SENATE FINANCE COMMITTEE ACTS!

Last Wednesday, as predicted, was a pro forma special session of your full General Assembly (GA).  Nonetheless, real progress was made toward breaking what has been the “budget roadblock” for the 2012 Sessions of the GA.  The Senate Finance Committee (SFC) had been meeting in various ways since the regular session ended.  The Committee was able to report its new versions of HB1300 (the caboose budget bill for the 2010-2012 biennium) and HB1301 (the new budget bill for the 2012–2014 biennium) on Thursday.

Remember when last we discussed the financial impasse of the GA, Del. Lacey Putney had gotten unanimous consent from the House to introduce new budget bills, the House Appropriations Committee (HAC) had amended those bills to be like HB 29 and 30 which the full Senate had defeated on tie votes, and the House had passed them and sent them to the Senate just before the Regular 2012 Session of the GA adjourned.

Remember also that the Democrat Senate Caucus suggested amendments to HB 1300 and HB 1301 that were before the SFC.  Then there were also one or two new amendments offered during the Special Session, and the Committee, of course, still had to consider all of the changes which the members had previously made to the Appropriations bills when they considered them initially.  They did the job.  The bills were reported from the SFC to the full Senate “in the nature of substitutes” unanimously!

The two houses had recessed last Wednesday until today, Monday, March 26.  The weekend gave the SFC staff time to produce all of the adopted amendments in the proper form and distribute them to the full membership.  Copies were also sent to the members of the House leadership and the members of the HAC.   As this is being written the full Senate has been briefed by the SFC staff on the details of their adopted budget.  It is fully expected that these versions of the Appropriations Bills will pass the full Senate this afternoon and evening

THE DEMOCRAT AMENDMENTS

A large majority of the amendments which the Senate Democrat caucus had forwarded to the Governor and the Senate Republican Leadership have been incorporated in the reported version of HB 1300 and 1301 as amended.  The one amendment which the last GP predicted might be a deal breaker is the $3,000,000 plus dollars to cover the cost of the “mandated ultrasound procedure” for women seeking an abortion.  The amendment the Democrat Caucus proposed would appropriate about $1.5 million a year to cover the cost of the procedure for women without insurance.

It is this writer’s opinion that the Democrat members of the SFC voted to report HB 1301 without this item included with every expectation of it being adopted on the floor of the Senate today.  There are indications that several Republican Senators will vote in favor of the amendment.  If the Democrat caucus sticks together then they would have at least the 21 votes needed to pass the amendment.   (Update:  While listening to the Senate debates, yours truly learned how wrong the indication he had received proved to be.  The amendment for funding the ultrasound procedure was sponsored by the Democrat Senate Floor Leader, Dick Saslaw, and defeated on a 19-20 vote.)

So, it now appears the Senate Democrat Caucus has achieved sufficient action on its money amendments to the budget to be able to support the final version of the SFC’s budget bills (assuming the ultrasound amendment is adopted).

Update:  This was not a deal broker.  The Senate passed the bills 34-5!

But what about the second portion of their concerns, i.e power sharing in leadership positions and committee assignments within the Senate structure?  Well now, it appears the leadership of the D’s caucus, having flexed the muscle they have (the ability to keep the Commonwealth from having a budget), they can keep their powder dry for the time being.  There is no real “immediate” advantage to the 20 Democrat Senators to achieve some additional committee or leadership positions “at this time.”

Now, come the time to start preparing for the 2013 GA Session, there might be — in fact, it is probably a very safe bet that there will be — some very strong additional negotiations between the leaders of both parties. There will be some private discussions in the meantime.

It has been a little uncertain exactly how the Democrat Caucus is defining “power sharing.”  This definition may, you understand, have changed since this subject of sharing power has come to the fore with the budget stalemate.  Amazing how politicians can modify their thinking when they learn maybe the public isn’t so supportive.  Do you suppose the elected officials across the Potomac might learn something from this situation?

 THE BUDGET PROCESS and THE FUTURE

Many legislators, anticipating a positive vote by the State Senate on the budget, have been stating there is a real possibility the final adoption of a conference report on the budget can be approved by next Monday, Apr. 2.   This time frame is a possibility, however, there are some historical perspectives that indicate it may not be probable.

The budget process, as has been discussed on several occasions in previous GPs, now goes back to the standard steps.  The Senate version of HB 1300 & 1301 now go to the House (perhaps this could happen yet Tuesday afternoon—March 27) and the more numerous body would reject the Senate substitutes and request a Committee of Conference for the bills.  The committee members, of course, are already known to be meeting although not officially since they have had no “official bills” on which to negotiate.

