By Mark A. Collins

Two constitutional amendments that will be on the November ballot in Virginia pose an unprecedented danger to voter control over local spending, debt, and taxes. The specific questions that will appear on the ballot are as follows:

…Shall the Constitution of Virginia be amended to authorize agreements among localities for sharing the revenues and costs of a specified land area and establishing a special governing body for the area, and to provide that fiscal commitments related to the land area will not be deemed local debt?

…Shall the Constitution of Virginia be amended to allow a combination of localities to contract debt as part of an agreement to share the revenues, tax base, or the benefits of economic growth and exempt this class of debt from the ceiling on local debt for cities and towns and from the requirement for a local referendum for counties?

Despite the startling step toward "taxation without representation" that these proposed amendments represent, they attracted surprisingly little attention as they sailed through both houses of the Virginia legislature and received Governor Gilmore's signature. No doubt the developers and other special interests who stand to profit from the amendments were all too happy to keep the issue shielded from voter scrutiny for as long as possible.

The time has come to subject the proposed amendments to a critical analysis, however, and the Taxpayers Alliance believes the measures fail miserably. These amendments, if approved, would allow county government to issue bonds in limitless supply, without voter approval, all in the name of "regional economic cooperation." Specifically, the amendments would allow localities to join together and finance new spending initiatives through debt that is "exempt . . . from the ceiling on local debt for cities and towns and from the requirement for a local referendum for counties." In simple terms, the bureaucrats want a credit card with no spending limits and no right of voter preapproval, financed by the taxpayers.

With no voter control over these future bond issues, the Taxpayers Alliance believes the danger for inefficiency and abuse is high, as developers and other special interests will rush to take advantage of the situation. Unelected bureaucrats from the local "special governing body" will be free to authorize new spending, bond issues, and taxes without ever having to face the voters. The resulting bond issues will inevitably result in an increased burden on Fairfax County taxpayers to service the debt. These and other considerations have already led the Washington Times and the Richmond Times-Dispatch to publish recent editorials opposing the proposed amendments.

The Taxpayers Alliance strongly opposes the proposed amendments, and urges its members to vote against this new threat to government accountability.

County passes $3 Billion Appropriated Expenditure Level

by Ludwig Benner

Proposed County General Fund expenditures will be $1.829 billion, or almost $5400 per household and $1950 per person. Fairfax County's total Government Proposed County expenditures for all purposes will be $3.065 billion, or almost $9000 per household in 1999. Twenty-five years ago General Fund expenditures were about $540 per person. Previous newsletters have described the $9 billion excesses in the County's expenditure growth. How can taxpayers forestall those excesses in the future, while assuring that proper County expenditures are supported?

Basis for budgeting County expenditures and revenues:

To understand why the budget has grown, one must understand the basis on which it was formulated. The Board of Supervisors adopted specific Budget Guidelines for 1999 and 2000 on April 27, 1997, directing the County Executive to limit increases in expenditures to projected increases in revenues. Revenue growth was projected to be 4-5% during those years. The Guidelines limit transfers to Public Schools to the rate of the increase in revenues. They challenge and empower County employees to look for long term savings, with one-time bonuses as rewards. Sixty percent of targeted savings are returned to the County, and 40 percent are returned for use at the agency director's discretion. They require available balances thus materializing during the year to be held in reserve for future needs.

The County policy context for budget decisions is provided by Ten Principles of Sound Financial Management which was adopted in 1975, affirmed in 1985, and modified for bond sales targets in 1988.

The development of any budget presents challenges to balance competing demands for service with available resources. The County Executive offers 12 factors affecting the 1999 Advertised County budget, which the Board amends and adopts.

County policies, guidelines and budgets are available at all County Public Libraries. The Budget can also be viewed and downloaded at the County's Internet site at http://www.co.fairfax.va.us/gov/omb The principles, budget guidelines and County Executive's factors are posted at http://www.co.fairfax.va.us/gov/omb/policies.htm

New in FY 1999 budget

The 1998 Budget provided 1700 management indicators, almost 85% of which were workload or output-related. The primary focus was on counting what was done, rather than how efficiently a task was performed. The 1999 Budget initiated a transition to a more outcome-oriented system of indicators, focusing on outcome as a critical member of the family of measures. Each cost center in the 1999 Budget now provides for one or more such indicators.

Another major change reflects a restructuring of senior management reporting functions, as an efficiency improvement measure. This results in changes in the budget accounts that will require diligence to identify trends in expenditures accurately in the future.

