A Review of the State-Local Fiscal Relationship in Virginia

Virginia's state and local governments need each other's close cooperation to function effectively, but in today's political and economic climate, the relationship has become badly frayed according to Neal Menkes, a longtime state finance expert. The state relies on local governments to deliver core programs such as education, public safety and social services. In return, the state provides localities legal authority, financial and technical assistance and a helpful buffer between them and the federal government, writes the author. The constitution of Virginia puts the General Assembly in charge of the state-local fiscal relationship and Virginia follows a legal precedent, called Dillon's Rule, which limits powers of local governments only to those expressly granted by the state. Menkes urges three approaches to ease the fiscal situation. First, the governor and legislature, as "senior partners," should agree not to further restrict local revenue authority, impose new spending requirements on services delivered by local governments, or shift state funding responsibilities onto local governments. Second, the governor and the General Assembly, in concert with local governments, should establish a task force to develop legislative proposals for compelling state agencies to justify standards and regulations, including those in public education, in terms of costs and benefits. Third, as part of its own budget deliberation processes, the state needs to develop fiscal priorities. For example, "Should education funding be afforded less priority than certain tax preferences?"