Governor Warner Presents 2006-2008 Budget to General Assembly Money Committees

Governor Warner Presents 2006-2008 Budget to General Assembly Money Committees

— Final two-year budget highlights investments that pay measurable returns —

RICHMOND - Governor Mark R. Warner today submitted his final executive budget for the 2006 - 2008 biennium to the joint money committees of the General Assembly. The budget has three main objectives:

* maintain the Commonwealth's financial stability for the long term;
* make targeted investments that will pay measurable returns in the future; and
* meet the Commonwealth's ongoing commitment to fund core services.

"Most of the new investments we make in this budget reflect years of work on shared priorities which in many cases will yield measurable progress, economic benefits, or costs avoided down the road," said Governor Warner. "We will also propose fully replenishing the state's cash reserves - to take the Rainy Day Fund to its constitutional maximum for the first time in history. And for the first time outside a recession, we will propose a budget that includes lower operating spending in the second year of the biennium than the first year."
Long Term Approach

Virginia's economy has continued to grow, resulting in increased revenue to the Commonwealth. The revenue forecast on which the budget is based - including tax policy changes - projects growth rates of 6.1 percent for fiscal year 2006, 6.0 percent for fiscal year 2007, and 5.3 percent for fiscal year 2008. At those levels, revenue growth is expected to approximate what would be expected during a typical economic expansion.

A large portion of the revenue, however, is derived from the three most volatile revenue sources: individual non-withholding (taxes from non-wage sources), corporate income, and recordation taxes. Given the volatile nature of much of the revenue growth, the budget targets as much funding as possible for one-time expenses.

To this end, the Governor is proposing an additional deposit to the Rainy Day Fund of $402.2 million. This deposit will take the Fund to its Constitutional maximum ($1.065 billion) for the first time since its inception. The budget also uses $930.6 million in cash rather than tax-supported debt for capital outlay on new projects, cost over-runs, and equipment for buildings coming on-line, while significantly increasing support for deferred facility maintenance. This is a return to Virginia's tradition of taking primarily a ‘pay as you go' approach to capital outlay.
Long-Term Financial Stability: The Revenue Stabilization Fund

For the first time ever, the proposed budget takes the Revenue Stabilization or Rainy Day Fund to its Constitutional maximum ($1.065 billion) with a mandatory deposit of $402.2 million to the Fund. Any excess deposit will be transferred back to the general fund. The $402.2 million deposit excludes the effects of tax reform for sales and use taxes.
Measurable Results of Investment

The Governor's budget supports a series of major investments that will yield measurable results well into the future, including simple cost savings from investing in efficiencies. The budget provides significant new dollars for higher education research, increases funds for transportation, and makes the largest investment in Chesapeake Bay restoration in the history of the Water Quality Improvement Fund. In recognition of the uncertainty of future revenues, these are not ongoing spending commitments.

The budget also includes funds for a long overdue transformation of the mental retardation and mental health care system. It invests in improving a host of services for children from birth to age five, when resources and attention have been demonstrated to make a substantial difference in a child's future. It reinforces the safety net for Virginia's most vulnerable citizens by funding increased caseloads, rising energy costs, and other priority needs in health and human resources programs. In response to rising energy prices, investments to reduce the consumption of energy resources at the state level and to encourage individuals to conserve have been provided.

Targeted Investments: Raising the Bar for Higher Education in Virginia

The Governor's proposed budget provides $518.9 million in additional general fund dollars to continue progress to expand educational opportunity, help provide affordable higher education, help meet the needs of a changing economy, and promote quality and performance accountability for Virginia's higher education institutions.

Funding is provided to bolster Virginia's research facilities, and will be matched by the institutions for a total R&D boost of a half billion dollars. It allows for the hiring of top researchers in the fields of biomedical science, biomaterials engineering, nanotechnology, and modeling and simulation, whose presence will attract more grant-funded research to the Commonwealth. The initiative has obvious economic development benefits, but also invests in the search for cures for cancer, diabetes, tuberculosis, Alzheimer's and Parkinson's diseases, and avian flu. Included in this total is funding to increase state support for the Institute of Applied Learning in Danville, which stimulates economic development in the region by creating research-based jobs in the region, attract new business, and conduct applied research for existing businesses.

In addition, the budget recognizes the enrollment growth institutions have absorbed and offers additional support to institutions that are increasing the number of degrees awarded each year. The Governor set a goal of 10,000 additional degrees awarded each year by the end of the decade. Since the beginning of his term, degrees awarded have grown by more than 5,700. Funding has also been included to ensure broad access to affordable higher education through student financial aid, including increases in need-based aid to offset tuition hikes at public colleges and universities, increases in Tuition Assistance Grants, and a two-year waiver of out-of-state tuition for military personnel stationed in Virginia and their dependents. The higher education budget also includes funding for innovative collaborations between local school divisions, community colleges, and universities to help individuals who did not complete high school.

Finally, the budget includes funding to support the New College Institute in Martinsville, to provide increased educational opportunities in Southside Virginia as it strives to be a transformational economic development catalyst.

