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Three amigos / December 19, 2018

The 2019 session of the Virginia General Assembly is just around the corner and as chance would have it, three Southside lawmakers have put forth proposals to address the problem of how to pay for new school facilities in the region and throughout the state. State senators Frank Ruff and Bill Stanley (R-Franklin) and Del. James Edmunds (R-Halifax) each has a plan for bringing fiscal resources to bear on behalf of hard-pressed local school divisions. We may soon find out if our area’s legislative delegation has the pop to put any of their ideas into practice.

This week, Gov. Ralph Northam unveiled budget amendments for consideration by the General Assembly, and the governor’s list includes a call for the first contribution in a decade to the state lending pool for school building projects. Northam wants to put $80 million into the Literary Fund, which historically has granted low-interest loans for facility improvements. In light of Mecklenburg County’s plans for its new middle school/high school complex, the cost of which is creeping past the $115 million mark, you might be thinking to yourself, “Eighty million dollars for school projects around Virginia doesn’t sound like much.” You’d be right.

The Virginian-Pilot in Norfolk published an excellent piece this week on the backlog of loan requests by school divisions that have gone ahead with badly-needed facility improvements, with the hope only of someday receiving state help on the back end — that is, future Literary Fund loans to refinance up-front borrowing costs in the present. Most counties and cities, aware that no money is sitting in the fund, have stopped asking altogether; according to The Pilot, the last request to the Literary Fund came in 2013. This state-funded borrowing pool allow local school divisions to finance construction projects at around two percent, rather than the five percent or up that they’ll pay on the open market, so the savings over time can run in the tens of millions of dollars.

Mecklenburg’s chances of benefiting from a cash infusion of $80 million to help school divisions throughout Virginia are slim and none, which is where the General Assembly enters the picture — in theory, at least. Ruff, who sits on the Senate Finance Committee, and Stanley, who wants to run for governor in 2021, both have offered ideas for dramatically boosting the state’s lending capacity. Edmunds, whose House district includes Halifax County, which has its own high school construction project to worry about, advocates a different approach: allowing local governments to impose sales taxes that currently are the exclusive province of state government. All three face the challenge of showing their ideas aren’t comprised of hot air, or don’t run afoul of other prerogatives, which is to say each lawmaker has his work cut out.

Senators Ruff and Stanley start from the same basic place: the enthusiasm that bubbles up whenever politicians gain a revenue windfall without having to do the dirty work of raising taxes. Earlier this year, the U.S. Supreme Court issued an opinion in South Dakota v. Wayfair allowing states to step up sales tax collections on online retail purchases. The ruling could mean as much as $400 million for Virginia without lawmakers having to lift a finger (a specialty of theirs), although the size of this particular cash cow is somewhat in dispute. Ruff, nodding to this reality, has a pretty simple idea: take Virginia’s windfall, whatever it turns out to be, and stuff it in the Literary Fund.

Stanley has a more grandiose proposal: float a $4 billion bond, financed by these same online sales tax revenues, and get cracking with a big list of school projects ASAP. This, of course, is typical of the Franklin County Republican (Stanley’s senate district includes the western half of Halifax County, adjacent to Ruff’s territory.) The Assembly’s version of Slick Willie has evinced a talent for marketing flash ‘n’ dash, if nothing else, and as result Stanley had drawn some adoring media attention with his bill. (The editorial page of The Roanoke Times, which used to be one of the best in the state, has developed a special weakness for whatever vaporware Stanley happens to be selling on a given day.) Stanley’s press clippings are likely to grow in inverse proportion to the prospects of his bill actually passing muster at the Capitol, but hey, who’s going to read all the way to the end of the story to find out how the senator’s best-laid plans worked out?