FY 1999 Expenditures

Fairfax County Government is a very large operation, by any measure. In FY 1999, expenditures for all appropriated funds for this County are budgeted to be $3.065 billion-that's Billion - including $1,832,476,851 Combined General Fund disbursements. That is an average appropriated expenditure of $9000 per household, and $4575 for every person more than 19 years old, or $3248 for every man woman and child in the County. The proposed Combined General Fund disbursements -the cost of operating the County government and schools -- are $1,832,476,851, or $5381 per household - about 7.7% of the average household income.

The proposed County revenues for FY 1999 from the Financial and Statistical tables of the Budget Overview are:

GOVERNMENTAL FUNDS
General Fund	1,829,519,500
Special Revenue funds	515,173,340
Debt Service funds	18,000
Capital Project funds	188,779,872
PROPRIETARY FUNDS
Enterprise	107,318,851
Internal Service funds	146,038,997
FIDUCIARY FUNDS
Trust funds.	412,655,817
Agency funds.	2,794,344
TOTAL APPROPRIATED FUNDS
TOTAL AVAILABLE FUNDS	3,202,308,721
(less Internal Service Funds)	(158,344,448)
NET AVAILABLE FUNDS	3,043,964,273

FY 1999 Revenue sources

County revenues are derived from 78 County taxes, fees, assessments, user and service charges, from State and Federal government transfers and grants, from general obligation and revenue bond sales, employer and employee contributions, developer contributions, return on investments, rental income, borrowed funds for loans to homeowners, client fees, tuition's, fares, private funds, seized funds, other jurisdictions, cable franchise fees, and miscellaneous sources. The largest sources of General Fund revenues (87.9%) are the real estate taxes (51.4%), Personal Property Taxes (19.8%), and General and other Local Taxes (Sales, Utility, BPOL, Auto Licenses and other). Revenues from State and Federal Governments will be about 5.9% or almost $108,000,000. User fees will provide 1.6% of revenues in 1999.

The Challenge for Taxpayers

Given this complexity, how can taxpayers determine if the value received from their Government is worth the price they are paying? The short answer is, they can't.

Recent FCTA newsletters have chronicled major growth and problem areas. The individual cost centers and program fund summaries in the Budget documents provide indications of what the County does with the money. The activities are very diverse.

The Budget documents are very comprehensive, and probably among the best County budget documents in the nation. Unfortunately, they still lack key information needed by the taxpaying "owners" of the County Government to assess the benefit and cost tradeoffs. The shortcomings include:

• program "success "indicators

The County's new initiative to focus on output measures is progress, but appears to miss one primary element needed to assess program value which is: who benefits and how do they benefit from the program, and how will everyone know it is successful, without missing unintended consequences? When new programs are instituted, the budget documents do not report how can the advocates and taxpayers can determine who will benefit if the initiative is a "success" in resolving the problem for which it was created. This will vary with the type of program. To illustrate this point, one main reason for providing a Fire and Rescue department is to reduce losses in the community that would occur were there not fire and rescue departments. Thus a measure of the department's benefits is what reduction in losses or harm did they achieve? Currently published measures, such as response time targets, do not address this kind of "benefit" data need, nor do they permit discourse about their place as a Government function. Who will benefit from these initiatives, and how will those benefits be balanced against their costs?

• program life cycle information

The County continues to change rapidly. How can the excessive growth that occurred in the past be better controlled in the future?

One way is to reduce revenues. Present policy forestalls that course of action unless a recession or other outside factors force a reduction.

Another option is to determine the full costs before the initiatives are adopted. Until life cycle costs of any new government initiatives are provided citizens cannot adequate make judgments about the tradeoffs to balance to arrive at their support or opposition. It would facilitate citizen review if the County were to provide in list form new program or agency initiatives with their life cycle costs and purposes for their adoption.

A third option is to review existing programs. With the County changing so rapidly, periodic review of all existing programs will be essential, since they all develop their own constituencies over time. Fairfax County expects to write about 526,000 checks, each one potentially reinforcing a dependency relationship on a County program. Many discretionary programs funded by the County have existed for several years. Most budget funds provide no indications of the age of current programs or projects, nor their remaining estimated life cycle and life cycle costs, except for bond funds. This impedes assessment of continuing program expenditures.

