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Posted August 23, 2012 | comments 1 Comment

VML: Local money boosts state surplus

By Alex Bridges -- abridges@nvdaily.com

Virginia's budget surplus touted by Gov. Bob McDonnell comes at a cost to already strapped cities and counties, claims an association for local governments.

McDonnell last week reported a surplus of $448.5 million for fiscal 2012 -- an amount including $192.2 million in extra, unexpected revenue and $319.3 million in savings from unspent general fund appropriations, higher education and other areas. This marked the third year in a row the state reported a surplus, with the three-year total nearing $1.4 billion.

Approximately $60 million of the surplus came from localities remitted as "local aid to the state," according to data from the Virginia Municipal League. The VML noted the budget revenue surplus falls short of the $310.7 million in fiscal 2011 and $220 million the previous period.

None of the surplus has been directly allocated to local governments.

Localities in the Northern Shenandoah Valley have paid their shares for "aid to the commonwealth." Shenandoah County in fiscal 2012 remitted $231,891; Warren County, $324,881; and Frederick County $293,812, according to information provided by each locality. Frederick County already has remitted $252,850 for fiscal 2013.

Frederick County Board of Supervisors in February adopted a resolution calling for an end to "local aid to the state." Warren County supervisors passed a similar resolution a year ago, which noted that localities will have given the state approximately $220 million by the close of fiscal 2012 on June 30. The Warren County resolutions also states the restriction shifts the costs to local taxpayers and "artificially increases the amount of state surplus revenue."

The VML and many local governing bodies argue Virginia leaders inflate the surplus amounts with money localities have had to pay back to the state. The VML this week called for the governor to end a mandate referred to as "local aid to the state." This policy requires localities pay certain funds back to the state, usually in January, or let the state decide where to cut the funds.

"At the same time the state is enjoying this surplus for the last few years, local governments have been absorbing more and more of what traditionally have been state costs," Neal Menkes, VML director for fiscal policy, said this week. "Local governments have assumed a larger role in paying for public education than what the state had been doing before the Great Recession hit."

Local governments need to apply pressure on the state to change the practice, according to Menkes.

"I think if local officials are just going to sit back and wait for the governor and general assembly to act out of their pure thoughts and their hearts and their brains and their good wishes then nothing's going to happen," Menkes said. "That's why we're hoping [local officials] will take advantage of what we recommend and write those letters to the governor and pass those resolutions so that the governor and the general assembly can see that this is a serious issue."

Menkes noted that the amount of unspent money tied to the surplus may paint a less-than-realistic picture of state finances.

"There's an expression that they use in Capital Square called 'bills in the drawer,'" Menkes said. "You don't pay your bills and your monthly balance in the checkbook looks a lot healthier than it really is. Yes, to some degree some of that is going on."

While the state experienced surpluses, data provided by the VML show local revenues took a steep drop in 2010 and only now appear to rising but still remain far lower than a peak hit in 2006.

"But it's kinda tough from the viewpoint of a local official that he or she has to balance what they're able to pay with what revenue they have and the state is enjoying a surplus for the third year in a row," Menkes said. "It's kinda hard for them to swallow and to realize that, to some degree, a portion of that surplus is due to the fact that local governments have been forced to give up tens of millions of dollars each year."

1 Comment | Leave a comment

    The Governor does a very good job of promoting himself & the Republican Party often at the cost of all Virginians. PTL that he was NOT Romney's VP choice & sparing us from seeing "pretty boy" face on national TV!!

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