HJR 707: Joint Subcommittee Studying the Balance of Power Between the
Legislative and Executive Branches
June 21,
2005
The joint subcommittee,
which began in 2004 (HJR 13) and was continued by the 2005 General Assembly,
resumed its study by developing a work plan and reviewing the revenue
forecasting process in Virginia and in other states. The joint subcommittee
consists of six members of the
General Assembly, Delegates R. Steven Landes (chairman), Harry R. Purkey,
H. Morgan Griffith, and Johnny S. Joannou and Senators Jeannemarie Devolites
Davis and Mamie Locke, as well as six citizen members, Constance Campanella,
Ben Carter, Tim Robertson, John Sherman, David L. Bailey, Jr., and Robert
L. Calhoun.
BACKGROUND
During its first
year, the joint subcommittee recommended the introduction of a constitutional
amendment to allow Virginia voters to decide whether the Governor should
be allowed to succeed himself in office. The constitutional amendment,
introduced as HJR 652 and SJR 401, was defeated in the Committee on Privileges
and Elections in both houses.
During committee
deliberations, members appeared unwilling to consider the amendment without
the addition of a proposal counterbalancing the shift of power granted
to the Governor if he is permitted to succeed himself in office. The defeat
of the measures means that the earliest date a constitutional amendment
could appear on the ballot would be 2008, if the General Assembly approves
a new amendment during the 2006 or 2007 session and then again during
the 2008 session. Because the original amendment was prospective, applying
to Governors elected in 2009 and thereafter, a
delay would not affect a current Governor who would not be eligible to
serve two consecutive terms. The subcommittee agreed to revisit the constitutional
amendment while looking at other proposals that would more equitably balance
the fundamental powers between the legislative and executive branches.
The members passed,
with overwhelming support, major legislation that establishes a deadline
for the submission of resumes and statements of the economic interests
of gubernatorial appointees, and codifies the current practice of reviewing
the information by a joint subcommittee of the Privileges and Elections
Committees.
REVENUE FORECASTING
Overview by Secretary
Bennett
John Bennett, the
Secretary of Finance, provided members with an overview of the revenue
forecasting process in Virginia and in other states. The requirement for
the Governor to submit a six-year revenue estimate dates back to 1975
in Virginia. Although the statutory provisions have been amended eight
times, the heart of the revenue forecasting process has remained basically
the same. The most significant changes to the statute occurred in 1984
when the revenue forecasting process was codified; the General Assembly
created two statutory advisory groups to assist in
reviewing economic data and revenue forecasts.
VA's Revenue Forecasting
Process
Revenue forecasting
begins with the assessment of the national economy. The Department of
Taxation maintains contracts with two leading national forecasting firms,
Global Insight and Economy.com. Global Insight provides detailed quarterly
projections of economic variables, such as employment, income, and housing
construction at the national and regional levels. Information from
Economy.com serves as a check on the data supplied by Global Insight.
Materials containing
economic data and at least two possible economic forecasts-a standard
and an alternate-are considered by the Advisory Board of Economists in
mid-October. The advisory board is comprised of academic and professional
economists who review the economic forecasts and identify the most likely
economic scenario on which to base Virginia's revenue forecast. Although
no legislative members serve on the advisory board, staff from House Appropriations,
Senate Finance, Legislative Services and JLARC attend the meeting and
have an opportunity to comment and ask questions. The Department of Taxation
uses the Virginia economic outlook approved by the
advisory board to develop a preliminary revenue forecast. The Department
uses forecasting equations for each significant revenue source, developed
from past statistical relationships between economic variables and revenues,
to predict future revenues. For example, growth in total personal income
is used to predict sales tax growth. The results are adjusted to account
for changes in federal and state laws.
The Department of
Taxation prepares the General Fund revenue forecast for 24 distinct revenue
sources, including individual income tax withholding and sales and use
tax. Other agencies produce forecasts for specific revenue sources, such
as lottery profits and profits from the sale of alcoholic beverages. In
mid-November, the Advisory Council on Revenue Estimates reviews the standard
and alternate revenue forecasts. The advisory council consists of legislative
members, representing the leadership of the houses and the chairmen of
the money committees, and business leaders from various industries. Review
by the advisory council serves as a reality check on the preliminary forecast
with members providing comment on what is currently happening in their
industrial sectors, as well as Virginia's economy. The Governor and his
staff review the comments from the advisory council, the latest available
revenue collections, and any new economic data before finalizing the revenue
forecast that will provide the basis for the introduced budget. By tradition,
the Governor provides an update of the revenue forecast during the General
Assembly session based on the most current revenue collections.
Revenue Forecasting
in Other States
The revenue forecasting
processes in other states vary significantly. In general, the processes
can be grouped into five broad categories based upon who develops the
forecast:
- Exclusively executive
- 5 states, including Georgia and West Virginia.
- Executive, with
legislative participation/review - 6 states, including Virginia and
Delaware.
- Joint legislative
and executive - 22 states, including Maryland and Kentucky.
- Separate legislative
- 13 states, including Alabama and Colorado.
- Independent -
4 states, including South Carolina and Texas.
Secretary Bennett
noted that the variation in the relative roles of the legislature, the
Governor, and various independent groups in the revenue forecasting process
is attributed to each state's unique constitutional structure and budget
process. However, all states use the same basic forecasting model for
generating revenue projections. Because forecasting models rely on historical
data and trends to predict future revenues, states often face forecasting
inaccuracies during peaks and troughs of business cycles. The forecasts
tend to overestimate revenue in economic downturns and to underestimate
revenues in economic upturns. The Secretary also pointed out that states
that have competing forecasts developed by different groups have a built
in bias that leads decision makers to choose a higher forecast. Members
agreed to examine at a future meeting the correlation between Gross Domestic
Product (GDP) and revenues, and the correlation between revenue collections
in the first quarter and collections for the remainder of the year.
STUDY PLAN
- The subcommittee
adopted a study plan of the following proposals for the current interim
that
includes items deferred from the subcommittee's last meeting in January:
Provide for 60-day sessions in odd-numbered years without the two-thirds
supermajority vote.
- Increase legislative
appointments on executive boards and commissions that have significant
contractual authority, including the State Board of Education, the Commonwealth
Transportation Board, and public institutions of higher
learning.
- Allow, by a constitutional
amendment, the legislature to nullify or suspend administrative regulations
without the concurrence of the Governor.
- Establish an independent
economic and revenue forecasting commission whose members are appointed
by the legislature and the
Governor .
NEXT MEETING
The subcommittee
has tentatively scheduled its next two meetings for August 22, 2005, at
10:00 a.m. and September 19, 2005, at 1:00 p.m. in House Room C of the
General Assembly Building.
Chairman:
The Hon. R. Steven
Landes
For information,
contact:
Ginny Edwards,
DLS Staff
Website:
http://dls.state.va.us/powers.htm
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