Charles Poindexter Report from VA General Assembly-Richmond
March 9, 2012
The General Assembly’s Regular Session ended Saturday night. By then, we had completed action on all bills for the year except one, the Budget bill.
The Poindexter Report, Week #9, March 5 – 10, 2012
The General Assembly’s Regular Session ended Saturday night. By then, we had completed action on all bills for the year except one, the Budget bill. The 20 Democrat Senators continued to hold the state budget hostage for Senate organization and committee assignments changes. So, we asked the Governor to call us into a Special Session to address the budget and the second critical item, which the Senate also refused to address: elect judges for the many vacant judge positions around the state. We then went into Special Session and recessed until 21 March, when we could take up the budget and election of judges, if the Democrat Senate is willing. There have been some informal discussions among Senate Finance and House Appropriations Committee members. This is a positive sign, but the Senate Democrat public demand for $600 million in new spending without cuts in other areas to offset that increase to the budget so we have a balanced budget as required by the Virginia Constitution doesn’t indicate much progress towards completing the budget.
Technically, there are two budget bills: the major bill for 2012-2014 and a second bill to make adjustments to current 2010-2012 spending, which ends 30 June. In previous cases of budget impasse in the General Assembly, the current year bill—called the Caboose Bill—has always been passed so today’s spending through 30 June aligns with revenues. For the Senate to not approve what is going on today is doubly irresponsible.
In the meantime our local governments , school boards, state agencies, hospitals, nursing homes, the Health Care Safety Net, free clinics, police, firefighters, EMS and many other organizations have nothing to work with to prepare for the new fiscal year. Hopefully, the Senate Democrats will come to realize their first priority is the citizens of the Commonwealth.
Our judicial/legal system is the institution that sets us apart from the rest of the world. Today, we have many vacant judge positions around the state, including the 22nd Judicial District, which serves much of the 9th House District. Delay, court overloads, over-tasked judges, etc., result in unacceptable delivery of timely justice, which is a critical pillar of our state and country. Holding judicial elections hostage for political control/influences is simply unacceptable.
One of the major issues we have struggled with all Session is the solvency of the Virginia Retirement System (VRS). So many states are in serious fiscal danger due to their retirement systems as well as overspending and borrowing. Our VRS system, if continued as is, will result in Virginia citizens and employees being in the same quagmire as some bankrupt states. Governor McDonnell said he would not pass the problem to future Governors. The Legislature agreed on a bipartisan basis. We had to do our part as will local governments, school boards, school board employees and local government employees. So, we passed major legislation we had debated for the last several years to step up and fix the solvency problem. It is not simple, nor perfect, and we and the Governor expect to make adjustments to the legislation before it goes into effect 1 July.
The VRS legislation has several components. First, it requires VRS recommended contribution rates be fully phased in over the next 4 biennium budgets and includes a mechanism to assure unfunded liabilities in VRS are covered for these employees who migrate to the defined contribution (DC) plan. Second, the legislation creates a new hybrid DB/DC plan and places all new hires into it starting in 2014. This plan covers all state and college employees, most local employees, teachers, constitutional officers’ employees, and judges. Employees must contribute as well as the state or local jurisdiction. Up to 8.5% combined contributions are included with 100% vesting after 4 years. This could result in a very favorable retirement benefit, potentially beyond that resulting from the current 5% contribution rate and DB plan.
The third component of this bipartisan legislation addresses employee contributions by teachers and local employees, since last year we addressed state employees by requiring them to contribute 5% and provided a 5% offset increase. Local government, teachers, and employees of constitutional offices will now have to contribute 5% to the VRS, offset by school boards and local governments providing a 5% salary increase. It is imperative to note that school boards and local governments are already making the VRS contributions for the employees so the cost is essentially a ‘wash’ as to whom they pay the money as they are already paying VRS on behalf of their employees.
Mindful of the financial pressures on school boards, this can be phased in up to 5 years. While the phase in is not applicable to local and constitutional employees, we have a commitment from the Governor that he will consider that as a possible amendment to the bill. I have no information on why the Senate did not include the 5 year phase-in for these employees, but I’m confident the Governor will address the issue. It is also important for local government officials to note that by using an 8% VRS return on investment rate, their contributions to VRS are reduced, and local governments under the House Budget will receive $100M statewide on local government direct aid restorations to help them with auxiliary costs for this or other purposes.
This is a most important action by the General Assembly on behalf of its citizens. We cannot go down the bankrupt road of states like Michigan, California, and New York. We must provide a solvent system that is competitive and fair. This legislation was the opportunity to put Virginia Citizens and taxpayers , as well as employees of the differing local jurisdictions, on the path to a sustainable and fair retirement system.
Many of you have inquired about the ‘Amazon’ sales tax bill. This issue of purchasers from online retailers not paying sales tax as they must at Virginia-located brick-and-mortar retailers is unfair to our local businesses. Amazon will collect sales tax on sales to Virginians and send the money to Virginia starting in 2013. This is due to the legislation and agreement between Amazon and the State. Note, however, that other internet sellers from out-of-state without a physical presence in Virginia will not do so. There are reasons for that not happening. First, it is probably not feasible. For example, there are over 9000 jurisdictions in the USA and their sales tax rates are susceptible to change at least yearly. It is unrealistic for every internet retailer—especially small retailers—to keep up with that or even know where the 9000 offices are to send the tax. Second, the US Supreme Court has ruled that an internet seller has to have a ‘physical presence’ in a state to collect sales tax from that state’s residents. Thus, this issue must be settled in the U.S. Congress, not the General Assembly of Virginia.
On a broader note, I often have complained about federal over-reach and over-regulation. I saw where last week the federal EPA has representatives in Lynchburg inspecting their stormwater pipes and wastewater plant, and Lynchburg is expecting to be fined and told to take whatever actions the EPA inspectors deem needed, from hiring more people to replacing lines, to spending local money on their facilities. Who’s next? Rocky Mount, Stuart, Bassett, Boones Mill?
My District office in Glade Hill will re-open on March 19. If I may be of assistance to you or to arrange for me to speak to your group or organization, please contact Alex or Tom at (540) 576-2600 or DelCPoindexter@house.virginia.gov or P.O. Box 117, Glade Hill VA 24092.
