RICHMOND - A conservative backlash over transportation funding in the House of Delegates continues to cloud efforts to close a projected $2.4 billion revenue shortfall in Virginia’s two-year budget as the General Assembly prepares to reconvene Monday.
House Republican leaders have tried to defuse the concerns of conservative lawmakers - and potential political rivals in a fast-approaching assembly election year - by reversing a budget amendment that would delay the transfer of almost $50 million in sales tax revenues from the general fund to the transportation trust fund this year as part of a package of budget actions to fill the projected revenue shortfall.
Del. Robert G. Marshall, R-Prince William, a foe of the transportation funding package that House Speaker William J. Howell, R-Stafford, championed in 2013, contends the assembly already has undone a provision of the law that would have repealed the package of tax increases on Jan. 1 if any of the money was diverted from use for transportation.
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“A great part of the effort to gain support of people to raise taxes was the provision that [revenue] wouldn’t be diverted” from transportation, said Marshall, who called the proposed delay “a complete reversal of the tactic to get suckers to vote for it.”
Marshall did not say whether he was preparing to file a lawsuit over the proposed deferral, as he did to block legislation adopted in 2007 to give transportation authorities in Northern Virginia and Hampton Roads the authority to raise taxes for regional projects - but he did say, “I’ve done it before.”
House leaders say they have taken the issue off the table by restoring the $49.8 million transfer of general sales tax revenue to transportation in the fiscal year that began July 1.
They say the decision, which House Appropriations Chairman S. Chris Jones, R-Suffolk, announced last week, makes unnecessary a budget amendment proposed by Gov. Terry McAuliffe. The governor’s measure is meant to reassure a jittery Northern Virginia bond lawyer that deferring the transfer until next year would not trigger the so-called “kill switch” in last year’s law to repeal transportation tax increases if any of the revenue in the package was diverted to other purposes.
“In other words, [the revised budget bill] will have no impact at all on the 2013 transportation plan,” Jones said in a memorandum to House members on Thursday that included a copy of the amended House Bill 5010.
The assembly, reconvening in special session for at least the sixth time since the regular legislative session ended in early March, also will deal today with other potentially contentious issues - filling judicial vacancies on Virginia’s two highest courts and considering legislation to allow consumers to keep health insurance plans that don’t comply with the Affordable Care Act.
But the biggest issue before them is acting - again - on a bill to revise the budget to reduce revenues by $882 million to fill a projected shortfall that has widened since the assembly adopted the two-year spending plan in June with $1.55 billion less revenue than when then-Gov. Bob McDonnell first proposed it in December.
McAuliffe has worked closely with House and Senate budget leaders since the shortfall first emerged in May, but the governor was perplexed last week by the continuing turmoil in the GOP-dominated House over tweaking the budget deal to address concerns about protecting $6 billion in estimated new revenue under the transportation package.
“I think this has more to do with intraparty politics,” the governor said on Election Day.
One likely Republican challenger agrees with him. “He’s exactly right - it is intraparty,” said Susan Stimpson, a former chairwoman of the Stafford County Board of Supervisors who said Friday that “there’s a very good chance I’m going to run” against Howell in House elections next November.
The transportation funding legislation already looms above the coming campaigns because of an additional increase in the wholesale tax on fuel that is expected to take effect Jan. 1. The 1.6 percent increase would be triggered under the law if Congress has not adopted the Marketplace Fairness Act proposed to levy sales taxes on Internet transactions that currently are exempt.
Under House Bill 2313, the federal law would generate an estimated $1 billion in sales tax revenue for Virginia over the six years. If not enacted, it would be mostly replaced by the additional wholesale fuel levy, which would raise about $200 million a year for the state and increase the gas tax to 16.2 cents per gallon, still less than the 17.5 percent tax at the pump before the law took effect. Marshall introduced legislation to block the increase from taking effect, but it died in a House subcommittee. He said he intends to introduce it again in January.
The failure to adopt the Internet tax legislation also would trigger the suspension of future scheduled increases in sales tax transfers from the general fund to the transportation trust fund, which was supposed to raise about $900 million over six years. The state made the first transfer of almost $50 million in the fiscal year that ended June 30. The law called for the additional transfer this year as part of a phased schedule to raise the share of general fund sales tax revenues for transportation from 5 percent to 6.75 percent.
Marshall and Stimpson contend that House Republican leaders already jeopardized new transportation funding when they adopted a budget in June that deferred a $30 million transfer of sales tax revenue to transportation this year as part of the legislature’s initial response to the revenue shortfall. The assembly increased the deferral to almost $50 million after the shortfall worsened.
“They’ve already unlocked the lockbox” for transportation funding, Stimpson said.
Matthew Moran, legislative aide to Howell, said Friday that “the speaker doesn’t think that’s accurate” and emphasized that the only reason for the proposal to delay the transfer was the need to close the budget shortfall.
“Something as serious as a $2.4 billion shortfall you have to elevate above the petty stuff,” Moran said.
Howell long has called for general funds to help pay for transportation maintenance and improvements, Moran said. “There just no motivation for them to [divert the money], except it’s a remedy to the budget shortfall.”
Stimpson questions whether House Bill 5010 - which the assembly adopted in September as part of an agreement with McAuliffe for closing the additional revenue gap - was necessary or whether Jones can revise it now without introducing a new bill.
“The logical question is, ‘Why are we where we are?’” she said. “They’ve obviously made a mistake.”
In a detailed memo to House members on Oct. 29, Jones said the concern about the so-called kill switch was raised by bond counsel for the Northern Virginia Transportation Authority. It is preparing to sell about $100 million in bonds that would be repaid with state and regional revenues raised under the law adopted last year.
Jones, who was a principal architect of the transportation law, said lawyers for the legislature and governor’s office did not believe the one-year delay in the sales tax transfer would trigger the kill-switch provision, but included language in the budget to ensure that nothing in the bill would do so. McAuliffe, working with the Appropriations staff, proposed an amendment last month to further restate the protection and reassure the authority’s bond counsel.
After Marshall and other conservative lawmakers continued to express concern about the potential effect of the deferred budget transfer, Jones said he would “eliminate any confusion regarding the status of transportation revenue streams” by restoring the money to transportation.
Jones said he will ask the House to send the bill and the governor’s proposed amendment back to committee, where he proposes to add a provision to ensure that the sales tax is deposited in the Highway Maintenance and Operations Fund this year as scheduled. The amendments also would add about $50 million to the $272 million in spending cuts the state ultimately will have to make in the fiscal year that begins next July 1.
Marshall said the maneuver would avoid a full House debate and vote on McAuliffe’s proposed amendment, which he wants. “A bunch of members were going to be in the spotlight for diverting the money and killing the kill switch,” he said.
Del. David B. Albo, R-Fairfax, voted against House Bill 5010 in September because of the concerns raised by Northern Virginia transportation officials, but he said the decision to restore the transfer fixes the problem. “This totally solves the whole thing,” he said.
Albo also dismissed the objections raised by Marshall and other conservatives. “The guys who didn’t like the transportation bill still don’t like it,” he said.