Targeted Investments: Helping Restore the Chesapeake Bay and Statewide Water Quality

The proposed budget will include $242.5 million for drinking water programs and the largest single investment in water quality in state history. Of that, $200 million for the Virginia Water Quality Improvement Fund will accelerate improvements to 92 wastewater treatment plants in the Chesapeake Bay watershed, helping them meet the new ‘strictest in the nation' water regulations for all five tributaries in the watershed, which were adopted last month after a two-year regulatory process. The funding is estimated to allow upgrades that will reduce nitrogen loads by about 2.6 million pounds per year, almost two-thirds of the state's 2010 Chesapeake Bay Agreement requirement, and will help reduce sewer bills for ratepayers in affected communities.

The Governor's budget proposal for water quality and drinking water programs will include the following:

* $200 million for ‘point source' reduction projects at publicly owned sewage treatment plants in all five river basins within the Chesapeake Bay watershed. [The funding is in addition to Virginia's mandatory deposit of $56.6 million from the current budget surplus, 70% of which will be used to reduce ‘nonpoint source' pollution. The nonpoint source funding is the maximum amount of funding that farmers and industry are estimated to be able to efficiently spend at the present time];
* $25 million grants to local governments for point source projects at publicly owned sewage treatment plants located outside of the Chesapeake Bay watershed;
* $7.5 million for combined sewer overflow projects in Richmond and Lynchburg; and
* $10 million for public drinking water projects through the Virginia Department of Health to connect more Virginians, primarily in Southwest Virginia, with clean and safe drinking water. 70,000 more Virginians have already been connected to clean and safe water since Governor Warner took office.

This $242.5 million is in addition to the Virginia Water Quality Improvement Fund mandatory deposits of $56.6 million for 2006.

Targeted Investments: Preserving Natural Areas

The Governor has included in his budget more than $11 million for the preservation of forestlands in Virginia through the purchase of almost 10,000 acres of forest property. The purchase of the Bromley Mountain tract for $3.6 million will add land in Washington County. Another tract of land will be purchased for $7.4 million in Sussex County, which will help protect one of the largest pristine forests still existing in Virginia.

Targeted Investments: Continuing the Progress of Transportation

The budget provides nearly $625 million in general fund support for transportation projects and programs in the next biennium. Approximately 46 percent, or $285.5 million, is for ongoing, permanent funding through the dedication of the insurance tax proceeds. The remaining 54 percent, or $339 million, is one-time funding to support specific transportation investments. These commitments will continue the financial rehabilitation of Virginia's transportation programs and add key investments in regional mobility and statewide economic development.

The deposit of one-third of the insurance tax proceeds ($286 million) will effectively relieve the annual debt service burden on the Transportation Trust Fund ($229 million). The remaining $57 million will support public transportation capital projects. This dedication is the most significant and long-term contribution to transit capital needs in two decades. This will allow the state to finance about 50 percent of all eligible mass transit capital costs for the foreseeable future.

The one-time investment achieves four goals:

* $142 million will provide the 20 percent match for all earmarked projects in the recently passed federal transportation bill.
* $142 million will substantially advance or complete major mobility projects that were identified by Congress as national priorities. These include additional Metrorail railcar storage, Virginia Railway Express rolling stock, the I-66 westbound widening inside the Capital Beltway, the I-264/I-64 interchange in Hampton Roads, the Route 164 rail relocation in Portsmouth and the Route 460 Coalfields Connector in southwestern Virginia.
* $1 million will benefit Telework initiatives to help reduce congestion.
* $54 million will provide a means to bring the economic benefits of the port expansions in Hampton Roads to the Rt. 460 corridor near Prince George and Petersburg, as well as to the Rt. 58 corridor in Southside Virginia.

Targeted Investments: Health and Human Resources

The Governor's mental health initiative begins long overdue improvements to the state's system of residential treatment, and continues investing in the Commonwealth's network of community-based mental health services. The Governor will propose replacement of two outdated state hospitals and two aging state training centers with state-of-the-art treatment facilities, located at or near the same sites, that will provide quality residential care in facilities that meet current building codes. These new facilities, which will not require the layoffs of any current employees of the Department of Mental Health, Mental Retardation, and Substance Abuse Services, will be more efficient to operate, and generally smaller in size. The four facilities are: Western State Hospital in Staunton, Eastern State Hospital in Williamsburg, Central Virginia Training Center in Lynchburg, and Southeastern Virginia Training Center in Chesapeake. The combined replacement value of these four facilities is estimated at $290 million.

The Governor's initiative also includes significant new investment in community-based services for the next biennium. Proposed General Fund spending of $116 million will draw-down more than $52 million in federal funds, for a total of almost $170 million in new funding for community-based behavioral health services.

The budget also boosts efforts to modernize health record keeping by encouraging the adoption of electronic health records. Core funding is also provided for increasing caseloads, rising costs, and other priority needs including enrollment growth and inflation in the state's Medicaid program.

