A Budget Cut that Should be Made

by Dick Hall-Sizemore

Just to show that I am not the “tax and spend” liberal that some people may think I am, I am proposing a significant budget cut for the Governor’s office to consider in its effort to satisfy all the demands it is getting for the upcoming biennial budget. That budget item can be summed up with one numeric phrase: 599.

Long-term observers and participants in Virginia government and politics, such as Jim and Steve, know immediately what I am talking about. The 599 program provides financial aid to local governments with police departments. The program’s appropriation for the current fiscal year is $191.7 million. Its name refers to its enacting legislation: HB 599, passed by the 1979 General Assembly.

The HB 599 program should be repealed and its funding used for more pressing needs of the Commonwealth. There are several reasons for this conclusion: The rationale for the program was flawed from the beginning; the underlying distribution formula is unknowable; and the funding cannot be tied to its original, ostensible purpose, the support of law enforcement. The remainder of this post will be used to substantiate these claims.

As a warning, this will be a rather long post. To justify my reasons for advocating the repeal of the program, I need to set out some of the details of the development of the program and some of its ensuing history. The program provides insight into how a program becomes entrenched in the budget.

HB 599 was part of a package of bills that were intended to end the “annexation wars” between counties and cities that consumed much of the 1960s and 70s. The study commission established to tackle that issue finally agreed to provide several urban counties immunity from annexation by their neighboring cities. Proponents of cities argued, that in exchange for losing the opportunity to expand their tax base, the cities should receive additional aid from the state.

Senator Ed Willey of Richmond argued strenuously that counties were highly favored by the state over cities in the area of law enforcement. He pointed out that, by and large, law enforcement in the counties was provided by sheriffs’ deputies and the state bore most of the cost for this service. Cities, on the other hand, got no state assistance for its police departments. Thus was born HB 599, which provided state assistance to localities with police departments.

The paradox in HB 599 is that the urban counties that obtained annexation immunity, primarily Fairfax, Arlington, Prince William, Henrico, and Chesterfield, also had police departments and thus qualified for HB 599 funding. In the current year, the locality receiving the most 599 money, by far, is Fairfax County with $26.4 million, almost 14% of the total available. The city of Richmond received the second highest amount, $15.5 million, about 8%. Of the top 15 recipients, five urban counties immune from annexation received about 32% of the total funding available. The entire annual distribution can be found here. (For some unknown reason, DCJS has not listed the FY 2020 distribution.)

The original formula set out in state law tried to tie the program to the need for law enforcement assistance by basing the distribution of the funding on localities’ predicted crime rates. To predict crime rates, researchers at what was then called the Institute of Government at UVa used multiple regression analysis to identify the demographic variables most closely associated with crime rates. That analysis produced the following variables: TANF enrollment, foster care rate, general relief rate, and population density. Those factors were then used to create an “adjusted crime index”, which, in turn, was used to determine the allocation of the funds. Just from this brief description, it is obvious that this process was rather complex. It was included in HB 599 and became a part of the Code of Virginia. (If you are really interested, you can read it for yourself here and in subsequent Code sections.)

HB 599 had one other feature that has significant budget implications. It included an escalator clause, requiring the total amount available to increase each year in proportion to the “anticipated percentage change in total general fund revenue.”

For many years, the formula worked well. The total amount grew and all localities received additional funding each year. At some point, however, a problem arose: Implementation of the formula would have resulted in a decrease in the annual allocation for some jurisdictions, including Richmond. For politicians, that is a no-no; no locality is supposed to “lose” funding. The reduction for Richmond was especially politically sensitive. Some tweaks were used: hold harmless, level funding, etc.

It was obvious to all involved that the factors used in the formula were outdated.  After all, localities had grown and changed; demographics had changed. Furthermore, if one is going to use demographic factors to predict a phenomenon such as crime rate, the multiple regression analysis should be re-conducted on a periodic basis to ensure that one is still using the factors most closely correlated with crime. Several attempts were made to refresh the multiple regression analysis or even to use a different approach altogether. For each attempt however, the conclusion was the same: Without a substantial increase in funding, the allocation for some localities would decrease. (I called this the “slicing the pie” effect: Unless you make the pie bigger, if you change the way you slice it, someone is going to get a smaller slice.)

There were some other ad hoc adjustments over the years. In the end, everyone gave up. For the last several years, the funding distribution ratio has been frozen in place. In the words of the Appropriation Act, “The amount to be distributed to each locality in each year [of the biennium] shall be proportionate to the amount distributed to that locality in [the last year of the last biennium].” That is, Fairfax is to get 13.764% of whatever is the total appropriation; Richmond, 8.059%; Norfolk, 6.482%, etc. Trying to reconstruct how those percentage distributions came to be would probably be futile; documentation for some changes is most likely nonexistent lost.