• capital expenditure assessments:

A common measure of value for investing money in capital assets like buildings, equipment, land, roads, sewers, etc. is the payoff period, or return on investment(ROI). One major reason for requiring this kind of estimate before making an investment commitment is to force clear articulation of expected value or benefit that will be achieved if the money is invested in that asset. A second major reason is to force consideration of alternative actions and risks. A third reason is to permit the ranking of investment needs and options.

County budget documents do not seem to recognize this need. For example, Fund 104 Information Technology has a budget for Network modernization: of $500,000 for FY 1999, to be added to $2.74 million already spent The Budget ROI statement on page 83 reads:

ROI "Funding for this project provides enhancements and critical modernization of, and investment in, the County's network infrastructure."

What are the value, alternatives and relative ranking of these enhancements assessed with such data? How can the ROI statement be used to assess future performance? How does one compare before and after "enhanced" and "modernization?"

Federal and State Mandates

1996 estimates prepared by the County indicate that the County pays for more than 75% of the $523 million for programs impacted by Federal and State-mandated programs. The County's General Fund budget for 1996 was $ 1.5 billion. The County's expenditures under these mandates should not be construed as the specific level of program expenditures required by the mandates, but it does provide an indication of the degree to which imposed requirements impact County expenditures, for purposes of assessing County expenditure levels and cost reduction opportunities. Remember, 1999 receipts from Federal and State sources will be only $108 million. How much will be excess expenditures, and how can they be assessed? How much is essential and how much is in the nice-to-have expenditure category?

Comparables.

Control of future growth would be aided by knowing what others are paying for comparable government services. What is the zone of reasonableness for current or proposed programs and projects? The County is about to embark on an extensive school construction project, where per room costs, after financing, can be as high as $500,000. How can citizens find out what other organizations - public and private - are paying for comparable or alternative facilities? Public availability of such data, perhaps outside the budget documents, is also needed to permit citizens assess the value of their government's services.

The County supports National Association of Counties and other similar organizations. The Virginia State auditor publishes comparables for all Virginia counties. Surely these organizations could help develop ways to satisfy these data needs.

What can FCTA Members do?

1. communicate with their Supervisor and Delegate to ask for any or all of the changes described.

2. review budget cost center data and offer FCTA Board members their suggestions for benefit/cost measurements.

3. identify present programs that need to be reviewed and reassessed.

FCTA Opposes Bond Referendum

Madam Chairman and Members of the Board:

My name is Arthur Purves. I am speaking as president of the Fairfax County Taxpayers Alliance. We oppose the proposed $87 million bond referendum for parks and the $100 million bond referendum for public safety. Annual capital costs should be paid for from operating budgets. Here are our concerns.

First, since 1995 the Countyís debt service has exceeded the funds raised from bond sales by $90 million. If the County had paid for capital projects out of its operating budget, it would have saved $90 million in the last four years, enough to fund the parks referendum. The County is like a homeowner that makes a yearly mortgage payment of $460,000 for a $450,000 mortgage. The County is in this situation because by having annual bond sales it is, in effect, buying a new mortgage every year. Annual expenses should not be funded through borrowing.

Second, it appears that the County is underfunding its capital needs. We are told that there is a $300 million backlog in storm drainage projects, a $40 million backlog in County construction and maintenance projects, and an undetermined backlog in transportation projects. Metro apparently has a $1 billion maintenance backlog, of which Fairfax County has a share.

The school system has a $400 million backlog that is growing. The County Council of PTAs 1998 budget statement reports that the school systemís Capital Improvement Plan, which is underfunded by $100 million, renews only half as many schools as is required.

Bond sales are not providing nearly enough funds to meet the Countyís capital needs.

Third, due to tax increases during the 80s, the County collects $900 million more per year than it would have if taxes and spending had not increased faster than population and inflation since 1975. Of this, $600 million goes to the schools and $300 million to the County government. Given this large increase in revenue, why is it even necessary to sell bonds and why does a capital construction backlog exist?

Last summer, the Fairfax County Taxpayers Alliance asked both the School Board and the Board of Supervisors where the tax increases had been spent. The School Boardís response listed all programs that had grown faster than inflation and enrollment and the FY98 cost of each. The Board of Supervisors response had an incomplete list of programs that had grown faster than population and inflation and failed to provide the cost of even the programs that were mentioned.

Both the School Boardís and the Board of Supervisors responses are posted on the FCTA website, www.fcta.org.

The schoolís share was spent not on capital needs but on the operating budget. Despite the extra money, standardized test scores did not improve and student behavior deteriorated. This happened because the school administration implemented programs without setting measurable goals for them.

