The Richmond Report - "SHOW ME THE MONEY!"

by Dave Watts
(Who is Dave Watts & what else has he written?)

As we have read and heard many times, and then again, the Commonwealth of Virginia is struggling through a major fiscal crisis, possibly the worst in over 50 years. My concern is simply this: How have the bass fishery programs of the Department of Game and Inland Fisheries ("DGIF") faired in this budget debate and the reduced levels of funding?

The short answer is no worse or better than the majority of other state programs. The funding for the next two years was decreased around $2 million per year, resulting in an annual operating budget of $41 million, which funds 472 full time positions. This reduction is in addition to the $2.8 million cutback in funding imposed by the General Assembly in 2002. DGIF programs survived, but at a significantly reduced level, with no new construction and the loss of 100 hourly wage part-time positions (the equivalent of about 70 full-time jobs).

In formulating a budget the Governor and the General Assembly make various predictions about future revenues and the general economic health of the Commonwealth over the next several years. If actual revenues are too low, expenses have to be adjusted downward and the budget amended to avoid operating in the "red." To make matters more interesting, Virginia budgets on a two-year basis - the biennium budget. For example, the budget for the period of June 2002 to July 2004 was passed by the General Assembly in March 2002. That budget was amended in February of 2003, as it always is, to reflect the more current revenue projections and to allow critical program changes.

That is the budget process for "normal" times. As most of us have experienced first hand, however, Virginia's economy took a significant down turn, leaving prior revenue estimates (i.e., the income from taxes, fees, and other assessments) greatly overstated. In November 2002 the Governor had to take the rare step of exercising his authority under the Commonwealth's Constitution to cut individual programs up to 15%. (DGIF was cut $2 million per year by this action.) The General Assembly retained most of these cuts and made more, while also increasing revenues by raising the cost of liquor and driver's licenses, for example. Obviously, if revenues again fall below the forecasted amounts, future reductions may be imposed.

The fact that DGIF "only" lost in total around 10% of its annual budget, while other programs took bigger hits, reflects the fact that DGIF gets its funds from more than just state taxes. The sources of revenue for the DGIF warm water fishery programs are the following:

Fishing licenses - This source of funding is dedicated by state law to the DGIF programs and amounts to around $8 to $9 million per year. (Total revenue from both hunting and fishing licenses runs around $18 million per year.) Although revenue projections suggest a modest decrease in license fees because of current economic conditions, the reduction is not considered to be dramatic. It is very significant that license revenues were not touched by the General Assembly in the new budget and will continue to go to DGIF's fishery programs. As will also be discussed later, fishing license revenues should never be diverted by the General Assembly to any other uses; otherwise, DGIF will suffer a significant loss of federal financial assistance from the U.S. Fish and Wildlife Service (FWS) in an amount of approximately $4 million per year.

Boat titling and registration fees and watercraft sales and use tax revenues - While this source of funding is similarly dedicated by state law to the DGIF programs, in this case some funds were diverted to other programs in order to balance the general budget. A number of special funds in other program areas met the same fate of being adjusted or eliminated in the budgetary process. DGIF will lose around $3 million annually of these fees and taxes, as a result of both reduced revenues and diversions to other statewide programs.

How can this happen? Because the budget is the last bill passed each session, its language trumps any revenue or distribution or transfer formulas previously enacted as part of the Virginia Code. Stated another way, no source of revenue is immune from the budget axe or a political agenda. In effect, dedicated revenue sources are not really "trust funds," as that concept is generally understood.

Sales tax collected on hunting, fishing and wildlife-watching equipment - This source of funds had been around $12 million per year. The money is transferred into the Game Protection Fund from the total sales tax collections deposited into the General Fund. These taxes are also known as HB 38 Funds, as the transfer was authorized several years ago by House Bill 38. Approximately $2 million annually was lost in the new appropriation act. Here it is important to note that the amount of watercraft sales and use taxes comes from actual collections; however, the money from equipment sales is based on a survey and may be again adjusted in future budgets.

General Fund Appropriations - DGIF never received General Funds except for a few specific projects. The General Fund is the "pot" of money that the General Assembly appropriates for many of the programs and activities of Commonwealth, with 84% of it coming from individual income and sales taxes. The General Fund makes up approximately half of the state spending. The rest is Non General Fund expenditures from sources such as the gas tax which goes directly to the VDOT highway program; federal medicaid matching funds; and college tuition. It is interesting to note that with rare exceptions the gas tax is treated as if it were a "trust fund."

Capital Construction Funds: This is another source of money paid out of the General Fund for construction, land acquisition, and major maintenance. This source of funding for DGIF has been zero, with a few modest exceptions. In effect, the General Assembly's budget authorizes the building of a fish hatchery or boat ramp, and also approves the expenditure of a specific dollar amount. However, no funds are given to DGIF; rather, it has to find the necessary dollars from other revenue sources. The park folks are treated differently. Their program receives the actual money for any park facility that is authorized from the Capital Construction Funds. DGIF has $3.4 million in authorized projects for 2003 and zero for 2004.

