THE GIESEN PERSPECTIVE

  

  The “Capital Troops” Warm up for The 2008 Session

DATE:           December 27, 2007

 

GETTING READY FOR THE 2008 GENERAL ASSEMBLY (THE GA)

 

While the 2008 Session of the GA won’t officially convene until Wednesday, January 9, 2008 at “high noon,” the activities to get ready for the session have been going on for several months.  The staff of the Department of Planning and Budget (DPB) has been working 70 hour weeks preparing the Governor’s budget. The staffs of Treasury, Taxation, Transportation, Education, and The State Council of Higher Education for Virginia have, also put in long hours in support of DPB’s efforts.  Then, of course, the Governor, his Cabinet Secretaries and his close advisors have been reviewing, revising, and re-revising the work of DPB and the others. 

 

This portion of the “warm up” came to a peak Monday (the 17^th) when the Governor made his official presentation of his budget to the “legislative money committees” (you remember those are the House Appropriations and Finance Committees and the Senate Finance Committee).  This is an important document for this Governor.  Because of our uniqueness among the states this is the only budget that Tim Kaine will develop and implement.   Of course, the General Assembly gets its chance to tweak it a bit before he “oversees its implementation.” The other states allow their governors to serve two terms (if they can get reelected after their first term) thus giving them an opportunity to have major control over at least three budgets (if the state operates on a biennial budget cycle like the Commonwealth) or, heaven sakes think of it,  seven annual budgets.

 

The second major portion of the “warm up” is getting the bills and resolutions ready for the session.  The staff of the Division of Legislative Services takes the ideas and opinions and suggestions of the legislators (both the returning members and the members-elect) and turn these into some proper form to be “dropped into the hopper” for legislative consideration.  The deadline for “pre-filing requests” from the members was December 5.  On that day DLS received a record number of requests—in excess of 1400.  This brought the total requests to that date to over 3200. That total has now exceeded 3700.  So the staff members of DLS are now working 10 to 14 hour days trying to get every legislator satisfied.

 

These are those “capital troops,” those bureaucrats, who are getting things ready or “warmed up” for the 2008 Session of Your General Assembly.  The next time you hear a citizen complain about how poor government workers perform their duties or how much better the private sector employees do their jobs, you might just let them know you are aware there are many, many government “bureaucrats” who are diligent, hard working, dedicated employees who perform admirably for the tax payers.

 

THE GOVERNOR’S PRAISE FOR THE DEPARTING LEGISLATORS

 

On the 17^th the Governor made his budget presentation to a standing room only crowd in the largest committee room in the General Assembly Building.  The only applause the Governor received during the address was early in the speech just after he had recognized the “eight members of the Joint Money Committees” who he would address for the last time in this particular setting.

 

These include the retiring Chairman of the House Appropriations Committee, Delegate Vince Callahan; the retiring Chairman of the Senate Finance Committee, Senator John Chichester; Vince’s colleagues, Delegates Wardrup, Reid, (Appropriations) and Welch (House Finance); and John’s colleagues, Senators Lambert, Hawkins, and Potts.  The Governor’s tribute to these retiring members was notable.  He gave particular praise to the Chairmen for their service and the other legislators and the audience gave all eight of the “retirees” a standing ovation when the Governor finished that portion of his talk with “I, along with all in this room, applaud you for your accomplishments.”

 

From the House money committees some 81 years of legislative experience leaves, while “the other body” will lose over 100 years of total legislative service from the Finance Committee.  (Two of the senators had the opportunity to serve in the House prior to moving over to the smaller body.)  More important than the loss of the legislative years of experience is the loss of the “institutional memory” that these particular members maintained and used for the benefit of the citizens of this Commonwealth. 