As a reminder, the conferees are from the House of Delegates: Delegates Lacey Putney, (Chairman of the HAC), Kirk Cox, Chris Jones, Steve Landes, Beverly Sherwood, and Johnny Joannou; and from the State Senate: Walter Stosch (Chairman of the SFC), Tommy Norment, John Watkins, Emmett Hanger, Chuck Colgan, and Janet Howell.  Most of these fine legislators have negotiated budgets in the past.  They are experienced in this process.  They are also knowledgeable and very strong willed.  They know how to compromise, but they also know how to maintain the position of their particular house when there is a disagreement.

There have been discussions going on behind the scenes for the past several weeks.  Many indications are there have already been many agreements between the conferees.  However, there are several new issues in the budgets which will be sent back to the House by the Senate.  For instance, the House has a long standing dislike of providing funds for Pre-K education in the Commonwealth. The position expressed in the past has been that the state has the obligation to provide funding for public education from kindergarten thru high school education.  Generally, the HAC has not been responsive to amendments for tax dollars going to pre-kindergarten education.  This will be a major sticking point since it is now a part of the Senate Substitute for HB 1301.

The House may also balk at the $600 million in bonded indebtedness authorized by the Senate bill.  This is in contrast to the $100 million in debt in the bill sent to the Senate.  This could be another item that will require some tough negotiations and may not be reconciled by the end of this week.

These are a couple of examples of items which might cause some delay in the conferees reaching a final conclusion for the whole budget.  It may not happen.  However, the past provides us with a lot of evidence that these or other items can delay a final resolution on the budget.  If one looks at the past decade it appears that your General Assembly doesn’t accomplish or fix the budget by the prescribed and agreed upon or revised deadlines.

On behalf of the localities and school systems of the Commonwealth, all of whom are struggling with their budgets at the present time, let’s hope and perhaps offer a few prayers that this perspective is incorrect.

The last days of the 2012 Regular Session of Your General Assembly

In the most recent GP, the statement was made about the budgets for the Commonwealth that, “the drama will continue!” It certainly is continuing and to an even greater degree than most anyone could have imagined at the beginning of your 2012 General Assembly.

The regular GA session of 2012 adjourned “sine die” on schedule, Saturday, March 9. Ah, yes they did.  However, there was a little twist to this action. Before going home for the March 3rd & 4th weekend, the House adopted HB 1300 and HB1301.  These bills were the same as the original budget bills presented by the Chairman of the House Appropriations Committee (HAC) on behalf of the Governor on Dec. 16th. The House gave Delegate Lacey Putney unanimous consent to introduce both bills, which were immediately assigned to the HAC. This was on Thursday, March 1.

The Committee met briefly, conformed these bills to the versions of HB 29 & 39 which they had approved on Sunday, Feb. 19, and reported the bills to the floor for action.  On Friday, March 2, after a brief floor debate, the rejection of several money amendments proposed by some Democrats and the adoption of one language amendment proposed by a Republican (no money involved!), the House waived the constitutionally required third readings on a unanimous vote and passed the HB 1300 (the “caboose” bill) on a bipartisan 87-12 vote. HB 1301 (for the 2012-2014 biennium) was a little closer, but still made it through on the final vote with a substantial margin, 75-22.

The Senate received the bills on Monday, March 5, waived the first constitutional reading and sent the bill to the Senate Finance Committee (SFC). There the bills sat as some behind the doors negotiations took place. Obviously, nobody budged and the Committee Leadership realized if they attempted to report the bills they would, at this stage of the game, meet the same fate the original Senate and House bills (SB29 & 30 and HB29 & 30) had received on the Senate floor — “The bill has failed of passage.”  Instead and on the last day of the Session, the SFC unanimously approved the motion of the Chair that the bills be “continued to the 2012 Special Session.”  A strategy was in place — there would be a Special Session on the budget.

The GA Leadership from both parties and from both houses had agreed to a Special Session and had also agreed to establish the first meeting of the Assembly for the Special Session to be a date specific — Wednesday, March 21.  This action requires an agreement from the total leadership and the ability for those leaders to persuade the individual caucuses to agree. Remember, that’s four different caucuses since both houses have to have a supermajority vote to call such a Special Session. In this case, there was no problem and both houses adopted the resolution unanimously. After all, with all of the static the GA has been getting on the budget impasse, neither political party nor assembled body wanted to be seen as the “roadblock” to this possible solution.

The Senate Democrat’s “Ploy?”

The Senate Democrat Caucus has closed ranks during the recent budget votes on the floor of the Senate. The D’s on the Committee and their colleagues on the floor have stuck together and voted “no” on all the votes for the Senate and House versions of the various budget bills.