Trout stamp - This generates about $1million per year for cold water (trout) fish hatcheries and stocking operations. These funds are not available for the warm water fishery programs, such as largemouth bass.

Federal Aid in Sport Fish Restoration - This source of funding comes from the U.S. Fish and Wildlife Service under what is now called the Federal Aid in Sport Fish Restoration Program (SFRP). It amounts to around $4 million per year or approximately 18% of the DGIF budget. This federal law was enacted in 1950, as the progeny of the highly successful Pittman-Robertson grant program for hunting restoration enacted in the late 1930's. The SFRP program has been a consistent source of funds for state fishery programs. Over the years around $50 million has been given to Virginia under this law. The federal funds come from a 10% federal excise tax on the sale of fishing equipment. The tax is paid by the manufacturer, and is, in effect, a value-added tax ("VAT") so popular in Europe. As the tax is imposed on the sale of fishing equipment, it has a user pay/user benefit appeal. In some ways it is like the Federal Duck Stamp program. Duck hunters pay a license fee, but the proceeds are expended on enhancing the National Wildlife Refuge System. The 1985 Wallop-Breaux amendments to SFRP allocated to this program federal gas tax revenues estimated to come from federal gas taxes paid by boaters. Rather than all the federal gas tax going to the Federal Highway Trust Fund, the gas tax revenues from boaters are now available for state fishery programs.

The federal SFRP program provides 75% federal matching funds for any approved state fishery restoration project. However, by law federal money is only available if none of the state license revenue is diverted to other programs. In effect, the Commonwealth would lose substantial federal aid, if it cannot match the federal funds or diverts the license fees to another program, say police salaries. To date this has not happened, and DGIF expects to expend around $4.3 million in federal funds this coming year. 15% will be expended on boat access, such as ramps. The remainder is allocated as follows: 71% on fresh water fisheries and 29% on salt water fisheries. These percentages are based on user surveys. [As a footnote, DGIF administers over 200 boat ramps state wide].

Now turning to what will be happening on the ground. The budget reductions in November of 2002 as well as in the new budget will have a direct impact throughout the Commonwealth. For example, 100 temporary employees are now laid off. These are the many folks in the various corners of the Commonwealth that help the DGIF programs on a seasonal basis, such as fish stocking, fish sampling, hatchery operations and local projects. About 57 folks laid off were fishery technicians, directly involved in the fresh water fishery programs. Their loss will be felt in the day to day program activities of the agency in the various regions, and in the reduced research efforts to improve bass fishing.

Legislation - No report would be complete without a brief discussion of some of the contentious fishery legislation considered this year by the General Assembly. For example, the warm water bass program was under assault from various bills introduced in the General Assembly that would dissolve DGIF and merge it with the Marine Resources Commission. It is important to note that this restructuring of the state government was not recommended by the Wilder Commission's review of state programs and activities. Further, this experiment was tried at the federal level in the 1960's and 1970's. The Bureau of Commercial Fisheries and the Bureau of Sport Fisheries composed the U.S. Fish and Wildlife Service of the Department of the Interior. As their missions were so different, if not conflicting in certain cases, President Nixon reorganized the Federal Government and sent the Bureau of Commercial Fisheries off to the Department of Commerce, where is was reconstituted as the National Marine Fishery Service, an agency of the National Oceanic and Atmospheric Administration [NOAA]. We should learn from history.

Also some of the proposed legislation tried to limit the warm water fishery programs to just the funds from fishing licenses. This is very short sighted and would result in the loss to DGIF of $22 million in future revenues. It does not take a Ph.D. in mathematics to realize the license fees would have to be raised dramatically to retain any semblance of the programs we know and love today.

Enacted during this session of the General Assembly was a new law permitting the collection of "admittance, parking and other use fees" at Department owned facilities, with the fees being deposited into the Game Protection Fund along with the hunting and fishing license revenues. There are important exceptions. The fees do not apply to "(i) any person holding a valid hunting, trapping or fishing permits, or a current certificate of boat registration issued by the Department, (ii) persons 16 years of age or younger, or (iii) the use of Department-owned boat ramps." It will be interesting to see how much revenue this new fee (tax?) will generate.

Finally, bass fishermen should go to the DGIF web site for further information on their programs and activities - www.dgif.state.va.us. And, if you ever need to buy a friend a fishing license on short notice go to Bass Pro Shops 1-800-986-2628. In the next few weeks fishing licenses can be bought directly on-line at DGIF's web site.

Bass fishermen need to have perspective on where the various conservation programs "fit" in the budget priorities of Virginia vis-a-vis other states. Let me provide some numbers (based on per capita spending and revenues).

• Virginia is the 14th richest state in the Union
• Virginia ranks around 45th in level of taxation
• Virginia ranks 3rd in spending on police and corrections
• Virginia ranks 50th - dead last - in spending on conservation programs
• Virginia conservation programs receive less than 1% of a $50.5 billion dollar state budget

Let me repeat: Virginia is dead last in over all conservation program spending! In my view that is also dead wrong.