Bill Text: VA SB645 | 2024 | Regular Session | Introduced
Bill Title: Local fiscal distress; determination by Auditor of Public Accounts, state intervention.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Passed) 2024-04-04 - Governor: Acts of Assembly Chapter text (CHAP0426) [SB645 Detail]
Download: Virginia-2024-SB645-Introduced.html
Be it enacted by the General Assembly of Virginia:
1. That the Code of Virginia is amended by adding a section numbered 15.2-2512.1 as follows:
§15.2-2512.1. Local fiscal distress; determination by Auditor of Public Accounts; state intervention.
A. For purposes of this section, "fiscal distress" means a situation whereby the provision and sustainability of public services, or the ability to appropriately fund financial liabilities, is threatened by various administrative and financial shortcomings, including cash flow issues, inability to pay expenses, revenue shortfalls, deficit spending, structurally imbalanced budgets, billing and revenue collection inadequacies and discrepancies, debt overload, failure to meet obligations to authorities, school divisions, or political subdivisions of the Commonwealth, or lack of trained and qualified staff to process administrative and financial transactions. Fiscal distress may be caused by factors internal to the locality or external to the locality, and in various degrees such conditions may or may not be controllable by management, or the local governing body or its constitutional officers.
B. The Auditor of Public Accounts (the Auditor) shall use leading indicators to develop criteria for a preliminary determination that a locality may be in fiscal distress. Such criteria shall be based upon information regularly collected by the Commonwealth or otherwise regularly made public by the locality. This information includes expenditure reports submitted to the Auditor, budget information posted on local government websites, revenue growth, financial reserves, debt, retirement liabilities, economic and property market value data, and reports prepared by the Commission on Local Government on revenue fiscal stress. Information provided by the Virginia Retirement System, the Virginia Resources Authority, the Virginia Public Building Authority, and other state and regional authorities concerning late or missed debt service payments shall be shared with the Auditor.
C. Based upon the criteria established by the Auditor, the Auditor shall establish a prioritized early warning system. Under the prioritized early warning system, the Auditor shall establish a regular process whereby it reviews data on at least an annual basis to make a preliminary determination that a local government is in fiscal distress. A locality's inability to produce required financial reports in a timely manner shall automatically trigger a fiscal distress analysis by the Auditor.
D. For localities where the Auditor has made a preliminary determination of fiscal distress based upon the early warning system criteria, the Auditor shall notify the local governing body of its preliminary determination that it may meet the criteria for fiscal distress. In coordination with the local governing body or chief executive officer, the Auditor shall conduct a review and request documents and data from the locality. Such review shall consider factors including budget processes, debt, borrowing, expenses and payables, revenues and receivables, and other areas including staffing, and the identification of external variables contributing to a locality's financial position. Any local governing body that receives requests for information from the Auditor pursuant to such preliminary determination based on the above-described threshold levels shall acknowledge receipt of such a request and shall ensure that a response is provided within the timeframes specified by the Auditor. After such review, if the Auditor is of the opinion that state assistance, oversight, or targeted intervention is needed, either to further assess, help stabilize, or remediate the situation, the Auditor shall notify the Governor and the Chairmen of the House Committee on Appropriations and the Senate Committee on Finance and Appropriations and the governing body of the locality in writing, outlining specific issues or actions that need to be addressed by state intervention.
E. 1. The Director of the Department of Planning and Budget shall identify any amounts remaining unexpended from general fund appropriations in the state budget as of June 30 of each year, which constitute state aid to local governments. The Director shall provide a listing of such amounts designated by item number and by program on or before August 15 of each year to the Governor and the Chairmen of the House Committee on Appropriations and the Senate Committee on Finance and Appropriations.
2. From such unexpended balances identified by the Director of the Department of Planning and Budget, the Governor may reappropriate up to $750,000 from amounts that would otherwise revert to the balance of the general fund and transfer such amounts as necessary to establish a component of fund balance, which may be used for the purpose of providing technical assistance and intervention actions for localities deemed to be fiscally distressed and in need of intervention to address such distress. Any such reappropriation approved by the Governor shall be separately identified in the commitments specified on the balance sheet and financial statements of the State Comptroller for the close of each fiscal year, to the extent that such reserve is not used or added to by future appropriation actions.
