Key 2003 Legislative/Administration Initiatives

1. Key 2003 Legislative/Administration Initiatives Northern Virginia Roundtable Sine Die Overview February 24, 2003

2. Observations • Some sweeping structural changes made that will change the way government operates. • Many, many strategic decisions on what government should do and how to pay for it were not addressed. • Clearly the Republican majority in the House is ready and willing to implement a social agenda. • The Senate majority played defense in protecting General Fund and was as much a barrier to tax reform as anyone. • No leadership in sight willing to take on the critical issues -- if the elected officials won’t lead who can/will?

3. Transportation • Bills and budget amendments to implement Administration reforms: • require financial plan for projects of $100 million, • require CTB to develop a debt policy, • get economic advisors involved in projecting transportation revenues • requires quarterly reports on the status of all projects • makes permanent the Rural Rustic Road Program • allows Commissioner to approve maintenance and construction contracts under $2 million • indemnify MWAA for roadway or transit ways within their right of way • Transportation safety • adds an automatic license suspension for underage drivers for driving with a blood alcohol content of 0.02 • allows for increased fines for violations in designated highway safety corridors • Efforts to make substantive moves forward on transportation funding failed: • increase gas tax revenues • constitutional amendment to protect transportation related funds; HB1600 adopted by GA, it requires a governor to provide a repayment plan in the budget when funds are diverted, but not considered to be powerful since the budget document can and does always override law. • authorize use of insurance tax premium revenue to support bonds on a 6-9 vote in Senate Finance, bill had passed House of Delegates • efforts to change the allocation formula

4. Tax Restructuring • Nothing approaching comprehensive tax reform was seriously considered in the 2003 General Assembly session • SB 1348 (Lucas) was the only comprehensive bill introduced. It was briefly discussed in Senate Finance but not approved by the committee. It proposed several changes in sales and income taxes as well as changes in exemptions and deductions • All other efforts failed • HB 1397 (Hull) and SB 1111 (Whipple) to provide equal taxing authority between counties and cities • Proposed increases to the state and/or local tobacco tax -- some for education, some for GF. • Various bills to roll back or cap the car tax. • Various bills to cap local real property tax revenues • Various bills or constitutional amendments capping state spending or suggesting surplus state revenues go to capital investment • The General Assembly -- after much discussion between the two bodies -- adopted a structure for one more year of study related to tax reform. The Commission on the Revision of Virginia’s State Tax Code and the Streamlined Sales Tax Project Agreement has several specific tasks: • examine the allocation of state and local government services and responsibilities • conduct a comprehensive review of the revenue impact of all tax deductions, credits, and exemptions • evaluate tax rates of all major taxes to determine sufficiency and appropriateness in the modern economy • consider appropriateness of adopting policies of the Streamlined Sales Tax Project Agreement and identify changes in Virginia tax code that may be needed to facilitate Virginia’s compliance with the agreement • The Commission is given deadline for finishing work -- November 30 -- and limited in meetings -- 5 • The Commission is obligated to submit at least an executive summary report by first day of the 2004 session • This is an effort to force action from the study by start of the next legislative session.

5. Delivery of Government Services and Programs • In terms of the Framework, this area saw the most substantive action. • Consolidation/Elimination of agencies or commissions bills passed: • Bills to eliminate inactive commissions or boards • Bill to limit life of new boards and commissions • Creation of a new information technology agency, redefinition of the CIO role and consolidation of IT positions across agencies • Reverse auctioning pilot made permanent, proven savings • Reform of Workforce Training Council and administration of programs • Budget amendment sets out a process by which CIT is to become self-sufficient by FY 2007 when it will lose all General Fund support. • $500,000 in GF support is being withheld until MOUs are signed that allow CIT to recover part of its expenses in securing federal R & D grants • Other Wilder Commission recommendations still under review • Budget language that called for development of a plan regarding privatization of ABC outlets was deleted by budget conferees

6. Delivery of Government Services and Program -- Planning/Fiscal Safeguards • A reforecast of revenues required as soon as revenues drop 1% below projections • Process for developing a Roadmap for Virginia’s Future to instill long range planning and performance measures for state agencies • When revenues are at least 8% over projections additional deposits into Rainy Day Fund are required • Constitutional amendments to put limits on spending or on local real estate taxes were defeated

7. K-12 Funding Issues • Budget treated K-12 fairly well with no significant cuts in state aid but with some block grants that provides local school boards with flexibility to decide how best to address remedial efforts. • Other proposals all failed: • Establishing a cap on the local share for SOQ, some through a constitutional amendment; • Amending the composite index to more fairly recognize a locality’s ability to pay • Constitutional amendment requiring regular updates of the SOQs • Bills creating a public school construction bond/grant program • Efforts to increase the sales tax .5% for education

8. Higher Education Budget Amendments • George Mason University • $535,000 to open new academic building in Spring 2003 • $4,500,000 through the Equipment Trust Fund to support new academic facility on Prince William campus; can’t outfit the wetlab during construction • Lost $127,125 in funding for Law School special funding and Center for Conflict Resolution; intent of General Assembly that non-general funds be used for higher ed public service centers and special purpose research; a 10% reduction • Northern Virginia Community College • $417,000 provide security for new medical campus in Springfield • Limits on colleges and universities ability to increase tuition and fees • Tuition for in-state, undergraduate students may be increased no more than 5% from the 2002-2003 school year rates • Mid year increases from the 2002-2003 year may be included as part of the base rate when calculating the 5% cap • Tuition rates for 2003-2004 may not exceed 105% of the 2002-2003 base tuition level • There is some relief for institutions whose Spring 2002 tuition increases were less than $225 (GMU qualifies) • Any increases used to support the proposed 2.25% faculty salary increase are exempt from the caps. • $4.5 million was added to statewide need-based student financial aid coffers to help offset expected tuition increases