There are some Democrat Senators who are perceived as “moderates” and who many capitol watchers expected to break ranks as the scheduled adjournment date for the regular session grew closer.  In fact, the former chairman of the SFC, Democrat Senator Chuck Colgan, made an impassioned speech on the floor of the Senate on the need for all of the members to stop being so partisan and put their shoulder to the wheel to get on with doing their most important work — passing a budget for the Commonwealth. The total membership gave him a standing ovation. The impact of the speech has yet to be felt, but it may as time moves closer to a real “critical deadline.”

Let me just add, from personal experience, it is very difficult for a caucus member to buck his/her caucus if the vast majority of the members are of a like mind. Members of each caucus understand this kind of peer pressure. Loyalty to certain issues supported by the caucus is necessary if the party system is going to work. So, unless it is a deep matter of conscious, you take a position that you might not take except to be a good team player.

The Senate Democrats’ “Supplemental Amendments” for HB 1300 & 1301

Now one aspect of the present situation with the Democrat Caucus may have been partially an outgrowth of Chuck’s position in the caucus and his speech on the floor. The Caucus submitted a supplemental list of amendments to the two new budget bills at the last SFC meeting before Sine Die. These amendments “address deficiencies in state spending in the proposed budgets and in those presented by the Governor.” Some of these suggestions from the Democrat Caucus may have been put forward in the subcommittees of the SFC, although your GP editor hasn’t confirmed this for certain. Certainly some of them have been talked about on the floor of the Senate since they apply to areas of the budget — K-12 education, “safety net” funding, and funding to provide coverage for Ultrasounds — which have received a lot of attention during the floor “speech positioning.” It is difficult to know whether the decision of the Democrat caucus to present this list of supplemental amendments came about 1) because of the pressure they were receiving from the media, editorial writers, local governments and public school systems (and possibly just some upset citizens) about their blocking of the various budges; or, 2) the insistence of some members of the caucus that the public was beginning to accept the Republican’s position that the whole episode of preventing a budget from being adopted was because they wanted more power sharing in the organization of the Senate.

In all probability, it is a combination of these two situations. The Democrat list of amendments was forthcoming late in the session. If that had been the primary objective of the earlier votes to defeat the budgets, one might have expected these amendments to have been presented when the floor debates were taking place on SB 29 & 30 on February 23.

OK, one can give them the benefit of the short time frame. It’s tough to get a group of solid amendments together in four days even if you have members of your caucus who serve on the SFC.

Now, wait just a minute! Yours truly does remember the House debates on the budget in the 1964 session when the 11-person GOP Caucus presented 100-plus amendments during the floor session and there was no representation on the HAC. Some “moderate Democrats” from the other side of the chamber proposed another 75 or 80 amendments on the same day and none of that part of the Democrat membership had any representation on the HAC either. Of course, the debate and the “killing field” for the amendments went on under the “special order” until the wee hours of the next morning.

Now the Senate Democrat Caucus in this session had a second opportunity to place their amendments before the full Senate for debate and adoption or defeat when the amended HB 30 (then exactly like SB 30) was considered by the full Senate on Feb. 29. But that wouldn’t have been nearly as much fun as putting all of the amendments together in a letter to the Republican Governor and suggesting he take a position on them! In the initial letter to the Governor, however, the Democrats didn’t quite make it clear exacting what they wanted.

Included in their initial requests was an item to mitigate the impact of some tunnel tolls which will be charged to pay for some Public Private Transportation Act projects in Tidewater. Thus the public and the Senate D’s may have been a little startled when the Governor told them they would have to find “funding or cuts for the $600 million in additional spending” he predicted their amendments would cost. The Democrats quickly “clarified” their requests. They stressed the moneys for the “toll mitigations” were to come from the non-general-fund (NGF) portion of the budget, i.e. from the transportation construction funds. So far as the media reporting is concerned, exactly what planned highway construction projects would be postponed or just not built would probably be left up to the Commonwealth Transportation Board.

The Recommended General Fund Sources

The General Fund (GF) portion of the Democrats’ Amendments total $142,540,644 in expenditures. The amendments also list the sources for increasing the money available for these changes which total $142,540,644.

One of the major revenue sources is the redirection of the new Mortgage Servicing Settlement funds ($65,900,000.00) coming from the national banks. The problem with this source is the versions of the budgets reported by the HAC and the SFC have already spent these funds on a number of different projects. To cover the Democrat amendments there would have to be a multitude of “re-arrangements!”

The second largest “chunk of change” (after all we’re talking about millions of dollars in a $35 Billion biennial GF budget) identified in the Democrat amendments is $30,000,000 from the Federal Action Contingency Trust (FACT) fund — $10,000,000 from the $30,000,000 the Governor recommended in FY 2012 and all of the $20,000,000 the Governor recommended for FY 2014. This one is, I’m confident, a hard area in the current negotiations. The establishment of the FACT fund by McDonnell has drawn praise from the rating agencies, particularly Moody’s. When you consider the impact that spending cuts by the Federal Government will have on Virginia you can see the wisdom of “being prepared.” In the March edition of Virginia Business‘ article entitled “Staring Down the Barrel,” Tom Loughran states, “Virginia is particularly vulnerable to dramatic budget shifts because federal spending makes up nearly a third of the Commonwealth’s economy…This political and economic uncertainty has Virginia companies and the state government preparing for much leaner times.”

