Giesen Perspective

The Giesen Perspective—Getting Caught Up

DATE: May 24, 2006

A LONG TIME BETWEEN GIESEN PERSPECTIVES—AN EXPLANATION

It’s been a rather long time between Giesen Perspectives (six weeks plus three days). There are two explanations. First, a long planned vacation to Florida was enjoyed, and secondly, trying to determine from legislators, staff, administrative personnel, or even the media exactly where we stand on the budget or a transportation plan for Virginia is like trying to catch a greased pig in a muddy barn yard!

THE SENATE TRIES TO CORRAL THE “GREASED PIG.”

As most of you, I am sure, have learned through other correspondence or through listening or reading the media, yesterday (May 23^rd) the State Senate made another concerted effort to catch that greased pig (the budget and a transportation plan for the state). In response to the House’s adamant stand that they would not accept a budget with any tax increases embedded in it, the Senate took the House Budget Bill for 2006-2008 (HB 5002) and substituted a bill which in the words of the Senate Finance Committee Chairman (John Chichester) “…incorporates the lion’s share of budget actions endorsed by the Senate on several occasions.” Then he told his committee the BIG exception—he actually called it “one significant difference ” between this substitute and previous Senate efforts.

As reported by others, the difference is in the Senate’s approach to the transportation crisis. In the previous version of their budget about $1 billion per year is provided in dedicated, long-term revenue.

To remove two of the most prominent factors pouring the most grease on this “pig,” the committee devised a method of placing the “bridge funds” (one-time general fund appropriations for the Transportation Trust Fund) in the budget with a contingency. (See below for a more detailed explanation of the “contingency plan.”) The Senate version of HB 5002 also removed any mention of tax increases within the Budget. The House in the past had ruled an earlier Senate Bill out of order because it had tax increases included in an act that had as its primary purpose “the appropriations of funds.” There has been a “one purpose” rule in the Virginia legislature unlike Congress, so perhaps on this point the House was on “traditionally solid ground.

With its action on this substitute bill, the Senate feels it has “…removed any remaining impediments…” allowing the House to focus on transportation. Senators were quick to point out to everyone present at the Committee meeting that the House, “…says it intends to address transportation once the budget is settled.”

Now the amended HB 5002 goes back to the House floor for action by the full body. It will not be referred to any committee. When the full House meets tomorrow at 11am it will probably take the normal action of rejecting the Senate’s amendments to its budget bill. The House then has option of directly asking for a committee of conference under the rules of the Special Session.

From certain conversations and movement of legislators in and out of offices on the 9^th and 10^th floors of the (the Appropriations Committee staff is housed on the 9^th and the Senate Finance Committee staff on the 10^th) there have already been “unofficial” meetings going on in recent weeks. Shortly after the Senate adjourned yesterday (the 23^rd) the House Appropriations Committee staff went into a long meeting. Prior to that some individual conversations indicated compromises on certain sections of the budget may have been explored in recent weeks. Public education and higher education were two areas where movement may have taken place. This movement seems to have been with the anticipation that the GF budget would be approached without the transportation portion being included.

Now the big question is, “how will the House deal with the contingency appropriation of $339 million in one-time General Funds for transportation?” No one knows for sure. However, The Speakers reaction signals the House may accept this as a positive step and there is now speculation there will be a state budget for the next biennium by June 9^th.

The way the Senate has worded the “contingency amendment” (Item 449.10 #1s for those who would like to go to the Senate web page and read the whole thing) says if there is no “…long-range transportation funding plan of sustainable, reliable and adequate revenues for the Commonwealth prior to November 1, 2006, the amount contained in this item ($339 million) shall be transferred to (a central account) Item 463.1 of this Act to be used as a one-time payment for local K-12 school construction ($100 million), capital construction ($202 million for capital projects named in the act with only planning appropriations for FY 07), and general tax relief ($37 million as a one-time revenue adjustment to modify state income tax withholding consistent with that permitted for federal tax purposes).

The House may balk but this contingency language does put the ball clearly in their court. The Senate has met the House’s demand to separate the transportation issue from the budget. Of course, the “set aside or contingency appropriation” is not near the amount the House was mentioning when it made this “separation” request. Stay tuned the greasy pig is still difficult to grab with a firm grip.

