Va. business leaders put transportation woes on back burner for now, turn to incentives and fairer school funding

Virginia’s budget woes may have proved stronger than Northern Virginia’s transportation woes, but area business leaders are sharpening their focus on issues from job creation to education funding in Gov. Bob McDonnell’s rookie legislative season, which started Jan. 13.

Business officials are generally receptive to the postponement of transportation fixes given the staggering $4 billion deficit.

Instead, they will take up an issue that has snared the political agendas of many regional business groups: the state’s formula for funding its school systems — encapsulated in a composite index that breaks down the state’s and local governments’ share of funding. The higher the composite index, the more that local government pitches in for school funding based on its ability to pay from sources such as adjusted gross income, taxable retail sales and property values.

Here’s where the index gets complicated. The current funding expectations from local governments were enacted July 1, 2008, for the 2008-10 period based on local revenue levels from 2005 — before the housing crash plundered property values.

Before leaving office, Gov. Tim Kaine had proposed freezing the current rates until July 1, 2011, to save smaller, more vulnerable localities from anticipated increases during budget crises. But business leaders said that leaves Northern Virginia and its larger localities shouldering more of the state’s budget burdens and paying tens of millions of dollars more in their cut of school system bills than they can bear.

“It’s adding insult to injury,” said Tony Howard, president of the Loudoun County Chamber of Commerce, which is teaming with the Dulles Regional and Greater Reston chambers for the first time to send a lobbyist to Richmond to focus on taxes and regulation, energy, the environment and economic development.

Business leaders said their rationale for making school funding a cornerstone issue is simple. They consider the health of neighborhood schools a key factor in attracting companies to the area.

“The No. 1 reason we hear for businesses to come to Virginia, and to Fairfax County in particular, in addition to the low regulatory and pro-business stance, is education,” said Stu Mendelsohn, Chamber of Commerce chairman in Fairfax County, where political leaders have considered legal action against the funding proposal.

While business groups lobby legislators for a budget amendment that would thaw the proposed composite index freeze, they also are trying to increase job creation, rallying behind McDonnell’s plan to double the Governor’s Opportunity Fund, a pot of money used to entice businesses to locate in the state.

Biotech business leaders are watching this legislative session closely, hoping for new benefits for potential investors. They are tracking bills lauded by McDonnell and offered by Sen. Mark Herring, D-Leesburg, and Del. Sam Nixon, R-Richmond, that would exempt capital gains taxes from income related to certain angel, corporate or venture capital investments in science and technology startups. Biotech leaders in Virginia see the measure as a way to better compete for younger industry players that might have chosen another headquarters address, such as in Maryland, where tax breaks are more readily available for angel investors. (For more on the tech industry's issues, click here.)

“It’s one more incentive to not consider that,” said Mark Herzog, executive director of the Virginia Biotechnology Association.

An optimistic Herring said the bills’ chances are good even in a downturn because they don’t require new funding.

Even as business groups train their eyes on the emerging issues of 2010 — everything from delaying new stormwater management regulations on new development to curbing the unemployment insurance burden on companies — transportation remains the top priority for some who anticipate it becoming the subject of a special session in the fall.

One bill to raise the gas tax is again on the table, but many observers think it has little likelihood of getting passed.

But another bill has captured more attention — one introduced by Del. Thomas Davis Rust, R-Herndon, that, in part, increases sales taxes in Northern Virginia by 0.5 percent to fund transportation projects specifically in that region.

“The budget is going to consume everything,” said Bob Chase, president of the Northern Virginia Transportation Alliance. “A pledge to make meeting Virginia’s transportation needs a top priority was a cornerstone of McDonnell’s campaign. It’s our expectation that he remains committed to honoring that.”

Washington Business Journal
Vandana Sinha
January 22, 2010