Education, job growth, a declining housing market, and their effects on Fairfax County’s fiscal outlook dominated the first 2008 conversation between the Fairfax County Board of Supervisors and the School Board on Monday. The two bodies have met occasionally throughout the past few years to address the revenue and construction needs of the school system, which receives nearly 73 percent of its revenue as a transfer from the county’s General Fund. The School Superintendent’s proposed Fiscal Year 2009 budget request is for $1.642 billion.
Deputy County Executive Edward L. Long, Jr. presented the gloomy fiscal out-look at Monday’s joint meeting. Although more than 38,000 net new jobs were created in Fairfax County between 2003 and 2006, and federal procurement contracts rose an average of 16.5 percent a year, the corresponding rise in home prices was unsustainable, and incomes could not keep up. The slowdown in the housing market that began in mid-2006 continues, resulting in fewer home sales, declining prices, and increasing fore-closures. In 2006, there were 593 foreclosures in Fairfax County; when final figures for 2007 are compiled, 4,000 foreclosures are anticipated. Most are the result of so-called subprime loans. After a couple of years, the low introductory rates adjust upward signifi-cantly; borrowers find they cannot meet tighter lending requirements to refinance; the property may be worth less than the loan; and prepayment penalties are steep.
There are noteworthy differences, Mr. Long said, between the slowing of the housing market today and the severe decline experienced at the beginning of the 1990s. Fifteen years ago, the decline was two-fold: loss of jobs and reduced demand for housing, including higher mortgage rates. Today, job growth is increasing, and mortgage interest rates remain low (30-year fixed rate of 5.87 percent with 0.4 points as of January 10, 2008). Non-residential real estate remains strong, and vacancy rates are expected to stabilize in the current quarter.
The housing market slowdown has a significant effect on other county revenue sources. Tighter credit can mean reduced Personal Property Tax receipts. Lowered consumer confidence results in lower Sales Tax collections. Fewer home sales and refinancings have a direct effect on Recordation and Deed of Conveyance revenues. Overall, the county’s projected revenue shortfall for FY 2009 is $120 million. Anticipa-ting the dire forecast, the Board of Supervisors last year adopted budget guidelines that hold county and school spending flat; agencies were directed to reduce their personnel budgets by four percent. In late November, County Executive Anthony H. Griffin ordered reductions of an additional two percent.
The School Board received Superintendent Jack Dale’s proposed budget last week. Mr. Griffin will present his proposed county budget to the Board of Supervisors in late February. Unknown for both budgets is the amount of state and federal funding that can be expected once the General Assembly concludes its session in Richmond in March.