3. Prior to any expenditure of the reappropriated reserve, the Governor and the Chairmen of the House Committee on Appropriations and the Senate Committee on Finance and Appropriations shall receive a notification from the Auditor that a specific locality is in need of intervention because of a worsening financial situation. The Auditor may issue such a notification upon receipt of audited financial statement or other information that indicates the existence of fiscal distress. However, no such notification shall be made until appropriate follow up and correspondence ascertains that, in the opinion of the Auditor, such fiscal distress exists. Such notification may also be issued by the Auditor if written concerns raised about fiscal distress are not adequately addressed by the locality in question. The notification issued by the Auditor pursuant to subsection D shall satisfy the notification requirement of this subdivision.
4. Once the Governor has received a notification from the Auditor indicating fiscal distress in a specific local government, the Governor shall consult with the Chairmen of the House Committee on Appropriations and the Senate Committee on Finance and Appropriations about a plan for state intervention prior to any expenditure of funds from the cash reserve. Any plan approved by the Governor for intervention shall, at a minimum, specify the purpose of such intervention, the estimated duration of the intervention, and the anticipated resources, dollar amounts, and personnel directed toward such effort. The staffing necessary to carry out the intervention plan may be assembled from either public agencies or private entities or both and, notwithstanding any other provisions of law, the Governor may use an expedited method of procurement to secure such staffing when, in his judgment, the need for intervention is of an emergency nature such that action must be taken in a timely manner to avoid or address unacceptable financial risks to the Commonwealth.
F. The governing body and the elected constitutional officers of a locality subject to an intervention plan approved by the Governor shall assist all state appointed staff conducting the intervention regardless of whether such staff are from public agencies or private entities. Intervention staff shall provide periodic reports in writing to the Governor and the Chairmen of the House Committee on Appropriations and the Senate Committee on Finance and Appropriations outlining the scope of issues discovered and any recommendations made to remediate such issues, and the progress that is made on such recommendations or other remediation efforts. These periodic reports shall specifically address the degree of cooperation the intervention team is receiving from locally elected officials, including constitutional officers, city, county, or town managers, and other local personnel in regard to their intervention work.
G. The Commission on Local Government shall act in an oversight capacity for the purpose of determining whether a locality has taken appropriate action to address the issues specified in subsection D as requested by the intervention staff and whether the locality appears to be on track to resolve its fiscal distress. Technical assistance shall be provided to the Commission by the Auditor, and all agencies of the Commonwealth shall provide assistance to the Commission, upon request. The Commission shall report its findings and conclusions to Governor and the Chairmen of the House Committee on Appropriations and the Senate Committee on Finance and Appropriations.
H. If the Commission's report to the Governor concludes that a locality is either unwilling or unable to comply with the conditions necessary to address its fiscal distress, the Governor shall use all powers available to him to intervene for the purpose of addressing such fiscal distress. The Governor shall appoint an emergency fiscal manager and grant the manager with all powers available and necessary to implement a plan to restore sustainable fiscal health to the locality. The authority granted under this subsection may apply to any locality facing fiscal distress whether such fiscal conditions originated before or after the enactment of this authority. The emergency fiscal manager shall submit a plan of action to resolve the locality's fiscal distress to the Commission on Local Government, which shall approve, reject, or revise the plan after timely notice of any proposed actions to be taken has been provided to the public and an opportunity for public input has been provided and such input has been considered by the Commission. Following approval of the plan by the Commission, the emergency fiscal manager shall report regularly to the Commission, the Governor, and the Chairmen of the House Committee on Appropriations and the Senate Committee on Finance and Appropriations regarding progress in implementation of the plan. The emergency fiscal manager shall establish benchmarks, approved by the Commission, that will allow a locality to exit the state intervention plan upon meeting such benchmarks.
I. The Department of General Services shall develop a master contract of qualified private sector turnaround specialists with expertise in local government intervention that the Governor can use to procure intervention services in an expeditious manner when he determines that state intervention is warranted in situations of local fiscal distress.