The big problem that Ruff and Stanley face is Virginia made a prior commitment for using these internet sales tax revenues: it’s all part of the 2011 transportation bill, which pledged to dedicate the sales tax revenue, if it ever materialized, to northern Virginia, Hampton Roads and other regions with acute transit problems, a.k.a. commuters in crisis. Given this set of facts, the question practically asks itself: On which horse are you going to put your money — the combined legislative muscle of Virginia’s most populous (and traffic-snarled) regions, or the oomph of the Honorables Ruff and Stanley? Hmmm.

The saving grace for Southside is that paying for school facilities improvements is a huge problem everywhere else in Virginia, too. As detailed by the Virginian-Pilot, Norfolk City Schools has a capital project backlog of $492 million. Newport News is sitting on $505 million in maintenance and construction work it can’t find the money for. Counties, cities and their local school boards all need help from somewhere. Maybe lawmakers can put their heads together at the Capitol and come up with a fair way of divvying up the Wayfair revenue spoils, apportioned in reasonable fashion between education and transportation, and spread the money around Virginia in a way that tangibly relieves the pressure on counties like Mecklenburg and Halifax. Or maybe the legislature settles for baby steps, after Northam’s lead. It wouldn’t be nothing, but it also wouldn’t be much.

That brings us to Del. Edmunds’ idea, which is to give localities the right to impose local option sales taxes for school capital needs (subject to voter approval via local referendum). Halifax County school officials have proposed a 1-cent levy on top of the state’s 5.3 cent sales tax to pay for a new Halifax County High School, but first they need a bill like Edmunds’ to become law because the Commonwealth doesn’t actually allow localities to mess with the sales tax rate. (Being a Dillon Rule state, Virginia keeps a tight leash on the taxing powers of local governments.) In the 2011 transit bill referenced earlier, urban communities were granted the right to enact their own sales tax to pay for transit projects, but the approach hasn’t been applied to the educational sphere. Edmunds, who also represents Charlotte and Prince Edward counties, is seeking to change that.

Just imagine how much money Mecklenburg County could take in with a sales tax that captures a share of consumer spending by the New York-to-Florida contingent on I-85. It could, emphasis could, be an enormous amount of money to offload from the backs of county taxpayers. In terms of political optics, Edmunds’ bill also has the virtue of leaving the decision to raise taxes with the people who would be called upon to pay them, i.e. local voters. What’s not to like about this plan? If the advance word out of Richmond is accurate, apparently a lot.

The prospects of Edmunds’ bill becoming law are said to be dim. Asked about this, Ruff told The Sun this week that “traditionally the General Assembly has not been in support of letting go” of control of the sales tax. This sounds about right, but it’s also a rather odd stance. Legislators may be justified in taking a dubious view of localities that are suddenly endowed with the authority to impose their own sales taxes — you can just imagine the patchwork of rates around the state, some likely to touch the lower bands of the stratosphere — but what’s a poor lil’ county like Mecklenburg supposed to do? Stack the full cost of building a new school onto local property taxes? Without getting into the merits of the county’s real estate tax rate, one of the lowest in Virginia, it’s unquestionably true that it would be positively groovy to make the I-85 crowd pay a portion of the school construction tab, too. Legislative prerogatives be damned.

A better idea, however, considering the yawning need all across Virginia, is simply for the General Assembly to take the lead and enact its own tax hike to pay for school capital needs. Edmunds’ idea, after all, is nothing more than a flat-out tax increase — with the caveat that lawmakers avoid blame if voters take up their suggestion and show the gumption to do what they cannot. There’s an underlying gutlessness to Edmunds’ plan that ought to appeal to the truest sensibilities of Richmond politicians. Yet they may not be able to bring themselves to do even this much. If so, a one-word explanation will suffice: typical.

In each instance, the approaches by Ruff, Stanley and Edmunds are shot through with a “don’t look at me, the suspect you’re looking for is over there” spirit that is responsible for landing Virginia schools in the fix they’re in. Someday perhaps we’ll see a measure of fortitude in the legislature to solve big problems that are now being dumped on the doorsteps of local communities. Yet who knows? Maybe Virginia’s version of the Capitol gang will have some surprises to offer in the new year. To be continued.

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