Monday, January 3, 2011

RE-post: Del. Mark Cole's GA update

- General Assembly Session Starts Soon
- State Budget
- Higher Education Proposal
- Transportation
- Virginia Retirement System
- Campaign Contribution Deadline

GENERAL ASSEMBLY SESSION STARTS SOON
The 2011 General Assembly session will start on 12 January. Thousands of bills and resolutions will have to be expeditiously dealt with in a matter of weeks. These bills and resolutions will include everything from mundane technical corrections or updates to the Code that will hardly be noticed by most Virginians, to broad policy issues that could affect the pocketbooks of every family and business.

It is probably no surprise that our biggest challenges this session will be money related. Fortunately for Virginians, our state Constitution requires us to keep the budget balanced, no running up huge deficits or printing money as they do in Washington.

STATE BUDGET
Virginia’s economy has shown some signs of recovery, which has led to a small increase in tax revenues; the first such increase in two years. Unfortunately the recovery has been anemic and not produced the amount of revenues that were projected. This will require us to reduce spending by nearly $ 150 million. While that is significantly less than the $ 4 Billion shortfall we had to close last session, it still presents challenges in light of previous spending reductions and the budget priorities outlined by Governor McDonnell.

Governor McDonnell’s budget proposal includes cost-savings strategies for state agencies, targeted use of tax dollars where there’s a solid potential for return on investment and innovative reforms to government. Economic development and job creation will remain a primary focus. The Governor is hoping to improve Virginia’s competitiveness to encourage companies to invest and expand here. A continued commitment to fiscal discipline, government reform and business-minded solutions should create an environment that speeds economic recovery and provide greater prosperity for all Virginians. Keeping taxes low is essential to grow the private sector.

HIGHER EDUCATION
One of the Governor’s key priorities to expand economic opportunities for Virginians is to increase access to a college education, focusing on science, technology, engineering and math degrees, and encouraging colleges and universities to operate more efficiently. The Governor’s $50 million proposal is driven by his desire to award 100,000 more degrees in the next 15 years. In the 21st century economy, more Virginians will need affordable access to quality higher education to help them find and keep good-paying jobs.

TRANSPORTATION
Transportation continues to be a high priority, especially for our area. Prior to the economic recession, the General Assembly, spearheaded by the House of Delegates, had significantly increased transportation funding; yet it seemed the more we spent, the further behind we fell. We were getting little bang for the taxpayers’ bucks. This spurred the House to push for additional scrutiny of VDOT’s use of funds including an audit; which was one of the first things that the McDonnell administration did.

The performance audit revealed $1.4 billion in previously authorized funds that were not being spent on needed highway maintenance and new construction. Many of these dollars are being redirect to long overdue transportation projects. Another positive development came when Governor McDonnell announced $1.1 billion in construction and maintenance projects for the first six months of Fiscal Year 2011.

More recently, the Governor unveiled an ambitious $4 billion transportation initiative as part of his budget and legislative package. With interest rates and construction costs at record lows, many believe now may be the best opportunity to get roads built in modern Virginia history. The challenge here will be balancing the need for additional roads financed by bonds, with the Commonwealth’s debt burden.

In order to preserve our AAA bond rating, Virginia has maintained a relatively low limit for debt payments. The temptation is strong for politicians to run up debt when times are hard. Doing so would be penny wise but pound foolish if it were to hurt our bond rating.

VIRGINIA RETIREMENT SYSTEM (VRS)
VRS will be one of the toughest challenges faced next session. The state retirement fund, which was more than fully funded a few years ago, now faces a $ 17.6 Billion dollar shortfall after the market crash of 2008/2009. While the state failed to make its recommended payment to the system this year - something that Governor McDonnell now admits was a bad idea and that I opposed - that is not to blame for the bulk of the shortfall (even if the state had made its full payment the shortfall would still be around $ 17 Billion).

Public retirement funds are heavily invested in the stock market, just like IRAs and 401Ks, and are subject to market fluctuations and adjustments. When the market is booming, as was the case several years ago, the fund appears to be in great shape; when the market is in decline, the fund needs help.

It would cost more than $ 6,500 per household to make-up this shortfall. Obviously it would be unfair to ask the taxpayers to make the system right. What is needed is long term reform of the system.

We took the first steps towards reform last session when we lowered retirement benefits for new employees hired after 1 July 2010 and required them to contribute 5 percent of their pay to their fund. Further reform is needed to keep the system solvent.

Governor McDonnell has proposed increasing state employer payments to VRS while requiring all state employees to contribute 5 percent of their pay to the fund, something that has not been required of them since 1983. While this will help the fund’s balance sheet, the long term solution is to transition away from the current defined benefit plan and move towards a defined contribution retirement plan for new employees.

Defined benefit plans have become costly dinosaurs that are nearly extinct in the private sector, being replaced by defined contribution plans such as 401Ks where both the employee and employer can contribute to an individual fund. These funds are not only less costly but are portable and can be transferred to a new job with the employee without loss of value or vesting.

CAMPAIGN FUNDRAISING REQUEST
I do not normally solicit campaign contributions via email, but we have a fundraising deadline rapidly approaching. 2011 is an election year for the General Assembly and once we go into session, I am prohibited from receiving campaign contributions – so I need to raise funds quickly, before we go into session (I need to receive the donation by 10 January).

If you can help it would be greatly appreciated. To make a donation, please visit the following web page:

Donate here

Thank you for your help and support!

If you have any questions or comments regarding the upcoming General Assembly session, please feel free to contact me.

Happy New Year!
Mark L. Cole
Delegate, 88th District
Stafford, Spotsylvania, and Fauquier Counties

Web page: www.MarkLCole.com

Authorized and Paid for by Mark Cole for Delegate

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