received from real property, personal property, local business taxes and other revenue resources.
Another factor that may distinguish select localities is the due date for taxes. Some counties collect two times and some once per year. Many have a December deadline while others collect in June. These due dates could create a “cash crunch” for many counties collecting in December.
Other factors to be considered are the reimbursement schedules for state funds to counties. One example is the state department of social services reimburses a county for providing mandated services on a quarterly basis while the Compensation Board reimburses on a monthly cycle.
The following information was developed through the assistance of many state and local partners and is not considered “all inclusive.” If there are missing components that impact your county, please contact Dean Lynch with additional information.
Many counties receive funding for employees that are classified as state supported positions. These positions in many localities are funded through a variety of state/local match funds. These typically include employees at local departments of social services, constitutional offices, local law enforcement agencies and local school divisions.
State direct, indirect, or Federal pass-through funding
These types of state funds provide substantial monies towards many county operations.
• Direct state funding impacts areas of all county services that include but is not limited to foster care payments, daycare and other human services, jail per diems, conservation easements and state grants. Mandated services provided by counties receive direct state fund reimbursements.
• Indirect state funding are items such as reimbursement from the Commonwealth for rental space for local department of social services and health department operations.
• Federal pass-through funding includes local department of social services operations and 100 percent funded programs such as special adoptions
Impacts on local school divisions
All counties receive state funding to deliver public education services. State funding as a percentage of categorical state aid varies among Virginia’s counties. A couple of county school divisions that would be most affected by reduced or eliminated state funding would be Lee (68.5 percent of total school funds were state funds) and Pittsylvania (68.2 percent of total school funds were state funds) as compared to Arlington (12.4 percent of total school funds were state funds) and Bath (15.8 percent of total school funds were state funds) counties.
• FY 2014 end of year revenue delays
• State sales tax distributions for Schools
• Federal pass-through grant funding
• State funding for schools will cease
• State funding for teacher retirement will cease
• Unfunded retirement liabilities would grow
Impact on local and regional jails
• State per diem payments cease
• State grants that support local or regional jail programs would cease
Impact on law enforcement
• State funding for Sheriff and deputy salaries would be impacted
• State grants and federal grants that are serviced by the state would be in jeopardy
Mitigating local impacts without state assistance will be troublesome to all counties.
Following is a list of discussion items that should be evaluated in each county.
• Cash flow – Does the county have enough cash reserves or new tax revenues coming in June/July to float the county’s operations until state dollars arrive? Does the school division have the fiscal capacity to operate?
• Budget revisions – The state’s failure will almost certainly require local governments to revise their budgets, requiring additional hearings and meetings. That may also hold true for school boards. Will local tax rates need to be revised and re-advertised? Locally adopted budgets may not reflect the most recent state revenue deficit of $300 million to $350 million in FY 2014.
• Teacher contracts – In past state budget stalemates, school boards were advised to make sure that the teacher contracts included language pointing out terms of employment could change if state appropriations do not materialize. This is important because state law requires teachers to be notified of any reductions in force due to funding decreases.
• If local governments do not have the cash to pay for all the operations usually included in their budgets, decisions will have to be made to determine essential versus non-essential services.
• For those local governments planning to enter the bond market for capital projects, the budget impasse could affect their bond ratings. Wall Street likes the certainty that bondholders will be paid. Local budgets may not look sufficiently “stable” to the bond rating agencies. If that’s the case, then bond issuance and interest costs would increase.
• Delays in getting state reimbursements for Compensation Board positions, local social services departments, road maintenance and Comprehensive Services Act programs.
• Delays in receiving local revenues collected by the state like local sales taxes, communications and sales taxes, and local fines and fees imposed by the courts.
• Uncertainty about how to pay for local positions funded jointly by the state and localities.
• Delays in receiving federal funds that pass-through the state.
VACo Contact:Dean Lynch, CAE