 

It should be noted the members leaving, particularly those from the SFC, served in the years when the main purpose of serving was to serve, not necessarily to establish a narrow political agenda.  Why some of the departing legislators even learned the great art of compromise.  Historically, we have benefited from the fact that many people who hold elected (and administrative) positions in all levels of government in our Republic have learned this art and are aware it is a key to the successful operation of a government in a democracy!  It recent years a number of observers of our General Assembly have wondered if learning this art has been lost on a large number of those holding elected legislative positions.

 

One can only hope that the members who fill the vacancies of those retiring from the money committees have learned or will learn this art quickly or it may be a very long session of the GA.

 

THE NEW LEADERSHIP OF THE MONEY COMMITTEES

 

After the applause subsided and the audience had resumed their seats (that is those who arrived early enough to have a seat), John Chichester acknowledged the Governor’s “kind comments” and noted he hoped the transition in the chairmanships of the House Appropriations Committee and the Senate Finance Committees would be smooth.  He also noted the incoming chairs were no strangers to the legislative process. 

 

Delegate Lacey Putney, an Independent who has been caucusing with the House Republicans for at least ten years, moves up from Vice-Chairman of the Appropriations Committee to be its Chairman.  He has been a member of the House since 1962, His political career is interesting.  He was elected as a Democrat closely related to the Byrd Machine.  He moved to the Independent status during the McGovern years and if it hadn’t been for Watergate during the Nixon years might have become a full fledged Republican as did Delegate George McMath.  He is the senior member of the House and the Appropriations Committee in terms of service.  Still a young 79 (he turns 80 on June 27), Lacey, recently re-married, and plays a mean game of tennis.

 

Having been Lacey’s seatmate in the House for eight years, I can attest to the fact Lacey never met neither a tax increase he liked nor an Appropriations Committee budget that he disliked.  Lacey has continued to be elected all these years because he takes care of his district, keeps in close contact with his constituents and has never met a stranger.  He has chaired a number of committees and subcommittees during his legislative career.  He will run a tight ship.

 

Over in the “Other House,” Charles J. Colgan takes over the chairmanship of the Senate Finance Committee in his 81^st year.  An astute businessman, Chuck,  who served in the United States Army Air Corp. and later in the U.S. Air Force, founded Colgan Airways Corp. in 1965 (now Colgan Air Inc.) and is now Chairman of the Board.  He gained local government experience as a member of the Prince Williams County Board of Supervisors before being elected to the State Senate in 1975.  While known as a mild mannered type person, Senator Colgan has been a firm member of the Senate contingency on the Budget Conference Committee for the past several years.  Considered to be a moderate, it is expected his leadership of the SFC will not be a great deal different from that of his Republican predecessor.

 

In his final comments, Senator Chichester stressed, “…the incoming chairs of the two budget writing committees bring some 78 years of legislative experience to the table.  It should be a smooth transition.”  To emphasize that the gavels are being passed, Vince and John left the chambers and turned the chairing of the joint committees over to Chairman Putney and Chairman Purkey (the House Finance Committee Chairman).  Senator Colgan was absent due to a flu bug.  So the transition begins and the two “most powerful committees in the GA” have new leadership taking over.

 

THE “LIGHTING ROD” HIGHLIGHTS OF THE GOVERNOR’S BUDGET

 

With the 2008 Chairs of the two House Money Committees chairing the meeting, following the cordial send-off for John and Vince, Governor Kaine presented his Caboose Budget (the tweaking of the 2006-2008 Appropriations Act for the balance of FY 2008) and his 2008-2010 Budget Bill.  As usual when Gov. Kaine delivers an address directly from a prepared text (particularly one where some of the figures it contained were still being revised as of Sunday, Dec. 16^th!) the possible applause lines are blurred even for his Democrat supporters.  Thus, the last ten pages of his presentation were delivered without interruption. 

 

The revenue picture which the governor outlined has not changed a great deal from his August address before the same committees.  He reiterated there was going to be a shortfall at the end of this biennium.  He did revise this downward from the August estimate of $641 million. Citing the 2007 slow growth and the five months of data for FY 2008, he stated, “…our revised revenue forecast now calls for a revenue shortfall, after balance and transfer items are considered, of $618.3 million to address in the caboose bill.” 

