VACo President Jeff McKay, County Representatives Speak to Joint Subcommittee on Local Government Fiscal Stress

January 12, 2021

The Joint Subcommittee on Local Government Fiscal Stress, which draws its membership from the House Appropriations Committee and Senate Finance and Appropriations Committee, met on January 11 to discuss the effect of the COVID-19 pandemic on localities, how localities have used federal relief funds to meet local needs, and how the state might assist localities moving forward.  Committee staff provided a briefing on the recent work of the subcommittee, as well as aggregated information on local use of Coronavirus Relief Fund dollars (as reported to the Department of Accounts for its September 30 reporting date).  The bulk of spending was concentrated in several main categories:  payroll for public health and safety employees, distance learning, certain personnel costs for employees whose time is spent on a different, COVID-related use than what was originally budgeted, and small business assistance.  Staff also provided an overview of the key elements of funding flowing to the state from the most recent federal relief package.  Presentation slides may be found at this link.

The Joint Subcommittee invited a panel of local representatives to discuss the local response to the pandemic and financial pressures facing localities in the short- and long-term.  VACo President Jeff McKay expressed appreciation to the Joint Subcommittee for its attention to local issues and members’ work to secure additional options for counties to raise needed revenues.  He also thanked legislators for shielding aid to localities from recent rounds of budget reductions, and offered special thanks for efforts to hold school divisions harmless from funding losses that would otherwise result from fluctuations in enrollment due to the pandemic, a concern that was echoed by the other panelists.  He reiterated the importance of the ongoing state-local partnership and offered some suggestions for areas in which that partnership could be strengthened:  public safety, broadly considered to include behavioral health and the overall justice system; election administration; and school capital needs.

Meghan Coates, Henrico County’s Finance Director, discussed how the County has managed its budget during the pandemic, noting some of the significant expenses it has incurred for overtime, pandemic-related sick leave, and personal protective equipment.  She discussed the County’s process for allocating its Coronavirus Relief Fund dollars, despite challenges posed by evolving federal guidance.  She outlined some of the County’s concerns about future economic challenges, such as potential changes to the commercial real estate tax base generated by a move away from employees working in offices, losses to the regional travel and tourism industry that Central Virginia localities have been working to develop, and potential impacts of future interest rate increases on the residential real estate market.  In addition to advocating for the continuation of assistance to local school divisions, Coates encouraged legislators to restore funding to localities that received distributions of recordation tax revenue prior to changes in 2020 and to assist localities with marketing funding to reinvigorate travel and tourism industries.

York County Administrator Neil Morgan provided an overview of York County’s experience in navigating the uncertainty associated with the pandemic, noting that residential real estate and sales tax revenues had performed well (largely due to collections from online sales), while transient occupancy and meals taxes suffered significant losses.  He encouraged continued state support of K-12 in order to assist local finances, particularly the hold-harmless funding to address temporary enrollment losses.  Pittsylvania County Administrator David Smitherman provided a perspective from a rural community, explaining that the County used its Coronavirus Relief Fund allocation as a “local stimulus package,” moving through a deliberative process to plan for the uses of the funds, which included assistance to the local school division, HVAC improvements to county buildings, expanded voting options to improve social distancing at the polls, and assistance with critical supplies and equipment for the local rescue squads to enable them to respond to the pandemic.  He also discussed the challenges of maintaining school capital facilities, particularly in a geographically large area, which requires more buildings spread throughout the county in order to avoid students traveling long distances to larger facilities.

Subcommittee members plan to hold a follow-up meeting after the legislative session concludes, and several members expressed interest in further work on the issue of state assistance with school capital needs.  VACo appreciates the work of the Joint Subcommittee in examining issues of importance to local governments and is grateful for its members’ participation in the meeting.

VACo Contact:  Katie Boyle

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