Big Property Tax Increases Across Virginia?

Governor McDonnell announced his plans to deal with the VRS (Virginia Retirement System) shortfall today and it isn't a pretty picture for counties, cities or homeowners in Virginia.

McDonnell is proposing a 2.21 billion dollar payment to VRS this year, the largest in state history.  That sounds good on the surface... but... read the fine print in his proposal.

McDonnell's 2.21 billion dollar payment is actually the combined payments of the state and local governments into VRS.  The state mandates what local governments have to pay into VRS for their teachers that are included in the system.  (Most other local government employees have their own systems).  The biggest increase in payments into VRS are actually mandates to local governments to pay- not state money.

Given that Virginia has capped personal property tax revenue to localities through the "no car tax" plan from the 1990's, that gives local governments only two options to meet this massive unfunded state mandate- raising property taxes or slashing county spending on schools, police, fire, parks and other local needs.

The state's pension system is a disaster from the General Assembly underfunding it- but the way to make up that money is by Virginia coming up with the money.  Passing the buck on to localities to make up when they already have limited ways to raise revenue is a terrible plan- and needs to be defeated.

Comments

[Rob Krupicka]

Typical Richmond. Always easier to pass the buck to local gov and then turn around and complain about local property taxes. Same thing going on with transportation funding as they try to pass the expense to counties. The religion of no new taxes has become a property tax increasing tool. And unfortunately, property taxes are regressive and hit the elderly and poor much more than other revenue sources.

[G.W.]

Personal property tax is not "capped". Counties may increase the tax but the car tax rebate does not apply to the increased amount...

[Not Larry Sabato]

Right on Rob!

G.W.- Not correct, there are penalties in the law for localities that increase it that diminish their share of the car tax cut.

[John Daniel]

Actually, most local governments participate in VRS. Fairfax County is an exception.

[Wayne Kubicki]

Ben - not sure you're correct on personal property. The $$$ amount each municipality gets to partially offset the car tax bills of its residents is a block grant at a fixed amount, and does not change year-to-year. Arlington actually raised its personal property tax rate back in CY06.

On VRS - I can't speak to what other localities did, but Arlington Schools knew the contribution hit was coming, and reserved for it in their last two budgets. I don't think it's a big hit for them.

[Kicked Can]

It's debatable to say real estate taxes hit the elderly hard, as most Virginia localities have some form of tax relief for the elderly (see Fairfax County's here: http://www.fairfaxcounty.gov/dta/taxrelief_faq.htm). I do agree with the sentiment, though, of Richmond continuing to cram down costs on local government instead of stepping up to the plate.

Personally, I think it's pretty shocking that we now have a $20 billion VRS funding deficit. Combine that with the transportation funding deficit and the Old Dominion is digging itself quite a hole.

This VRS funding deficit is a pretty big issue moving forward, and it'd be nice to see some long-term solutions, because this mandated payment is just a drop in the bucket.

[Martin Lomasney]

tell me again, why do we have a state government?

[Bubby Hussein, Hillbilly Sheikh]

"tell me again, why do we have a state government?"

To provide upstart politicians with the "executive" credentials necessary to pursue their national ambitions!

[NotJohnSMosby]

Will the cram down of costs for VRS and transportation also come with some modern home rule legislation? Or are local governments getting stuck with a bill on projects they have no control over?

[Not a Dem]

I don't know the legal origin of this (insight solicited) BUT as (downstate) Dems have controlled the GA & Guv in the majority of the last 30 years (and predominated before then), I have suspicions about who's to blame.

[Steve Vaughan]

The funding gap exists because both the state and the localities haven't paid what they should in the past. The state sets the rate for all, so more blame rest there. This wasn't a huge problem until the recession because VRS managed a very good return on it's investments that lowered what both the state and localities had to pay.