 

LIGHTING ROD number 1 is the manner in which the Governor proposes to address this reduced short fall.  The administration has cut $300 million from the FY08 budget and agencies found some $96 million in “savings…found at my instruction at the end of FY07.”  (The House Appropriations Committee staff might suggest these savings “were found” in reaction to the legislative pressure applied to the administration upon their analysis of the Governor’s August presentation—made after the close of FY07.)

 

So far so good, as far as the legislature is concerned, but to close the rest of the “shortfall gap” the Governor stuck to his original recommendation and as part of the caboose budget has a withdrawal of $261.1 million from the “Rainy Day Fund.” This withdrawal from the “Revenue Stabilization Fund” does not sit well with Republican legislators.  They seem to see this action differently than does the administration—can you imagine such a thing?

 

Senator Walter Stosch wrote the Governor a letter months ago stating his position that “…the new budget should not rely on withdrawals from the ‘Rainy Day Fund.’”  In the Republican Leadership Press Release issued Monday afternoon, Senator Stosch reiterated that he had given the Governor this advice in his letter.  He particularly noted that no Rainy Day Funds should be used, “…if he desired to initiate any new programs with significant fiscal impact.  I regret that this proposed budget rejects that advice.  Not only does it tap the Rainy Day Fund, it draws it down at the maximum allowed by law.  It is not a modest withdrawal.  It is a raid.”

 

Needless to say this “lightening rod” issue is seen quite differently by the Administration.  In his presentation following the Governor’s address, Ric Brown, Director of DPB, stressed that by the end of the introduced biennial budget the “Revenue Stabilization Fund will be larger than it is today even after a withdrawal this year (of $261.l million).”  The fund had a balance of $1,189.8 billion in it at the end of FY07.  The transactions recommended by the Governor would consist of: (1) deducting the $261.1 million transfer to cover the GF shortfall; (2) depositing the $119.1 million reserved from FY 2006 to be deposited in the fund; (3) depositing some $23.1 million required by law from FY07; and, (4) depositing the interest earned by the Fund into the principle of the Fund.  This would leave the Fund at an estimated $1,098.3 million level by the end of FY08.

 

From the economic forecasts being used for the budget there would not be any anticipated “surplus” during FY09 or FY10.  Nonetheless, it is conservatively estimated by the administration that the Fund would earn between $60 and $70 million a year in each of these fiscal years.  The Rainy Day Fund should easily top $1,215.0 million by the end of FY10, six months after Tim Kaine leaves office.  The fund had $1,064.7 million in it on June 30, 2006 six months after Mark Warner left office. 

 

So the Administration argues this is not a “raid” on the Fund but simply using the Fund for the purpose for which it was established.  “The General Assembly may appropriate an amount for transfer from the Fund to compensate for no more than one-half of the difference between the total general fund revenues appropriated and a revised general fund revenue forecast presented to the General Assembly prior to or during a subsequent regular or special legislative session.”  The Constitution of Virginia, Article X, Section 8, Paragraph 4.  The calculated variance for FY08 is $522.3 million and one-half of this “calculated variance” is $261.1 million. 

 

While it appears the administration has acted within the constitutional boundaries for the Fund, the action is not pleasing to the Republican Leadership.  This “withdrawal” from the Rainy Day Fund will be hotly debated.  At the end of the day, however, the shortage of revenue will, in my opinion, force the members of the money committees to yield and withdraw some funds from the Revenue Stabilization Fund.

 

LIGHTENING ROD number 2 is the Governor’s plan to “borrow” $180 million of the $500 million in GF dollars appropriated to the Transportation Trust Fund (TTF) by the GA thru HB 3202 (you remember, the 2007 compromise, no tax increase, “fix it” transportation bill). This use of GF dollars was, as I’m sure you will recall, supported by the Governor.  Here the Republican legislators are arguing the taking of these dollars is a diversion of $180 million from the TTF in FY08.  This $180 million will allow the Governor to fund new or expanded non-transportation programs.  In a press release the Republican Leadership reminded the public (and the voters, of course) that, “Reducing funds already committed to transportation—which the Governor had characterized as our most critical need—implicitly violates his promise to secure the TTF.”

