RICHMOND, Va. — Beware of state legislators boasting of austere budgeting and courageous cuts that prevent state tax increases. Some of their actions the next few weeks could drive up the tax bills you pay on your home or your car.
Decisions made for years by the legislature's budget hawks have eaten into state subsidies for duties required of city and county governments by Virginia law and its Constitution.
Surveys of city and county officials indicate that years of ebbing state support paired with unfunded local mandates and the prospect of more in the coming weeks make local tax increases, service cuts or a blend of both likely wherever you live.
Senior House Republicans pledged last week to restore some funding for local governments and school districts across the state. But it won't make up for a decade of overall declines in state aid and, in the past five years, diminishing local revenues.
"We're at the point where we can't just continue to do 5 percent or 10 percent cuts," said Lynchburg's city manager for the past 11 years, Kimball Payne. "I think we're going to see generally, across the state, more local government managers at least putting a tax increase on the table."
Republicans who've signed pledges not to increase taxes have stifled every general tax increase put before the General Assembly since the last one was enacted in 2004. Since then, a crippling recession that yielded nearly $7 billion in shortfalls forced the state to balance its books in other ways: find savings, borrow money, tap the state's rainy day reserves and cut appropriations from the general fund, which supports core services of government such as health care, public schools and public safety.
About $1 billion worth of those cuts in state spending — made by legislatures under both Republican Gov. Bob McDonnell and his Democratic predecessor, Tim Kaine — was in aid to local governments. Much of that was direct aid to public schools, according to an analysis by Jim Regimbal, a private financial analyst who advises the Virginia Municipal League.
Total general fund aid to local governments in the fiscal year that ended in June 2009 totaled almost $8.3 billion, representing 52 percent of all general fund appropriations. Two years later, it was $7.2 billion, or 46.9 percent of state general appropriations.
"What's happening now is local boards and councils ... are going to have to put that burden on the local taxpayer as opposed to using state sources," said Jack Tuttle, Williamsburg's city manager. And because the revenue sources localities can raise and lower at their discretion are those on real estate and cars, taxes on homes are the most likely to increase, even as the value of homes continue a slide that began with the home mortgage crisis five years ago.
By far, the largest share of state money for localities goes to public schools.
McDonnell's $2.2 billion rescue of Virginia's public employee pension system, now $20 billion underfunded, sent a chill through school boards and superintendents, county boards of supervisors and city councils. The state would pay about $1.2 billion of that — about $600 million as the employer's share for state employees and the same amount as the employer's share for teachers. That leaves local governments to pay $1 billion.
Across the state, school districts are projecting staggering operating deficits for their upcoming annual budgets.
The Virginia Association of School Superintendents last week surveyed local school divisions statewide, asking each whether a shortfall was anticipated given the governor's introduced budget. Of 95 responses, 91 expect to be far short of their needs. All of the 91 planned deep cuts, and only 19 said they intended to ask their city or county governments for help.
The Associated Press obtained a copy of the survey, and in it, comments from the districts ranged from defiant frustration to dispirited resignation.
"As of March, 2011, we were the 6th lowest school division in student per capita expenditures in Virginia," New Kent County's schools lamented in its comment. "By next year, we may have the honor of finishing dead last, now that the State proposes to pass on more of its share of K-12 funding to the localities."
Without added funding or some relief on paying VRS rates, Gloucester County Schools intends to cut about 50 staff positions, possibly by closing an elementary school.
"We have eliminated positions, cut programs, practically eliminated all equipment purchases (including buses) and are now looking to increase class size," Chesapeake City Schools said in its reply. And perhaps, the writer added, "we should look to taking the State to court for not fully funding the SOQ," or Standards of Quality, the mandated minimum state curriculum standards.
Across Virginia on Friday, public school teachers wore black at the urging of the Virginia Education Association and the Virginia PTA, symbolically mourning lost education funding and implicitly imploring legislators to provide more.
The House of Delegates intends to add about $140 million to McDonnell's proposed education budget. But the hand that gives also could take away. Educators are fighting several bills now before the General Assembly that they say further threatens school funding.
An effort to place limitations on the state's machine and tool tax was beaten back last week, but a measure that would also diminish yields from the business, professional and occupation license tax remains alive. Both feed revenue into local governments.
A proposed tax credit for corporations and wealthy individuals who endow scholarships for private schools that serve needy children could cut $25 million annually from the state general fund, critics noted in a failed effort to defeat the legislation. Donors would receive a tax credit of 65 cents for every dollar given to a qualifying program.
Bob Lewis has covered Virginia government and politics since 2000.