State Structural Imbalance - 2011 Legislative Program

3. The Commonwealth should rebalance its resources and responsibilities so that the structural balance of the budget and the funding partnership with localities are restored.

The Commonwealth is currently facing a serious structural imbalance in its budget, as more than $4 billion in federal stimulus funding has largely sustained the General Fund in the last two years.  Additionally, reducing Medicaid eligibility to balance the budget, as adopted in the 2010 session, is no longer an option as a result of federal health care reform.  To fill this gap, Governor McDonnell and the General Assembly rely on additional federal Medicaid revenues to restore Medicaid eligibility and avoid severe human services reductions in FY 2011, exacerbating the structural imbalance through the use of one-time funds for ongoing expenses.  The current budget also depends on accounting tools, such as accelerating sales tax collections, and the fiscally troubling decision to borrow funds from the Virginia Retirement System.

The depth and breadth of state cuts to localities in recent years has severely stressed the state-local funding partnership.  State aid to localities will be approximately $1 billion less in FY 2011 than it was in FY 2008, and in FY 2009 the state began requiring “local aid to the Commonwealth” -- $50 million per year in FY 2009-FY 2010, increasing to $60 million per year in FY 2011-FY2012.  As the state’s economic situation improves, funding restorations to the following programs should be of paramount consideration:

  • HB 599 – This funding for localities with police departments is tied to state GF revenue levels; since FY 2010, the state has cut HB 599 funding below those levels;
  • State supported local employees – Funding to the County has been cut by $3.6 million since FY 2010;
  • Jail per diems – State changes to these rates reduce funding to the County by nearly $5 million in FY 2011;
  • Flexible cut to localities – The County’s share of this cut is over $4 million each year in FY 2011 and FY 2012.

Restoring the state-local funding partnership should be a top priority of the 2011 General Assembly.  (New position.)



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