As for the escalator clause, both the Governor and the General Assembly have generally complied with the Code requirement to increase the total amount by the same percentage as projected for the General Fund. The major exception was the years during the recent recession. The annual appropriation had grown to $205 million for FY 2009. After a series of reductions, the total amount settled at $172.4 million, an annual reduction of $33.1 million. The appropriation remained at that amount until FY 2017, when it began to grow again to its current level of $191.7 million.

There is one other facet of the HB 599 program that is problematical. On its face, the funding is intended to assist eligible localities in providing law enforcement. But the money does not go to police departments; it goes to the county, city, or town treasury. There is no direct tie to law enforcement spending. The General Assembly has tried to plug this loophole. There is language in the Appropriation Act that proclaims the legislature’s intent that the funding be “used to fund local public safety services” and not used “to supplant the funding provided by localities for public safety services.” The language goes on to require each recipient locality to certify to the state the amount of funding it provided to support law enforcement and that the HB 599 funding was used to supplement, and not supplant, local funding. There is no provision for the Department of Criminal Justice Services, the administering agency, to follow up on the accuracy of those certifications. Besides, as an astute agency budget director once pointed out to me (in another context), supplanting is awfully hard to prove. In the end, the HB 599 program is an example of “revenue sharing” by the Commonwealth.

Summary from the Soapbox. I am under no illusion that the HB 599 program will be eliminated. Any attempt even to reduce the total funding would bring forth howls of outrage from local governments. Although most counties do not benefit from the program, the large urban counties benefit, as do the cities and all the towns, down to the smallest one. Although not large in the context of the total state budget, the amounts received by many of these small towns is an important part of their budgets. I am confident that every member of the General Assembly has at least one jurisdiction in his/her district that benefits from the HB 599 program and many have several cities and towns in their districts. That would be a lot of phone calls from upset members of boards of supervisors, city councils, and town councils coming in to their offices. The HB 599 program is one of the budget sacred cows.

Nevertheless, from the perspectives of the illogic inherent in the design of the program from the beginning, of the disconnect of the allocation formula from any rational basis, and of the disconnect of the actual use of the funds from their ostensible original purpose, the program should be abandoned and the funding reallocated to higher priority uses.

There are currently no comments highlighted.

13 responses to “A Budget Cut that Should be Made

  1. So, another one of those money committee meetings where all the seats are taken by uniformed police and deputies, sitting there all day (on their free time, one can only hope) to intimidate the legislators? Instructive, Dick, but wishful thinking. The bill was part of the compromise which ended the practice of annexation, as you note, and nobody wants to reopen that wound. The cities would go there immediately.

    • Sure, we could combine the hearing on the 599 repeal with the annual meeting for the consideration of funding for raises for the deputies. The temporary GAB would be overrun with police and deputies. Amanda Chase would feel very safe.

    • You beat me to the punch on this Mr. Haner. There was the tie to the annexation moratorium on HB 599. A few years back the Commonwealth was requiring localities to return a portion of state funds received (we at the local level affectionately called it “Local Aid to the Commonwealth”). The original language of HB 599 had a provision whereby if funds were reduced the ability for cities to annex would be back on the table. Of course when the recession hit, the General Assembly conveniently amended state law to remove that provision.

      I don’t think there can or should be a discussion about ending HB 599 without a corresponding reduction of state support for Sheriffs Departments unless the annexation discussion is reopened and we all know that’s not going to happen. Maybe a serious look needs to finally be taken at the “independent city” issue if the Commonwealth wants to be more efficient in the use of state dollars.

      • I can agree with you about 599 being tied to the moratorium and ending it would be sort of a double cross. So, in lieu of being repealed, the program could be amended to focus on its original intent. 1. The counties that received immunity should not be eligible for 599 funds, even if they have police departments. 2. Towns should not be eligible. (They can annex). 3. The formula should be updated frequently and its results applied regardless of who loses.
        Of course, this scenario happening is even less likely than repeal. At least with repeal, there would be savings. The General Assembly is not going to go through the political pain and work to make the system rational if there are no financial savings involved.

  2. Good LORD Dick! Put a stake through its heart – put several in it, and any like it!

    But your post got me to thinking a bit as to why we do not have more consolidated locality approaches to things like fire, police, EMS, schools LIKE we NOW do with Regional Jails because in reality, it’s this provincial attitude among counties and city/towns that leads to such atrocious abuses like the 599 mess.