The Governor’s position is that the Federal Government eventually has to start fixing their spending habits and he wants Virginia to be ready when that effort reduces Virginia’s share of federal spending, which it almost certainly will do. There will be some very hard pushing and shoving over these items.

In addition, the Democrats have identified $15.5 million in various economic development “pots” (the Governor’s Opportunity Fund, $11 million; Jobs Investment Programs, $1.5 million; Motion Picture Opportunity Fund, $3.0 million) which may be easier for the Republican legislative negotiators to absorb.  And then there are $9.4 million dollars in the reported budgets to fund Senate bills that ended up failing. Those will be easy dollars for all parties to re-arrange!

The Recommended Uses for these Funds

True to their word, the Senate Democrats recommend the majority of the revenue which they have identified should be spent on K-12 education — $88.1 million. Then for their second highest priority is health care — $34.7 million (the Dept. of Health, $4.1; the Dept. of Medical Assistance Services, $24.9; and the Dept. of Social Services, $5.7 million). All of the specific programs for which these dollars are recommended are ones where shortages have been identified during budget deliberations, including teen pregnancy prevention programs, nursing home Medicaid eligibility, at-risk child care subsidies, and employment support services for disabled.

The one suggestion from the Democrat Caucus that may be a “deal breaker”, if there are efforts to totally defeat it, is the $3,135,888 to “Provide Coverage for Ultrasounds,” now a required component for abortion procedures in Virginia. The amendment itself would read, “…amounts from this item shall be paid $1,567,944 in FY 2013 and in $1,567,944 in FY 2014 to cover the full costs of the fetal transabdominal ultrasound imagining as required by section 18.2-76 for uninsured Virginians.” The amendment also requires that all health insurance plans cover the procedure.

On the last Saturday of the Regular Session the Democrat floor leader was quoted in the Richmond Times Dispatch as saying “…the amendments submitted by the caucus to restore funding to areas such as education and social services are going to have to stay or a budget won’t get through the Senate,” but he would not specify which items were potential deal breakers. With its emotional appeal and the fact that a “vast majority” of Virginia females disagreed with the passage of state-mandated ultrasound imaging requirements, the rejection of this recommended amendment may well be one of the “deal breakers!” For the others there may be some “wiggle room” on the amounts, although it would appear the Democrats are very serious about getting more funds for most of their high priorities. If the Republican Senate leadership can agree to enough of these budget recommendations, then the Democrat “Minority Floor Leader” may be able to get some of his caucus to agree to vote for the budget without the Republicans bending on the power sharing demands.

NOW FOR THE FIRST SESSION OF THE FIRST SPECIAL SESSION OF 2012

This will be a “pro forma” session. As the date has gotten closer it has become more and more apparent that the behind the scene negotiations which have been going on since March 9 may have produced some agreements, however, there have not been enough to warrant a return of the full Assembly on this Wednesday. So it is your writer’s forecast that very little will happen in this session except to set a date for the second meeting of the first special session of your GA for 2012.

Oh yes, a footnote on those NGF for toll mitigation in the Tidewater area (also part of the Democrat amendments to the Budgets). The suggested detail amendments (the devil is always in the details, you know) provide for “an addition $250,000,000 in Commonwealth Project Revenue Bonds for Phase II of the Dulles Metro Silver Line {how did that get in there? Dulles isn’t in Tidewater. Oh yes, that’s right, there are a lot of Democrat Senators from NOVA, aren’t there?} AND for “…$250,000,000 in Commonwealth Project Revenue Bond proceeds for construction of the Downtown/Midtown Tunnel/ MLK Extension Project…” both “…for the express purpose of mitigating toll rates levied to support construction of (these) projects.”

So the Governor won’t have to worry about getting this $500 million from other places in the budget. The Commonwealth will just redirect some of its current authorization to borrow half a billion dollars from unnamed transportation projects. Then maybe the negotiators on the budget will include the other Democrat recommendation that the gasoline tax be indexed to “the U.S. Dept. of Labor’s Producer Index for Other Nonresidential Construction … for the year immediately preceeding the affected year.” Maybe some people on the GOP side will recognize that the gasoline tax in Virginia has been $0.175 per gallon since 1986. Let’s see what was the price of gasoline thirty-six years ago? And what about asphalt, concrete, crushed stone, cars, tires, etc. etc. etc.? An interesting research project for some enterprising student, isn’t it?