 

On the other hand, these funds are sitting in the TTF and cannot be spent for two years because projects are not designed and are not ready to be put to bid.  Since the funds were originally raised for GF projects why not use them for that purpose and then put the $180 million back in FY10?  There is always the concern; will the money be available in FY10?  Governor Kaine can, of course, cover the $180 million when he introduces his 2010-2012 budget.  Then, if there is a need for the $180 million for other purposes the next governor, who will implement that budget, will just have to worry about how to pay back the TTF.

 

This practice of using GF revenues to support transportation projects always seems to stir up controversy.  In the “dark ages” before all these “computer generated models, etc.” transferring funds around was much simpler.  If the highway revenue streams were doing better than the general fund tax collections in a particular FY, then the strangest thing would very quietly take place.  That year the State Police would be funded thru a non-general fund (NGF) transportation allocation.  If the reverse was true, i.e. GF revenues were stronger than the NGF transportation revenues, the State Police would be designated to be paid from GF.  Of course, everyone on the scene was dedicated “not to raid the transportation funds!”

 

LIGHTENING ROD number 3 is the Governor’s trimmed down expansion of the Virginia Preschool Initiative (VPI).  The Governor’s objective is to give the maximum number of “at-risk” preschool children the opportunity to secure a”high quality early childhood education.”  His proposal would increase the number of at-risk children served by VPI from 13,000 to 20,000. This expansion would cost “slightly over $56 million--$18.2 million in fiscal year 2009 and $38.1 million in fiscal year 2010.”  The explanation of the funding breaks it up into different categories.  The first is “the biennial rebenchmarking of VPI costs” established by the State Board of Education (60%); second, TANF dollars “specifically designed to serve low-income children” (25%); and “only $7.6 million of the biennial cost is from new general fund dollars not earmarked to serving children.” 

 

This is an initiative which the Governor has been “selling throughout the state.”  He is dedicated to the concept that high quality early childhood education gives every child a better opportunity in their education experience and in later life.  For him it is not only a good investment, it is a necessary one for the future of Virginia and for the nation.  His program would be a cooperative effort with local school divisions and would make use of private providers to help solve the space problem often sited by local governments. 

 

To the legislators who must now “dispose” of the Governor’s proposals, no matter how you divide up the figures this is still a $56 million new initiative in a tough revenue year.  It’s going to be a very tough sell to the money committees.  Whether this gains any traction may depend on how well the Governor did his earlier “selling to the chambers of commerce and the business community across Virginia.”  His main pitch was this is a very necessary investment in Virginia’s future.

 

LIGHTENING ROD number 4 is so well grounded that it probably won’t even generate any sparks.  Sometimes it takes a tragedy to bring people together.  The Governor’s recommendations for increased funding for the Mental Health System should gain support from all quarters.  All three branches of our state government-- the executive, the legislative and the judiciary—have studied the system since 416 (the date of the Tech shootings).  All studies have recommended similar actions.  So it is expected that the Governor’s recommendations for some $42 million in new initiatives in the mental health field will be adopted.  In fact, there is a very good chance the GA will “find” additional funds to enhance the Governor’s program.

 

LIGHTENING ROD number 5 will be the Governor’s revenue forecast for the second year of the biennium.  A growth rate of 6.7% for FY10 seems high to the legislators at least that is what some of them have said.  The Governor did remind the members of the money committees that he and his staff had gone through two detailed forecasting sessions, “…meeting twice with the Governor’s Advisory Board of Economists (the economists who briefed the House Appropriations and the SFC retreats sit on this board) and the Governor’s Advisory Council on Revenue Estimates.”  The latter council has many of the most prominent business and manufacturing company executives sitting on it as well as “legislative representation.”  So at least some of the legislators have participated in reaching this “consensus” on the growth rate used by the Governor.  Maybe this rate of growth won’t be such a lightening rod as the GA moves through the session.