NOW BACK TO FILLING IN THE TIME GAP -- SINCE APRIL 7

Since we last chatted via the written word, the First Special Session for this year has gone on, and on, and on. Negotiations on the budget and the transportation impasse, unfortunately, have not been very prominent in the process of this on-going session. The special session has wrapped around the 2006 Reconvened Session (some refer to it as the “Veto Override Session”) held on April 19^th.

In the Special Session there have been different plans submitted by the Senate in an effort to break their deadlock with the House of Delegates. Each effort up to today (May 24), including a plan to allow regional authorities with prescribed taxing abilities to be created along with a statewide plan, have been rejected or tabled by the House of Delegates. After all, every plan the Senate came up with, prior to May 23, had tax increases included. As described in past Giesen Perspectives, the Senate’s position has been and continues to be you cannot have a “…patch work transportation plan. We need a dedicated, sustainable source of new revenue to meet the crisis we are in.”

In the other House the majority of members are just as dedicated to a “no new tax” position. “How can we need more taxes when there is a $1.4 Billion dollar surplus?” At least, that’s how the argument goes. So the House plan pays for the immediate transportation needs with General Fund (GF). The plan helps secure this financing partially by shifting capital projects from the GF to bonded indebtedness. The Senate on its part doesn’t like paying for state projects with bonds unless absolutely necessary. Thus “the substitution of bonds for GFs” presents another sticking point. Even with the new effort on the Senate’s part to separate the budget and the transportation issue there are still these “sticky points.” Maybe though, as some optimists believe, these points can be “greased” and the budget, at least, can be adopted in time to avoid taking the Assembly and the Commonwealth into uncharted waters—you know, no operating budget at the beginning of the fiscal year!

Some people have complained about the Governor being a “potted plant” in this budget debate. He has been pretty active behind the scenes and in public with his town meetings on transportation. Governor Kaine clearly indicated to local elected officials that if there were no budget by July 1, he fully intended to continue what he was elected to do, that is, run the Commonwealth. While his administration has not definitively stated how he was going to acquire the funds to do this, the speculation has been he would use his emergency powers authorized by the constitution. Education, public safety, transportation, corrections, mental hospitals, public health, law enforcement, “et cetera, et cetera, and so forth” could all be considered “emergency services,” don’t you think?

THE IMMEDIATE IMPACT OF THE TRANSPORTATION DEBATE

Now that it is likely there will be no new transportation plan for the state before summer there will be a rather drastic impact on local governments and primary and secondary road construction. The Secretary of Transportation’s office has been warning for several weeks that they were approaching the point of no return in revising their six year plan for highway construction. That point in time has now passed. There is every indication the Transportation Trust Fund for construction will have to be cut $362,000,000 for the five years left in this six year plan. This amount of dollars will be needed to replace the increased cost of maintenance already planned for the next five years. Asphalt alone has increased an estimated $182 million just since the last revision in November of 2005.

So anticipated construction on secondary and primary roads will, of necessity, be curtailed for the coming year even if a transportation plan is forthcoming from the General Assembly later this year. The planning and implementation time for highways is too long to take any other course, especially on projects involving federal funds, according to the Administration.

So we may be driving on dusty roads in the rural area and in congested side streets in the suburban and urban areas, at least for another year!

A POST SCRIPT

By the end of the day on May 25^th, the House had finished its rebuff of the Senate substitute to HB 5002, and even announced a couple of areas where agreement between the two houses has reported been struck! Another important announcement was also made – the Conference Committee will be meeting on Tuesday, May 30^th. Stay tuned! (srr)

Links to Previous Giesen Perspectives:

Arthur R. Giesen, Jr., fondly known as Pete, served in the Virginia House of Delegates for over 30 years. He represented the citizens of the Central Shenandoah Valley surviving four different district realignments. During his career he represented Augusta, Bath, Highland and part of Rockingham County and the Cities of Staunton and Waynesboro.

Following his career as an elected official, Pete assisted Lt. Governor John H. Hager as his Chief of Staff.

Pete now keeps an eye on Virginia government and assists many clients with his unique perspective on the workings of the Virginia General Assembly and its relationship with the other branches of state government.