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Wilson Center Newsletter December 2011
2012 General Assembly Session
Delegate Christopher Peace '98 - represents the Virginia House of Delegates' 97th District and serves on the prominent Courts of Justice, Health Welfare and Institutions, General Laws, and Finance Committees. The district spans parts of Hanover, Caroline, King William, King and Queen, Henrico, Spotsylvania Counties and all of New Kent County.
The dedication of state lawmakers over the course of the recent recession and its sluggish recovery has put Virginia on better footing than other states going into the next two year spending cycle. With legislative action and the leadership of Governor McDonnell necessary cuts and prudent structural adjustments were made preserving our bond rating keeping the cost of borrowing low and balancing our budget without a tax increase. But next year there will be nothing new under the sun.
While economic indicators show slow growth in Virginia over the coming biennium or two-year cycle, the national picture is much bleaker as recovery continues to be extremely sluggish. The state's modest positive balance or "surplus" from Fiscal Year 2011 has been directed by statute to the Rainy Day Fund, the Governor's FACT Fund, and the Water Quality Fund among others sources. In 2011, we have had revenue growth, but it has been slow revenue growth. As a result, the state will be able to meet base budget needs, however revenues will be inadequate to cover increases to Medicaid, re-benchmarking K-12 and making contributions to the retirement system. This scenario will require a serious, conservative approach in 2012.
Further complicating the Commonwealth's finances is the late and unproductive work of the federal "Super Committee." Since the Super Committee failed to pass a deficit reduction plan, federal defense spending cuts will work a disproportionately large hardship on the Commonwealth. We cannot plan, with any precision, for the various possible outcomes in Washington and their effect on Virginia. Governor McDonnell will be recommending a reserve fund to mitigate against potential impacts.
Looking forward, expect K-12 re-benchmarking, the Virginia Retirement System, constitutionally required distribution to the rainy day fund, and Medicaid adjustments to be the major budget considerations. These items present significant additional costs above the base budget.
As you know, the Governor has asked each Secretariat to submit 2/4/6 reduction plans, which have been completed and are currently under consideration. We await the Governor's Joint Money Committee meeting December 19 and the introduction of his budget in the 2012 General Assembly session. .
Delegate Lynwood W. Lewis, Jr. '84 - represents the 100th District in the Virginia House of Delegates. First elected in 2003, Delegate Lewis serves on the Commerce and Labor Committee where he serves on the Energy subcommittee, House Finance Committee, the Committee on Agriculture, Chesapeake and Natural Resources and the Militia and Police and Public Safety Committee. He has been appointed to and continues to serve on the Chesapeake Bay Commission. Delegate Lewis also serves on the Governor's Aerospace Advisory Council.
The Virginia General Assembly is always concerned about revenue and budgets. The 2012 Virginia General Assembly promises to be no exception. This is a budget writing session and given the extremes of our slowly recovering economy, it may be perhaps the most challenging yet. We have done everything we can with the help of federal monies to minimize the impact in these extreme times, but we are out of budgetary maneuvering room. The shortfall this year, despite increasing revenues, could be as much as a billion dollars in our two-year budget. The cost drivers are as always the cost of Medicaid, the increasing cost of K-12 public education, and the burgeoning funding of our retirement system.
Along with our fundamental budgetary concerns will be a continuing effort to deal with our transportation problem. The Governor is proposing using a portion of our sales tax, .25%, to be applied towards transportation maintenance. This will set up the usual philosophical debate regarding use of general fund monies for transportation purposes. In addition, there will likely be some significant changes proposed to the Virginia retirement system. The system is approximately 20 billion dollars under-funded. Some significant changes must be made in order to preserve and protect our system and our obligation to State employees.
Another important issue which will be hotly debated this year will be the effort to allow the development of regulations for uranium mining projects in Virginia. This is prompted by changing market conditions in uranium and by the huge (approximately 119 million pounds) amount of uranium in Pittsylvania County. An economic study has just been released showing a significant and positive economic impact on the Pittsylvania County Region and the Commonwealth. The legislature anxiously awaits a study soon to be completed by the National Academy of Sciences as to some of the more significant questions regarding the potential environmental and health impacts of mining.
As always with the General Assembly, there are probably two or three issues that will gain significant public attention which are not firmly planted on the radar screen yet.