 

LIGHTENING ROD number 6 may well be the Governor’s recommendation for a $1,640 million general obligation (GO) bond issue for facilities for our higher education institutions.  This would be the first such bond referendum since 2002 and the fifth since these types of bond referendums were approved in 1968.  Just a little history—the 1968 referendum was for $81,000,000 for facilities for education and mental health (note this was a presidential election year); the 1977 referendum was for $125 million and included monies for facilities for education, mental health, corrections, ports and parks (note this was in a gubernatorial election year); in 1992 the state went to referendum for a package of $612,944,000 GO bonds for education, mental health, and parks (another presidential election year); and then in 2002, the first year of Governor Mark Warner’s term, the Commonwealth’s citizens approved a $1,019 million package ($900 million for higher ed and $119 million for parks).  This suggested bond referendum comes a little quicker than most.  As you can tell most of the earlier referendums have had at least a 10 year interval before going back to the voters for approval of another issuance.  The Assembly may decide this is a little early for such a move particularly considering the potential impact of this presidential election year. 

 

There are many other items in the budget proposals that may be “lightening rods” for various groups of people.  Local governments, for instance, may feel like the burden of slow state revenue growth is again being shifted to their shoulders—the budget freezes payments to local police departments, as an example.  More of this will come to light as the session progresses.

 

A “NEW DAY” IN THE COMMITTEE “CHAIRMANSHIPS”

 

When your Assembly convenes on January 9^th for the first time in history the Senate of Virginia will have a majority of Chairwomen presiding over the eleven standing committees.  Seven committees will be chaired by “gentlewomen.”  In addition, Senator Henry Marsh from Richmond, an African-American, will chair the Courts Committee.  Only three committees will have Anglo-Saxon American male chairmen.  The Democrat Steering Committee which makes the appointments for the committees promised there would be diversity in their selections.  They have fulfilled their promise.

 

In the House there is also a slight shift in the committee chairs, but not as dramatic as in the Senate.  Two gentlewomen move up to new positions to chair The Committee on General Laws (Delegate Terrie Suit) and The Committee on Science and Technology (Delegate Kathy Byron).  Delegate Bev Sherwood remains as the chair of Militia, Police, and Public Safety.  There were a couple of surprise chairmanship appointments by The Speaker which will have to be tracked down for a future GP.  Keep tuned!

 

To all a VERY HAPPY NEW YEAR.  2008 may prove to be a very exciting session of your General Assembly.  

 

 

 

Links to Previous Giesen Perspectives:

June 10, 2007 April 5, 2007 April 2, 2007 March 24, 2007 March 23, 2007 March 22, 2007 March 21, 2007 March 19, 2007 Feb. 28, 2007 Feb. 12, 2007 Feb. 5, 2007 Jan. 22, 2007 Jan. 15, 2007 Dec. 18, 2006 Nov. 22, 2006 Nov. 10, 2006 Sept. 7, 2006 August 23, 2006 June 30, 2006 June 1, 2006 May 24, 2006 April 10, 2006 March 30, 2006 March 20, 2006 March 6, 2006 Feb. 27, 2006 Feb. 17 and 19 2006 Feb. 10, 2006 Feb. 3, 2006 Jan. 27, 2006 Jan. 23, 2006 Jan. 16, 2006 Dec. 21, 2005 Nov. 9, 2005 Oct. 21, 2005 Sept. 16, 2005 Aug. 26, 2005 Aug. 19, 2005 July 7, 2005 June 8, 2005 May 27, 2005 April 7, 2005 March 10, 2005 February 21, 2005 February 14, 2005 February 8, 2005 January 31, 2005 January 15, 2005 December 23, 2004 November 19, 2004