Since the schools are not spending their extra $600 million a year wisely, the Board of Supervisors should stop selling bonds for school projects and should require the school system to fund all of its capital needs out of the school operating budget. That would require only $200 million of the $600 million.

Since the Board of Supervisors does not tell how it spends the $335 million of tax increases that the County government gets each year, the Taxpayers Alliance had to do its own analysis to get an estimate. We found that 75% of the tax increases are spent in three areas: $43 million on County debt service, which weíve already discussed; $84 million on public safety, and $190 million on health and welfare. Employee benefits account for more than $50 million of the $335 million. We found that the cost of fringe benefits per employee increased 70% since 1975, from $5800 per year to $10,000 per year (in inflation adjusted 1998 dollars).

While we have an idea of where the tax increases are spent, we still do not know why the increases occurred. We donít know, for example, why the cost of fringe benefits increased.

The Social Services and Health Departments received an extra $43 million. Transfers to the Community Services Board increased by $48 million. The Facilities Management Division received $9 million. The Office for Children received an extra $26 million. The sheriffís office received an extra $22 million and the police an extra $14 million.

Computer spending, which was not reported as a separate item in 1975 now costs about $27 million. About $10 million of this is offset by reductions in other County administrative functions. Overall, computer spending appears to have increased net administrative costs by $17 million.

Spending on transportation appears to account for only $20 million of the $335 million.

Again, these are Taxpayer Alliance estimates. We would prefer to cite official County figures, but if they exist, the Board of Supervisors will not release them to the public. And again, we do not know why these increases occurred. Since taxes and spending began escalating in the late 70s, the County has spent $3 billion more than was needed to keep up with population growth and inflation. It concerns us that the County feels it can spend an extra $3 billion, not report to the taxpayers where the $3 billion was spent, and then ask approval for $187 million in new bonds.

In conclusion, we believe that the County is not justified in asking for voter approval of the $187 million bond referenda next November. We believe that the County should first explain why capital expenses cannot be funded from the $3 billion in tax increases it has collected since 1975. Voters should not approve the bond referenda until the Board of Supervisors answers the $3 billion question.

Thank you.

Comments to the Fairfax County Board of Supervisors
Regarding the Proposed 1998 Bond Referenda
By Arthur G. Purves
President, Fairfax County Taxpayers' Alliance
June 29, 1998

Can We Reduce School Overcrowding Without Increasing Cost?

by Doug Barylski

Many Fairfax County schools have been overcrowded for years in spite of repeated School Bond referenda being passed. And the school system has no plan on how to solve this problem any time soon. But the state legislature and Gov. Gilmore have just given us a low-cost way to help the situation. And the children donít have to wait years for relief.

The answer: a charter school. A charter school is run under the oversight of our School Board, but is not under the direction of the Superintendent. The charter school has no requirement to use the bureaucracy of the regular public school system, and is managed like a business. And the School Board can shut down the charter school after only one year, for any reason. The law allows no appeal. This shut down provision protects us from any flaky business or education practice.

Thomas Jefferson High School is similar to a charter school, in that it has a separate enrollment process and many special courses. There are already hundreds of charter schools all over the country, so there is plenty of experience with them.

A charter school could open in September 1999, long before the normal school construction process would be able to complete an addition or a new school. Thatís because a charter school can lease space, like a former department store or a closed school.

A charter school wonít solve the whole problem of school overcrowding in Fairfax County. But at least some of our children can be helped, and without increasing taxes.

"Bondage"*

by Doug Barylski

This November you will see a "Public Safety" bond referendum. But the majority of this bond issue is for an expensive $92 million courthouse expansion.

Does the County need this courthouse expansion? We think not.

The master plan for the court expansion shows an increase of 36% in space. But population and prison population should grow at less than half that amount over the next decade. Remember just a few years ago when the County built the new Government center? Commonly referred to as the "Taj Mahal," the Government Center clearly wasted a lot of space. The County then had to buy two more buildings to get the space they wanted. So we are right to be skeptical of the courthouse expansion.

In addition to all this, the school system says itís short several hundred million dollars in bond funds for school construction and renovation. We agree with the Fairfax Journal* that our government should focus on what we really need in this County. The Public Safety bond referendum should be sent back to the planners for reconsideration.

The Fairfax County taxpayer should not be placed in "bondage" for an expensive courthouse expansion.

The Fairfax County Taxpayerís Alliance encourages you to vote "NO" on the Public Safety bond issue.

