An Historic Budget Agreement
Delegate Al Eisenberg released the following statement regarding the historic new budget agreement recently passed by both houses of the Virginia legislature.
When Governor Warner announced his tax reform proposals last fall, he identified three primary goals: to make the tax code fairer and more equitable for Virginians, to provide the funding needed for education and the other core priorities of government, and to safeguard Virginia's reputation for fiscal integrity.
"The tax reform and budget package adopted by the General Assembly meets these goals," Governor Warner said. "This is a bipartisan plan that meets our existing commitments and provides tax relief to Virginians in a fair way. It also builds on our success in responsibly addressing $6 billion in revenue shortfalls over the past two years by shrinking the size of state government and implementing common-sense reforms to make government more efficient."
In coming weeks, Governor Warner will share the details of the final tax reform and budget package with the three major rating agencies -- Moody's, Fitch, and Standard & Poor's. Moody's is the rating agency that placed the Commonwealth on "credit watch" for a possible downgrade of its sterling Triple-A bond rating last September.
The 2004 tax reform and budget package makes the tax code fairer and more equitable, particularly for low and middle-income taxpayers:
- The compromise makes the income tax fairer by lowering the income tax for all Virginians. It increases the personal exemption from $800 to $900, eliminates the "marriage penalty," and raises the filing threshold from $7,000 to $14,000, which removes 141,000 low-income Virginians from the tax rolls entirely. The compromise also creates a new low-income tax credit for the working poor. * * The compromise makes the sales tax less regressive by reducing the sales tax on food by ½ cent on July 1st next year, a ½ cent the next year, and ½ cent the year after that.
- The compromise makes sure that the tax burden is more fairly distributed by closing two common loopholes used by many major corporations and businesses to legally avoid paying state taxes.
- The package gradually raises Virginia's lowest-in-the-nation 2.5-cent per pack tax on cigarettes to 30-cents per pack.
- The Legislature agreed with the Governor that the age deduction for older Virginians should be reformed based on income, and that a small increase in the sales tax was the most equitable way to raise revenues for our basic needs.
- While Governor Warner's original tax reform proposal would have completed the phase-out of the car tax, the compromise adopted by the General Assembly caps state car tax reimbursements to localities at $950 million annually -- one-and-a-half times the original projected cost of the program.
The Governor's introduced budget included the largest increase in state funding ever recommended for public education. The final tax reform and budget package builds upon that historic commitment, providing a total of $1.5 billion in new state support to public education and reducing the pressure on local real estate taxes.
The package reflects the biennial "re-benchmarking" of public education costs, including the rising costs associated with increased student enrollment, teacher salaries, and rising health insurance and retirement costs.
The budget supports almost 10,000 teachers previously not recognized by state standards - about eight additional teachers per 1,000 students. Funding also is included for art, music and physical education resource teachers in elementary grades, technology instructors and aides, and planning periods for middle and high school teachers. The compromise budget also eases the burden on local budgets by recognizing the cost of school support positions, a recommendation made by the Joint Legislative Audit and Review Commission.
The improved funding supports the revisions to the Standards of Quality recommended by the State Board of Education. Funding also is included to implement the Board's recommended SOQ prevention, intervention, and remediation programs.
Half of the ¼ cent of sales tax revenue, or $189 million, will be distributed to school divisions based on the Constitutionally-mandated Standards of Quality formula in support of the improved SOQs. The other half of the ¼ cent of sales tax revenue, representing an additional $189 million, will be distributed to school divisions based on school-age population.
The budget supports efforts to improve achievement for at-risk children by providing $51 million for the Virginia Preschool Initiative, a program for at-risk four-year-olds currently not served by the federal Head Start program. * * The budget includes $27 million to increase funding for English as a Second Language (ESL) programs vital to communities with large immigrant populations, and to reflect "cost of competing" adjustments for school divisions in Planning District 8.
The budget provides $9.2 million in additional funding for Governor Warner's "Education for a Lifetime" program, a series of targeted initiatives aimed at improving student achievement and teacher quality. It also includes almost $1 million to continue Governor Warner's voluntary school efficiency reviews.
The tax reform and budget package includes $275 million to address chronic under-funding of Virginia's world-class system of two- and four-year public colleges and universities to maintain high-quality academic programs.
The budget begins closing the estimated gap in adequate base funding at Virginia's public colleges and universities to support growing student enrollments, offset rising tuition costs, and allow students to graduate on time. It also provides $31 million to increase faculty salaries by three percent, effective November 25, 2004. The budget increases in Tuition Assistance Grants (TAG) for Virginia students at private colleges and universities, from $2,210 annually to $2,500.
The tax reform and budget package includes new investments for the mentally disabled and for state support of nursing homes and other services for our most vulnerable citizens:
- The budget adds nearly $32 million to provide mental retardation waiver services for 700 people currently living at home with aging parents or siblings.
- Provides additional funding for services to the elderly and the physically disabled.
- Increases Medicaid reimbursement rates paid to providers of mental retardation services, home care services for the elderly and disabled, hospitals and nursing homes.
The tax reform and budget package makes vital investments in public safety:
- Strengthens public safety by providing competitive salaries for State Police, Capitol Police, deputy sheriffs and judges.
- Meets the state's obligation to pay for the cost of state prisoners held in local and regional jails.
- Provides funding for 100 new correctional officers, adds 25 adult probation officers, and provides funding to fill juvenile probation officer positions held vacant due to budget cuts.
- Provides additional funds for state aid to localities with police departments ("599 funding") to allow a combined 10.6 percent increase over the two-year budget period.
- Authorizes a new $69 million, medium-security prison in Tazewell County.
In addition, the tax reform and budget package includes the largest infusion of funds for natural resource programs in Virginia history -- $15 million each year of the biennium to the Water Quality Improvement Fund, and $2.5 million each year of the biennium to the Virginia Land Conservation Foundation.
The package also invests in our workforce through a three-percent salary increase for state employees and state-supported local employees, effective November 25, 2004, and provides for a two-percent increase in the second year of the budget period. State employees received a 2.25% increase last fall - their first salary adjustment in three years.