Last month I attended the House Appropriations / Finance Committee Retreat in Staunton. Hosted by Chairman Lacey Putney and his staff, the retreat was held on November 15 and 16th and designed to provide the necessary information for these two committees to prepare for work on the biennial budget. As you will note in this summary, it will be another challenging budget cycle.

While economic indicators show slow growth in Virginia over the coming biennium, the national picture is much bleaker as recovery continues to be extremely sluggish. Our modest unappropriated balance or "surplus" from FY 2011 has been directed by statute to the Rainy Day Fund, the Governor's FACT Fund, and the Water Quality Fund among others sources.

The dedication of state lawmakers over the course of the recession and its sluggish recovery has put Virginia on better footing than other states going into the next two year spending cycle. The actions of our conferees and the leadership of Governor McDonnell led to necessary cuts and prudent structural adjustments preserving our bond rating and balancing our budget without a tax increase. While we have revenue growth, it has been slow revenue growth. Consequently, House Appropriations Staff anticipates that the state will be able to meet base budget needs, but revenues will be inadequate to cover increases to Medicaid, re-benchmarking K-12 and making contributions to the retirement system. This scenario will require a conservative approach.

Further complicating the Commonwealth's finances is the late and unproductive work of the federal "Super Committee." Since the Super Committee failed to pass a deficit reduction plan, federal defense spending cuts will work a disproportionately large hardship on the Commonwealth. We cannot plan, with any precision, for the various possible outcomes in Washington and their effect on Virginia. However, Governor McDonnell will be recommending a reserve fund to mitigate against potential impacts.

Looking forward, House Appropriations Staff expects K-12 re-benchmarking, the Virginia Retirement System, constitutionally required distribution to the rainy day fund, and Medicaid adjustments to be the major budget drivers for the upcoming biennium. These items present significant additional costs above the base budget.

As you know, the Governor has asked each Secretariat to submit 2/4/6 reduction plans, which have been completed and are currently under consideration. We await the Governor's Joint Money Committee meeting December 19 and the introduction of his budget in the 2012 General Assembly session.

Please feel free to contact me if you have comments, questions or concerns about this economic forecast. 

Delegate Peace would like to hear from you. He is soliciting feedback on the Governor's government reform proposals contained in the press release from the Governor's Office below.

E-mail your thoughts to delcpeace@house.virginia.gov

Governor McDonnell Announces Government Reform Initiatives for 2012 Legislative Session

Will Eliminate 2 State Agencies and 19 Boards and Commissions; Merge 7 Agencies and 23 Boards and Commissions Into Others

~ Initial Estimates Find Reforms will Save at least $2 Million a Year~

RICHMOND - Governor Bob McDonnell announced today his government reform initiatives that are contained in a Government Reorganization Plan submitted to the General Assembly. The proposals are a result of the ongoing work of the Governor's Commission on Government Reform and Restructuring. The proposals include eliminating two state agencies; merging seven state agencies into others; eliminating 19 boards and commissions; merging 23 boards and commissions to form 11 boards and commissions; moving four offices and initiatives; and, de-regulating three professions. The Government Reorganization Plan will be considered as a resolution in the 2012 session of the General Assembly. Initial estimates by the Department of Planning and Budget find that the submitted reforms will save at least $2 million per year.

Additionally, today Governor McDonnell issued two executive directives to improve operational efficiencies. The directives will implement administrative recommendations of the Commission on Government Reform and Restructuring that will allow for better cooperation among state agencies, implement more streamlined purchasing of essential commodities such as energy, water, waste, and document management services, and provide for a more advanced travel and human resources management system.

Speaking about his Government Reorganization Plan, Governor McDonnell commented, "Immediately upon taking office, I signed an executive order establishing the Governor's Commission on Government Reform and Restructuring. That Commission had one objective: find ways to streamline government and make it more effective and efficient for all Virginians. Over the last decade state spending has grown 66 percent; 23 percent when adjusted for population and inflation. In this tough economy, when families are struggling to make ends meet and business owners are facing declining revenues and tough choices, we simply cannot afford a government that just grows bigger and bigger with each passing year. We must strive for a smaller, smarter government that spends the limited taxpayer dollars of our hardworking citizens wisely and prudently. We must make government more accountable to its owners, the taxpayers. Over the last 22 months we have implemented a number of measures that have increased innovation and privatization in state government. This coming General Assembly Session we intend to advance even bolder reforms to reduce waste and ensure that we are providing the best services to our citizens in the most fiscally responsible manner."

