Thursday, April 1, 2004

RICHMOND — City and county governments in Northern Virginia will have to raise real estate taxes if the House and Senate remain deadlocked over a state budget for months, officials said.

Fairfax County officials would have to raise its current tax rate of $1.16 per $100 of assessed value by 47 cents if state lawmakers don’t draft a budget by the June 30 deadline. Alexandria officials would have to raise its rate of $1.03 by 1 or 2 cents.

Officials in Arlington, where the tax rate is 98 cents per $100 of assessed value, had planned to reduce the tax by 3 cents. However, if there is no budget on June 30, county officials most likely would scrap those plans.

Local elected officials and their budget writers also will have to guess how much state funding they will receive during upcoming budget-proposal reviews if lawmakers can’t agree on a state budget in the next two weeks.

“The difficult part is the unknown,” said Ed Long, chief financial officer in Fairfax County. “If we knew what we were getting from the state, we could make adjustments and go forward. But we don’t know which way the state is going to go.”

A lot is at stake in the local budgets, including the future of hundreds of teachers and dozens of social-services programs.

The House and Senate have been deadlocked over the state’s two-year tax-and-spending plan. The Senate is pushing a plan that would raise $2.4 billion in revenue by increasing the state sales, cigarette and income taxes. The House is standing firm against those tax increases.

The General Assembly is now in its 79th day of a 60-day session. Lawmakers have until June 30 to come up with a budget. If they don’t, most state government functions likely will cease July 1.

Under the Senate plan, local governments would receive more state funding because of the tax increases. Localities would receive less money under the House plan because it does not include general tax increases.

For example, Alexandria would lose $1 million in funding for law enforcement under the House plan, according to Bruce Johnson, director of the city’s Office of Management and Budget.

The difference equals about a 1 cent increase in the real estate tax rate per $100 of assessed value if the city decided to make up revenue instead of cutting services, Mr. Johnson said.

Like Arlington, Alexandria officials had hoped to offer a 3-cent decrease on the real estate tax. But, they said, that is unlikely now.

“Under the worst-case scenario, we would hike the real estate tax 1 or 2 cents,” Mr. Johnson said. The city has put aside $575,000 in a contingency fund to handle “unexpected developments,” he said.

Alexandria has a $433 million budget and receives about $25.5 million a year from the state.

If state lawmakers can’t agree on a budget by June 30 and Alexandria receives no state funds, programs that help at-risk youth would have to be stopped or sharply curtailed “until we figure out what happens,” Mr. Johnson said.

House Republicans on Tuesday proposed to immediately craft a one-year budget to help local governments that are “budgeting in the dark.” The proposal would fund state operations for one year without raising taxes and give local governments an idea of what they will have to work with.

Gov. Mark Warner, a Democrat, and leaders of the Republican-controlled Senate said they would reject the proposal.

Arlington County Board Chairwoman Barbara Favola, at-large Democrat, said the budget stalemate in Richmond presents a challenge. But, she said, she would rather have the state work through the tax issues and approve the Senate’s proposed tax plan.

“If they drag us along, all of that will be worth it if the state passes meaningful long-term reform,” she said. “I don’t want to have to go through this debate again, and I don’t want to keep scrounging for dollars. Now is the time for tax reform.”

Arlington has a $710 million budget. The county receives $93 million from the state, of which $37 million goes to public schools. The remainder funds police, jails and salaries of some county workers.

“That would be a lot to make up,” Miss Favola said.

Arlington officials planned to cut the tax rate since real estate assessments have increased by 17 percent in the past year, Miss Favola said.

“We can’t get ourselves in a position of overextending ourselves in a tax-rate reduction when the state is in the position it’s in,” she said. “We’ll have to be very cautious.”

Fairfax County has a proposed $2.7 billion budget, which the county supervisors are currently reviewing. The county gets about $678 million a year from the state. About half of that sum goes to the county schools.

Mr. Long said the Fairfax County Board of Supervisors and its budget writers are trying to estimate the budget numbers.

However, the Fairfax County school system doesn’t know whether it will have enough money to rehire all of its teachers for next year or send layoff notices by early next month.

“That will certainly disrupt the system,” Mr. Long said.

Fairfax County officials are expected to adopt a budget April 19. Arlington and Alexandria officials plan to approve their budgets April 24 and May 3, respectively.

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