Raw Data: Callahan's Memo to House
TO: Member, House of Delegates
FROM: Vincent F. Callahan, Jr.
SUBJECT: House Bill 5002 as amended
I regret to inform you that today about 2:00 p.m. our Senate colleagues stormed out of budget negotiations and left Richmond. The apparent reason for their action was the House conferees’ insistence that the dollar figure for transportation must be subject to negotiation and the transportation language amendment must be clarified. This action was especially shocking in view of the fact that your House conferees, at our very first meeting with the Senators, stressed that these items must be considered early in negotiations.
Just moments after receiving the latest House proposal, which included a transportation component, the Senate conferees returned our proposal through a staff member and without comment. Shortly thereafter, they came to my office and said that transportation was non-negotiable and that by injecting it into the discussion the House wanted to shut down government. When the House conferees reiterated that transportation always had been a top priority of the House and a topic of negotiation (as indicated by two previous letters sent to the Senate conferees), one of them dismissively said, “Call us next Wednesday if you’re ready to negotiate” and left the General Assembly Building.
The House conferees previously had made clear their intention to work through the entire weekend with a view toward completing the negotiations prior to Tuesday June 6th. Today’s actions by the Senate conferees has halted all discussions on the budget unless we agree to their transportation funding level and the language stipulating that even this level of funding will not flow to transportation unless a statewide tax increase is approved by November 1st.
As the week began, the Senate put forward a request to begin our discussions on capital construction needs for state agencies and higher education institutions. We agreed to their request recognizing that the two largest areas that separated our budgets was the amount to spend on capital construction and the amount to be included in the transportation reserve fund.
At the request of the Senate and in consideration of their agreeing to remove the tax increases from the budget, the House conferees also agreed to develop a capital budget package that used all cash and no debt. In doing so our approach to capital was guided by the following: First, we would use cash to pay for capital projects. Second, we would give priority to projects that had been previously vetted. Third, that we would not provide funding to plan, design or conduct architectural and engineering studies for projects without a commitment to fully fund them in the future.
Over the last several days, the House conferees have proposed a capital program compromise including over $930 million which focuses funding on projects that will have an immediate impact on core services in higher education, public safety and mental health. Our capital package also would provide some limited pre-planning for three additional mental health projects. Our proposed construction and planning package represents an increase of nearly $300 million in cash from our original capital proposal contained in House Bill 5002.
I think our package is a responsible compromise and accedes to most of the key objectives of our Senate colleagues. We still differ with the Senate’s insistence on spending over $34 million in planning rather than on construction of needed projects ready to build. A major item remaining in the Senate’s proposed planning is $12.5 million for new executive office buildings with a construction value of nearly $200 million. To us this represents a misplaced priority given the needs in transportation, higher education, and mental health. Even so, and as expressed by one Senate conferee, we were only inches apart on capital.
Clearly, we can settle our differences on capital. However, to finalize the level of capital spending, we also must determine the level of funding to be set aside in a transportation reserve fund. This reserve fund is part of the budget and is intended to serve as part of the future discussions on transportation.
You may remember that our original budget proposal set aside $1,030 million in the transportation reserve fund. The Senate’s proposal of $568 million was less than the amount proposed by Governor Kaine. In fact, the figure failed to keep the General Assembly’s legally stipulated commitment to pay the $74.8 million in biennial FRAN debt service payments.
Additionally, the Senate proposal did not include the one-third of the insurance premium tax as stipulated by law. Finally, despite the nearly $200 million in additional revenue adjustments included in their budget – over and above that recommended by the Governor – their budget does not dedicate any more surplus revenues to transportation than did the budget introduced by Governor Warner.
It has been our position from the beginning that as with any item in conference, the exact dollar amount and accompanying language for a transportation reserve fund would reflect a compromise that satisfies the objectives sought by both bodies. In keeping with this approach, we proposed a transportation reserve fund figure of $800 million. Apparently the Senate conferees believe that any figure above that contained in their original proposal is non-negotiable. Your conferees believe otherwise.
Despite the actions of the Senate conferees this afternoon all House conferees stand ready to resume negotiations immediately and resolve the budget.