Governor McDonnell continued, "I have decided to advance a number of recommendations made by the Governor's Commission on Government Reform and Restructuring in their recent report, as well as a number of additional reforms. These include eliminating two state agencies whose functions duplicate work already being done elsewhere. We will also propose the merger of seven agencies and transfer of four state functions to streamline the delivery of services. Additionally, we will propose the elimination of 19 boards and commissions and the consolidation of 23 boards and commissions that duplicate efforts or are no longer an efficient use of state resources. Finally, we have identified three professions that we believe are better served if no longer regulated by the state. These targeted reforms will save taxpayer dollars and reduce the size of government, while still ensuring that the Commonwealth provides the high quality core services our citizens expect and deserve."

Governor McDonnell's 2012 Government Reform Initiatives:

2 Agencies Eliminated

• Virginia National Defense Industrial Authority (VNDIA)
• Board of Towing and Recovery Operators (BTRO)

7 Agencies Merged into Others

• Department of Rehabilitative Services with the Virginia Department for the Aging (VDA) and the Department for the Deaf and Hard of Hearing
• Human Rights Council with the Office of the Attorney General
• Department of Correctional Education (DCE) with the Department of Juvenile Justice (DJJ) and Department of Corrections (DOC)
• Department of Employment Dispute Resolution with the Department of Human Resource Management
• Virginia War Memorial into the Department of Veterans Services
• Chippokes Plantation Farm Foundation into the Chippokes Plantation State Park

19 Boards and Commissions Eliminated

• Commonwealth Competition Council
• Interagency Dispute Resolution Council
• Virginia Public Buildings Board
• Virginia Council on Human Resources
• Advisory Council to the Southeastern Interstate Forest Fire Protection Compact
• Small Business Advisory Board
• Board of Surface Mining Review
• Board of Mineral Mining Examiners
• Virginia Public Broadcasting Board
• Hemophilia Advisory Board
• Sewage Handling and Disposal Appeal Review Board
• Child Day Care Council
• Boating Advisory Committee
• Virginia Council On Indians
• Litter Control and Recycling Advisory Board
• Foundation for Virginia's Natural Resources
• Board for Correctional Education
• Virginia Juvenile Enterprise Committee
• Board on Transportation Safety

23 Boards and Commissions Merged to form 11 Boards or Commissions

• Reforestation of Timberlands Board into the Board of Forestry
• Seed Potato Board and the Potato Board
• Bright Flue-Cured Tobacco Board and the Dark-Fired Tobacco Board into a single Tobacco Board
• Pesticide Control Board into the Board of Agriculture and Consumer Services
• Board for Opticians and the Board for Hearing Aid Specialists
• Board for Geology with the Board for Professional Social Scientists and Wetlands Professions
• Public Guardian and Conservator Advisory Board with the Commonwealth Council on Aging and the Alzheimer's Disease and Related Disorders Commission
• Advisory Board on Child Abuse and Neglect with the Family and Children's Trust Fund
• Chippokes Plantation Farm Foundation Board of Trustees into the Board of Conservation and Recreation
• Northern Virginia Transportation Commission and the Northern Virginia Transportation Authority
• Virginia Scenic River Board into the Board of Conservation and Recreation

4 Functions Moved

• Office of Consumer Affairs into the Office of the Attorney General
• Virginia Office of Environmental Education from the Department of Environmental Quality to the Department of Conservation and Recreation
• Municipal Separate Storm Sewer (MS4) Permitting from the Department of Conservation and Recreation to the Department of Environmental Quality
• Governor's Office of Substance Abuse Prevention to the Virginia Department of Alcoholic Beverage Control

3 Professions De-Regulated

• Hair braiders
• Mold Inspectors and Remediators
• Interior Designers

Executive Directive 2: Government Reform - Operational Improvements  

Executive Directive 3: Government Reform - Operational Improvements, Human Resources and Travel