* Fairfax Journal editorial, June 26, 1998

TAXMONGERS: HERE COMES THE NEW

ALTERNATIVE MINIMUM TAX! LOOK OUT BELOW!

Writer wishes to remain anonymous due to past experiences with the IRS

This is the "sneaky tax." Back in the old days, when I was making lots of money I got nailed very hard on the AMT. The part that was hard to take is that my taxes are done by an excellent husband-and-wife team, both of whom are CPA's! They use computer technology and always compute my tax both ways; with and without AMT.

In my case, the IRS used a "machine audit" at the end of the three-year period and simply sent me a bill. It was a bogus tax bill. The IRS neglected to enclose "the attached statement," or even give a reason or a computation of why I owed money. Several phone calls and a registered letter later, I located the manager of the specific branch in the Philadelphia office. Caught by surprise, he told me (by phone) that it was an AMT, computed by someone in the bowels of the Philadelphia office. I asked for a written accounting or summary. It was never mailed. This put me in the position of "paying up" a bogus bill, or having to face a new computation, another tedious and expensive tax-preparation exercise by my accountants, and an audit. With the three-year expiration and no desire to open up my returns so that something could be contested or disallowed, I decided to cough-up the money. It was quite late for the IRS to be going on a fishing trip.

Aside from the unfairness of an AMT that will remove more legitimate deductions from the middle-income taxpayer, it is also a "license to steal" for the IRS. Just send a bill three years after the taxes were filed, blame it on the AMT, and watch the money roll in. If the victim of this hijacking doesn't like it, just bring the tax records and go through a hellish audit. For an owner of a business, it is devastating, especially if the business is having a bad year and fixed costs cannot be reduced.

This was another reason for an old codger like me to take "vows of poverty" and live modestly and happily. It is hard enough to work and make a significant amount of money. But it is intolerable to spend one's limited free time to deal with a rapacious organization that uses any means to confiscate what is left after taxes! I am willing to "stay in compliance" and pay my fair share. But I would rather not fight unsubstantiated tax claims from the IRS. In the long run my decision to retire cost the government lost tax dollars. I sent in a check and retired from work. I believe many people retire each year partly to get out of the annual tax hassle!

FCTA Now Has Our Own Web Page

Check it out! Tell your friends!

We have a very helpful source entitled "Contacting Elected Officials" which lists County, State and Federal Officials as well as providing a means of identifying your representative. Go ahead - call your supervisor and let them know how they are doing.

Read FCTAís statement opposing the Board of Supervisors' proposed salary increase - (September 28, 1998). Between 1987 and 1991, the supervisors' salary increased from $21,589 to the current amount of $45,000. Even after adjusting for inflation the supervisors' salary without the proposed increase would still be 30% larger in 2003 than it was in 1987. With the proposed increase, the supervisors' salary would increase 70% since 1987. If this seems excessive to you, $59,000 for a part time job, call your supervisor and complain!

Remember! Itís www.fcta.org. Tell someone!

ANOTHER ABUSE OF POWER!

I'll never forget the IRS agent who visited my son, Mike, age 39, who was in terminal stages of Leukemia shortly before he died. Mike had been the President of US operations of a Swiss company that made precision measuring software equipment for manufacturers. My son lived in Farmington Hills, MI at the time. The agent showed up at the home unannounced on a Saturday morning. Although my son was no longer associated with the company, the agent wanted to claim corporate payroll taxes on a long-past FY quarter. There was no appointment or previous written request. My son was under heavy chemotherapy and not in very good shape. Before I left the room, I asked Mike (in the auditor's presence) if the doctor would allow such activity at this time. There was no indication of apology or contrition from the IRS auditor.

I was furious, and left the room, but kept quiet because I had no direct involvement. Fortunately, my son kept excellent corporate records in the basement of his home and produced receipts and a canceled corporate check showing the tax had been paid. Undeterred, the IRS inspector examined the books, and to his consternation found that the IRS owed the Swiss company approximately $300.

There were several Federal statutes and IRS "regulations" that were violated by the IRS agent. The episode left a bad taste in my mouth. Fortunately it was not a "seizure" or an armed raid. Unfortunately there is no recourse by an ordinary citizen. I am further outraged by the attitude of our federal, state and local elected representatives who feel that our money is "their" money and present the taxpayer with false choices. Our elected officials simply encourage illegal dealings by their tax collectors.

Name Withheld by Request

Previous newsletter (Summer 1998)