    We currently have regional libraries and regional water/sewer but the police and schools are locality-based silos.

    Why not configure funding so that localities get MORE funding if they combine and operate regionally?

    • There are some regional schools. Thomas Jefferson High School for Science and Technology in Fairfax and Maggie Walker Governor’s School for Government and International Studies in Richmond are two examples. I do not know if the localities get any incentive money for these regional efforts.

      The state used to provide an incentive for localities to build regional jails, rather than a separate jail for each jurisdiction. For regional jails, the state would reimburse 50 percent of the cost of construction or expansion, as opposed to 25 percent for single jurisdiction jails. Because regional jails now serve most of the areas for which such a facility would be logical, the state has dropped the incentive

  3. Dick, Thanks for shining the light on a dark recess of the state budget. Programs always exist for a reason, and it’s good to be reminded of the reasons behind this nearly $200 million expenditure. Your critique is spot-on in every regard.

    I would draw one larger lesson. The 599 funds are an excellent example of how an entitlement (in this case, an entitlement for localities) designed to address a particular set of circumstances can live on even when those circumstances have changed. A government program, once enacted, is darn hard to kill. That’s why government spending, with brief exceptions during recessions, goes only one way — up.

    • It’s an argument for zero-based budgeting – start from scratch …each cycle.

      On this, I AGREE with Jim B and others who say once an item is funded – it’s dang near impossible to “un-fund” it.

      A friend who ran a school library related his experience where at first, he could not get a projector bulb then when he could, he ordered several with the idea that he’d have spares in the future. Well.. those bulbs got embedded as an annual expense in the school budget and he soon was overrun with bulbs…and he was sharing them with other schools in the system but even then the money kept flowing and so he asked if he could use that money for some other purpose – NOPE! All he could do was order bulbs with it!

      This is the stupid part of government.

      In a non-govt Corporate environment – their bean counters would be descending on the recipient of this money and asking why so much money was being spent on bulbs !

      And of course, none of us would do anything this stupid – save some of us who buy stuff on sale that we don’t need or already have too many of because the sale is so good!

      😉

      • I have never known a government budget system in which specific items, such as projector bulbs, got embedded in the annual budget. In budgets, such items are lumped into line items such as “instructional supplies”. If the school system had a budget with line items for such specific items, the budget director for that system is highly incompetent. Also, just because there is a line item for an expenditure does not mean that the funds have to be spent. It is stories like this that give government a bad image.

        • Well you’re right. After he got told he could only order bulbs he had the item removed (which is a perverse sort of way actually reduced the budget)!

          😉

  4. I’ve never understood the ban on annexation in Virginia. Many researchers see annexation as a key to maintaining the health of cities. Cities which can annex have statistically relevant better bond ratings. Why is anybody surprised that the most fiscally stressed jurisdiction in Virginia are all cities? If you scroll to page 9 of the Brookings Institution report on annexations (dated, I know) you’ll see that Virginia is the only state where 1) there is unincorporated land (much of New England has no unincorporated land) and 2) annexations are banned.

    Of course, Virginia (as usual) stands alone in its annexation theories because it stands alone in its independent cities theory. Hence, we have no real cities by my definition of a real city that includes total population and population density.

    There are 133 “incorporated places” in the US with population densities over 10,000 per sq mi. None are in Virginia. These “incorporated places” include localities as small as Milbourne, PA (pop 1,159) and as large as New York City.

    There are 37 Census Designated Places in America with population densities over 10,000 per sq mi. Only three are located in Virginia – Seven Corners, Bailey’s Crossroads and Huntington) . Not only does Virginia lack real cities it generally lacks even urban neighborhoods.

    I grew up in one of Virginia’s 3 CDPs with a population density over 10,000 per sq mi (Huntington). The tiny area sits within Fairfax County but borders Alexandria. There is no question in my mind that the very urban neighborhood of Huntington would be much better served as a part of the City of Alexandria than a part of Fairfax County. But annexations have been “temporarily” banned by the brain trust in the General Assembly for the past 40 years.

    I get the distinct impression that managing an effective annexation policy was beyond the mental capacity of the General Assembly so they temporarily / permanently banned annexations. Like a football team that can’t complete forward passes pulling all the pass plays out of the playbook. There’s a term for such teams – losers.

    It seems to me that real cities not only draw a disproportionate share of wealth and economic growth but also provide the closest thing we have to functional human settlement patterns. Virginia’s simple minded banning of annexations has retarded the growth of cities and creates a drag on economic opportunity.

    https://www.brookings.edu/wp-content/uploads/2016/06/20060810_fateofcities.pdf

Leave a Reply