About $57 million is included for early childhood in recognition of the importance of focusing resources on children at a young age to provide the best possible start in life. This funding will create an early childhood foundation to deal with issues facing young children, address the childcare service needs of citizens enrolled in Virginia's Initiative for Employment Welfare activities, eliminate the waiting list for children under six in urgent need of mental retardation waiver services, and increase funding for early intervention services for infants and toddlers. The "Healthy Virginians" initiative provides over $17 million to assist people in improving their health over the long-term.

Targeted Investments: Conserving Energy

In addition to executive action, the budget provides more than $17 million to expand both heating assistance and weatherization projects, and increases funds to help state agencies deal with the dramatic increases in fuel costs. State agencies will do their part in the conservation effort by absorbing approximately ten percent of the increased gasoline costs and thereby reduce discretionary travel. Essential public safety and human services travel will not be affected.

Economic contingency dollars will be used to reduce the number of vehicles on the road carrying state employees to and from work through incentives for the use of mass transit and car-pooling. The Department of General Services will replace 150 fleet vehicles with more fuel-efficient vehicles. Capital investments totaling $50 million have been proposed to replace aged and failing infrastructure such as heating, ventilation, and air conditioning systems, heating plants, and power plants at state facilities throughout Virginia.

Targeted Investments: Stimulating Economic Development and Tourism

The Governor's budget includes $4.2 million to stimulate economic development in rural areas by expanding access to broadband networks. Funding is provided to complete engineering and permitting associated with extending broadband networks to the Eastern Shore, Northern Neck and the Middle Peninsula. State support is also provided for best ‘last mile' solutions for other rural areas.

Funding is also provided to support industry-focused regional research and development centers, which will conduct research on product and process development and enhancement.

Additional funding is provided to increase advertising and tourism activities associated with the Jamestown 2007 celebration, as well as to increase visitation to rural attractions.

Finally, a total of $43.8 million is provided as incentive payments to semiconductor manufacturers which have met employment and investment targets set for them when they located in Virginia.

Targeted Investments: Support for the Arts and Cultural and Historic Attractions

Museums and cultural centers across Virginia provide educational opportunities, are a powerful tool for recruiting and retaining quality employers, and provide direct tourist dollars into our economy. The Governor's budget increases support for the Commission for the Arts by a total of $4.1 million, to reach 80 percent of the goal of $1 per capita in arts funding by the end of the biennium. The Commission makes grants to local arts organizations in the Commonwealth. In addition, the budget provides $19.8 million to support selected cultural and historic attractions across the Commonwealth.
Meeting Core Commitments

The bulk of the budget is devoted to meeting statutory funding obligations of the Commonwealth. Stable funding for these commitments makes the state a good partner with local government, takes some of the pressure off local property taxes, helps preserve the state's sterling credit rating, and helps recruit and retain a talented public workforce.

Meeting Core Commitments: K-12 Education

The Governor's proposed budget provides over $1.5 billion for elementary and secondary schools. This includes $941.9 million for the estimated state cost of the technical re-benchmarking of the Standards of Quality based on approved funding methodologies and increased enrollment. A total of $167.6 million is recommended for the state share of funding for a three percent salary increase for teachers and other public school employees, effective December 1, 2006, and $165.9 million is provided for the increased costs of fringe benefits, including teacher retirement. The budget also distributes $185.0 million in additional sales tax revenues.

Meeting Core Commitments: Retaining a Productive Workforce

The Governor's budget includes funds for state employees to receive a three percent salary increase effective November 25, 2006; teachers and other public school employees and state-supported local employees are slated to receive a three percent increase on December 1, 2006. In addition, the budget provides for salary increases ranging from two to four percent across the higher education system for teaching and research faculty. This funding will allow institutions to make progress toward meeting the 60th percentile of their peer institutions.

In addition to these salary actions, the budget provides an amount equivalent to one-half of one percent of salaries and authorizes agency heads to use these funds to recruit and retain the best employees and address compression issues.

The budget also provides funding to support the increased cost of health insurance for state employees, including the cost of an enhanced wellness benefit. This benefit eliminates the co-payments required for some routine medical visits and testing, to encourage prevention and greater health awareness.

Finally, the Governor's budget includes language to prohibit discrimination in state employment on the basis of race, sex, color, national origin, religion, age, sexual orientation, or political affiliation, or against otherwise qualified persons with disabilities. Placing such language in the Employment policy section of the budget carries the force of law, and is a valuable tool in recruiting and retaining a quality workforce at a time when employees are being asked to work more efficiently and effectively. The Governor has also amended Executive Order One to reflect the change. Specific protection against discrimination on the basis of sexual orientation is the policy of eight out of 10 of Virginia's largest employers, the majority of the states, and the majority of the members of the General Assembly in their own hiring.
Transparent Budget Structure

The new form and structure of the budget meets a basic commitment to make the budget more understandable. Since agency budgets are now determined at the service area level, it is appropriate that the budget document fully describe how that service area supports the overall agency strategic plan. This increased focus allows decision makers and the public to see what activities the agency performs, how much funding it receives in each area, and quantifiable measures of the agency's current and targeted performance levels in each service area.

http://www.governor.virginia.gov/Press_Policy/Releases/2005/Dec05/1216.htm