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Budget negotiations wait on new revenue, special session

Budget negotiations wait on new revenue, special session

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Teachers want pay raises, and so do state employees.

The Board of Education says Virginia needs to spend almost half a billion dollars to meet its own standards for public education.

Home health agencies say they need a big boost in Medicaid reimbursements to cover their costs when the state minimum wage rises on May 1 and again on Jan. 1.

But all of these big-ticket spending requests will depend on how much sustainable revenue that General Assembly budget negotiators expect to have for the two-year budget that each chamber will release this week.

And they won’t know the answer until Gov. Ralph Northam will tell them how much he expects revenues to grow beyond what he had expected in the two-year $141 billion budget he introduced before Christmas. That won’t happen until after the House of Delegates and Senate act on their budgets on Friday.

“I don’t know how you get to a good budget now without that revenue forecast,” said Jim Regimbal, a private budget consultant for local government organizations in Virginia. “It’s going to make a huge difference.”

Confusion over the budget intensified late Friday after the Senate Finance & Appropriations Committee abruptly canceled the meeting it had scheduled for Sunday to release its version of the revised two-year spending plan. The committee carried the budget bill over from the regular session that will adjourn on Monday into the special session that will convene Wednesday.

A snowy weather forecast also played a part in canceling the budget meeting on Sunday, said Sen. George Barker, D-Fairfax, who said members did not want to drive back to Richmond on potentially icy highways since the legislature is scheduled to be idle on Monday and Tuesday.

The unprecedented delay will upend a legislative calendar already rearranged in response to the refusal of House and Senate Republicans to extend the regular session from 30 to 46 days, the schedule the assembly has followed in odd-numbered years since the revision of the state constitution in 1971. The chambers were supposed to vote on their versions of the budget on Friday.

Sen. Creigh Deeds, D-Bath, a member of the finance panel, called the hasty deferral of the budget and other legislation to the special session “a lot of mechanics and do-nothing stuff just so Republicans can make a point.”

Senate Finance Chair Janet Howell, D-Fairfax, agreed. “This year, they really dug in and refused,” she said, “and that’s created some havoc.”

Senate Finance now expects to meet on Wednesday afternoon to release its budget. The House Appropriations Committee will meet Sunday to carry over the budget bill and other legislation to the special session, but it will also wait to release a budget.

“The House is fully prepared to go forward,” Committee Director Anne Oman said. “But given that the Senate has not completed its work, we will delay the release of the House budget until Wednesday.”

Both budget committees know that chances are good they will have more money to spend, especially after Northam announces what’s likely to be a substantial boost in state revenues.

Secretary of Finance Aubrey Layne said Friday that the daily collection of state revenues from income, sales and other taxes is following the same trend it did last month, when the governor announced that revenues were up by $778 million in the first six months of the fiscal year that began on July 1.

Revenues were also about $667 million above the forecast in the last budget, which the assembly adopted after almost four months in a special session that Northam had called to deal with a potential $2.7 billion two-year revenue shortfall because of the economic fallout from the COVID-19 pandemic.

Based on results in January and early February, “the expectation that there will be additional revenue is good,” Layne said in an interview.

Still, the assembly money committees won’t know how much until after they act on their budgets, which Howell said could mean “more resources” for the joint conference committee that will negotiate a budget agreement between the chambers.

The House and Senate also still have to resolve a political dispute over how much tax relief to provide businesses that received emergency loans that the federal government will convert to grants if they don’t lay off their employees during the pandemic. The total cost of conforming the state tax code to new federal laws ranges from $107 million in the House to $180 million in the Senate.

The budget committees know they are likely to be able to use money from a federal emergency aid package adopted in late December to swap for about $240 million that Northam had included in the proposed $47 billion state general fund budget to pay for distributing new vaccines against COVID-19 and other public health measures to end the pandemic.

Virginia could get hundreds of millions of dollars more if President Joe Biden’s administration follows through on a previously announced plan to maintain a higher federal share of Medicaid program costs through the end of 2021, instead of ending the favorable match on June 30.

The committees also don’t know how much the state would receive, either directly or indirectly, from a $1.9 trillion emergency aid package that Biden is trying to push through Congress to help end the pandemic and boost the economy.

But that’s money Virginia lawmakers can’t rely on, and much of the state’s additional cash is likely to be one-time funds that can’t be used on ongoing spending — for salaries or Medicaid reimbursements to home health agencies and personal care attendants for homebound Virginians who are elderly or disabled.

“If they have more money, it’s going to go into public education, or the bulk of it,” Regimbal predicted.

Northam has already signaled, in the State of the Commonwealth speech that opened what is likely to be a hybrid 46-day session, that he wants the assembly to convert a 2% bonus he had proposed for teachers in the budget into a salary increase of at least 2%.

It’s unclear what that means for state employees, as well as local employees who are supported by state funds, or faculty at Virginia’s public colleges and universities. They, like teachers in K-12 public schools, were supposed to get raises in the budget the assembly adopted on March 12, the same day Northam declared the public health emergency because of the pandemic.

Those raises were part of the more than $2 billion in new spending in the budget that the governor and assembly suspended six weeks later. The assembly restored some of that spending in the budget that it adopted in October during the special session, which also promised $98 million in one-time bonuses for state and state-supported local employees and faculty if state revenues grew enough to pay for it.

State police are seeking an additional $28 million to pay for a compensation package to slow the escalating exodus of veteran officers, primarily because of pay, and help recruit new ones to fill hundreds of vacancies. The Senate passed legislation to add a $4 fee on vehicle registrations to raise money for a public safety trust fund for compensation, but the House traditionally has preferred to address compensation issues in the budget.

“I’m sure they’ll do something,” said Col. Wayne Huggins, a former state police superintendent who leads the Virginia State Police Association. “I’m just not sure what that something might be.”

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