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Delegate Morgan: “tougher economic times ahead”

“We need to be looking more at user fees because it is a more desirable way to raise money.” —Delegate Harvey Morgan

by Larry S. Chowning

State Delegate Harvey Morgan told the Middlesex County Board of Supervisors Tuesday that the state was $1.3 billion below anticipated budget revenues in September, and the deficit is probably going to be double that in October.

Morgan noted that a second year of federal stimulus funds and using $283 million from the state’s “rainy day” fund will probably get the state through the 2010-11 (FY10/11) two-year budget without any great changes.

Morgan noted, however, that balancing the FY11/12 and FY12/13 budgets will be challenging “to say the least.” By that time, the federal stimulus funds would be used up and the state rainy day funds would be down to $300 million.

When the economy was booming, Virginia’s rainy day fund rose to $1.1 billion. “We are using up the rainy day fund very rapidly,” said Morgan.

Governor-elect Bob McDonnell ran his platform on not raising taxes, noted Morgan. He is proposing to reduce funding for higher education by 7.7%; to withhold funds that normally go into the Virginia Retirement Fund for one year; and to close three state-owned facilities.

“No one knows what we will do when the stimulus package is gone,” said Morgan. “Every state is in a pickle. Virginia is still one of only seven states with a Triple A credit ranking. We are still considered one of the best-managed states in the country.”

Morgan said this is the fourth recession he has been involved with as a state delegate. “Of the four, this is by far the deepest and presents us with the biggest problems,” he said. “It’s a bad time to raise taxes, but something is going to have to be done.”

Pinetop District supervisor Kenneth W. Williams told Morgan the county needs more ways to generate income rather than just raising real estate and personal property taxes.

Williams noted that the county voters rejected two referendums on a meals tax, yet town and city governments can adopt a meals tax without a referendum.

He also criticized the state lawmakers for allowing state taxpayers to pay all the proceeds going into the Virginia Retirement System. 

“State employees are the only people I know who don’t contribute to their own retirement system,” Williams said.

Morgan agreed. He said the policy of the state paying all the retirement of state employees went into effect in 1993 when times were much better. “Making employees contribute is one way to deal with the shortfall and still be fair,” he said.

Morgan said he and other delegates have considered other ways for counties to generate revenue, but not all would help Middlesex. For example, a county-wide income tax in place of a county real estate tax would probably do Middlesex more harm than good, he said.

Middlesex land values are more in line with urban areas around the state than urban income levels, said Morgan. “You’d probably have less revenues with an income tax.

“Real estate should not be the basis of a tax structure,” said Morgan. “We need to be looking more at user fees because it is a more desirable way to raise money. If you use it, you pay for it, and if you don’t, you don’t pay.”

Morgan said he knows county officials and others are frustrated with the current composite index formula used by the state. The composite index is one way the state determines a county’s ability to pay its own school and other expenses. The composite index is primarily based on real estate values, and Middlesex has one of the highest composite indexes in the state.

Morgan indicated he is going to work with others to try and find ways to “tweak” the composite index to make it fairer to counties such as Middlesex.

In another matter, Morgan warned the county that Virginia has not done its part in cleaning up the Chesapeake Bay and the Environmental Protection Agency (EPA) has said “it is going to come in and tell us how to do it. It’s going to be expensive.”

Several years ago, the states within the bay’s watershed and the federal government agreed to clean up the bay by 2010. The state of Maryland passed a “flush tax,” which is a tax on all septic systems and treatment plants in the state, Morgan said. All of these “flush” funds go toward cleaning up the bay.

Morgan said that part of the problem with Virginia is that only 12 of the 95 counties in the state are on the bay, and counties in southwest Virginia and elsewhere are less concerned over the health of the bay.

“The counties in southwest Virginia don’t see a need for a flush tax, and if they are west of I-95 they are not part of the Bay Act,” he said.  “Whereas most of Maryland is on the Chesapeake Bay.”

posted 12.03.2009

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