Lynchburg City opts to refund state $486,000

City officials are grudgingly promising to surrender almost $500,000 to the state in order to preserve funding for programs ranging from law enforcement to children’s services.

The decision, cemented by a vote of City Council earlier this week, protects a slate of agencies from recent cuts made to the deficit-plagued state budget.

Virginia communities, as a whole, are losing $50 million. Lynchburg’s share of that comes to $485,892.

State aid makes up about 10 percent of the city’s total budget. Affected agencies include social services, police and the office of the commonwealth’s attorney.

Localities have until month’s end to let the capital know how they plan to offset their individual funding shortages. The two chief options extended are to either cut costs or cut the state a refund check.

Lynchburg is taking the latter path. The city previously prepared for this moment, which was expected, by taking local money to establish a special reserve in its annual budget.

A total of $800,000 was set aside. The excess money — around $314,000 — is being held in the event the regional jail seeks extra funds to offset its own loss of state aid.

The jail is still considering how to respond to its reduction of nearly $525,000 by the state. Lynchburg is responsible for about half of the facility’s local support.

City leaders aren’t letting any of this money go without protest. On Tuesday, City Council approved a resolution objecting to the state’s demands and asking that its refund check be recorded as local aid to the commonwealth’s deficit, a small slap at legislators.

The statement, based on a template circulated by the Virginia Municipal League, passed 6-1. Ward III Councilman Jeff Helgeson dissented, calling the measure “trite and silly.”

“The point is their check is in the mail. Let’s move on,” he said. “… This sounds almost mean-spirited. Like a couple of kids on the playground.”

Ward I Councilman Mike Gillette quickly replied he was voting for the measure “because I don’t put up with bullies on the playground.”

Others said the state was unfairly pushing its own responsibility off onto the cities and counties.

“If we just take it and roll over, maybe they’ll come back for more,” Vice Mayor Bert Dodson said.

The city has already changed its own name for its special reserve fund from “Reserve for General Assembly Action” to the “Reserve for FY2009 Local Aid to the Commonwealth.”

Neal Menkes, director of fiscal policy for the Virginia Municipal League, said such changes were symbolic acts reflecting local government’s frustration with the position in which it finds itself.

Asking communities to choose between cutting services or sacrificing local revenue is the equivalent of “letting us choose which poison to take,” he said. “It’s not really a choice.”

At least one city has refused to engage the state’s requests. Virginia Beach sent back a letter declining to pick one of the specified options, saying it didn’t want the job of making cuts to state programs.

“The letter essentially says we’re not going to play this game,” Menkes said. “You take responsibility, and you make these decisions.”

Those choosing to write a check must do so by Jan. 9. Lynchburg will hold its money in savings until that deadline approaches in order to accrue interest on the cash.

City Manager Kimball Payne said interest rates fluctuate daily, but generally settle in the low single figures. The city has no estimate on how much might be generated over the coming months.

Officials hope the decision not to cut service within the city will discourage legislators from reducing Lynchburg’s baseline funding in the future.

“There’s a little bit of naivety in that argument, a little bit of wishful thinking,” Payne said earlier this week. “But we don’t want to put ourselves in a worse position.”

The present cuts were approved for the next two years, but local administrators have been advised to act as though they were permanent.