State budget drops ‘aid’ tactic

State legislators decided last week not to use a funding scheme that takes money back from local governments.

The Virginia General Assembly adopted a biennial budget Thursday that removes the “local aid to the commonwealth” – a technique to require localities to repay state money or cut revenue for programs from their budgets.

Shenandoah, Warren and Frederick counties have each had to repay about $1 million to the state through the “local aid” mandate. Governments usually used local money to make up the loss. Virginia began using the technique under Gov. Tim Kaine as a way to deal with waning revenues during the recession. Localities repay the state based on amounts determined by the Department of Planning and Budget.

Shenandoah County has had to repay, or reduce programs by almost $1.1 million or reduce programs in the past five fiscal cycles when the state used the funding scheme. Warren County has repaid or cut programs by $1.23 million over that time.

Shenandoah County’s County Administrator Mary T. Price said she and Finance Director Mandy Belyea have not discussed whether or not the budget should include an amount as a cushion in case the state revives the mandate.

“What we’ll do is budget zero because that’s what they have indicated to us but, understand, that could change,” Price said.

Doug Stanley, county administrator for Warren County, noted that the state could use the tactic again if the revenue picture takes a turn for the worse.

The Virginia Municipal League and the Virginia Association of Counties lobbied on behalf of local governments to see that the state stops using “aid to the state” to plug budget holes. Neal Menkes, the league’s director of fiscal policy, pointed out that the state supposedly stopped using the scheme then revived it.

“It’s the second go-around of being eliminated,” Menkes said Monday. “I suspect that, you know, the next time that the state’s economy goes into a tailspin and general fund revenues are sinking that somebody will remember that this was a budget technique and it’ll be reemployed.”

Counties were told to expect another $30 million reduction in “aid to the state” if the scheme again went into effect. That amount has been as high as $60 million in previous years.

The state did not institute the mandate in fiscal 2014, marking an end to the use of the funding scheme. But, in a surprise move last fall, the state told local governments they would need to reimburse $30 million to offset a shortfall. Shenandoah, Warren and Frederick counties had to repay a total of $268,000. The department notified local governments in mid November – about six months after most localities had adopted their fiscal budgets.

Shenandoah County took $84,803 from a contingency line item in the fiscal 2015 budget to cover its required reimbursement in the fall. The state did not mandate that local governments take the funds out of specific line items but suggested areas in their budgets to reduce. The county’s contingency fund has not always covered the reimbursement.

Local governments in the past could either write a check to the state for the reimbursement or take the funding cut through a program reduction because they would know the amount early enough, usually as they discussed their next budgets. But the requirement usually took effect after the local budgets had been passed.

Contact staff writer Alex Bridges at 540-465-5137 ext. 125, or abridges@nvdaily.com