Gov. Ralph Northam would spare public schools the loss of more than a half-billion dollars from a drop in enrollment during the COVID-19 pandemic under the new two-year budget he proposed on Wednesday, nine months after the public health emergency began.
Northam’s budget would forgo $513.5 million that the state could have saved in K-12 funding because of declining enrollment, but which the governor warned “would devastate our public education system.”
“That is why this budget helps school divisions, students and teachers,” he said during a speech to the General Assembly money committees from a nearly empty Senate committee room with only his masked wife, Pam, a school teacher, shown behind him.
Northam also proposed a 2% bonus for teachers and school support staff and promised to push legislators to convert it to a “permanent pay raise of at least 2%” if enough revenue becomes available during its legislative session that begins Jan. 13.
“It is a small way to say thank you for your devotion to educating our children,” he said.
Assembly Republicans have vowed to limit the session to 30 days, but chief of staff Clark Mercer warned Tuesday that the governor could call the legislature back into special session if they need more time to determine if revenues were sufficient in January to increase teacher salaries.
“We’re not going to leave here without teachers being able to get raises,” Mercer said during an embargoed media briefing on the budget.
Sen. Ryan McDougle, R-Hanover, chairman of the Senate Republican Caucus, called the governor’s budget proposal the “second bite at this apple” and said it reinforces the GOP commitment to limit the session to 30 days.
“Growing Virginia’s government in the midst of an economic downturn exacerbated by endless lockdowns is a recipe for future instability that will prolong the genuine hardship imposed on our citizens,” McDougle said.
House Minority Leader Todd Gilbert, R-Shenandoah, called the governor’s proposals “extremely disappointing,” especially for students and their families.
“The amount of failing grades in our K-12 schools have skyrocketed,” Gilbert said. “Children trapped in endless Zoom meetings aren’t just failing to learn — they’re losing hope. The governor has proposed no funding to help parents get the technology or other assistance their children need to succeed in virtual schools.”
Northam also included almost $98 million that the assembly had earmarked in special session this year to provide one-time bonuses of $1,500 for state employees, 1.5% for state-supported local employees and $750 for adjunct faculty at Virginia colleges and universities.
However, the governor remains cautious about spending commitments that the state may not be able to sustain because of the uncertain recovery from a pandemic that hasn’t ended.
Northam wants to deposit $650 million in the state’s cash reserve fund to push the state’s total financial reserves to $1.9 billion, or 8% of the state’s general fund by the time he leaves office in 13 months. The deposit would recover about two-thirds of $900 million in reserve fund deposits the state suspended after the public health emergency upended the budget the General Assembly had adopted in March and triggered a projected revenue shortfall of more than $2.7 billion.
The money for the proposed deposit would “come from one-time cash balances, which is why they should not be used to pay for ongoing programs,” he said. “Instead, putting them in reserves makes sure they’re accessible if revenues don’t grow as quickly as expected so we won’t have to make budget cuts.”
Northam also proposes to spend $100 million to reduce unfunded liabilities for teacher pensions, state retiree health credits and disability payments for emergency first responders, which he said would save the state and local governments money in future years.
Senate Finance Chair Janet Howell, D-Fairfax, likes the governor’s approach.
“I think he’s acting very responsibly in troubling times,” Howell said Tuesday after being briefed on the proposed budget. “He’s being responsibly cautious and focusing on having reserve funds for any ongoing uncertainty.”
Northam expects to recover 45% of the previously projected shortfall, or more than $1.25 billion, thanks to improved collections of taxes on income, sales and deeds as Virginia’s economy relies on high wage earners, a shift to online purchase of goods and a strong housing industry to weather the economic downturn caused by the coronavirus pandemic.
State revenue collections have grown more than 6% in the first five months of the fiscal year that began on July 1, or about $600 million, despite the pandemic.
“Virginia’s economy has held up better than we thought,” Secretary of Finance Aubrey Layne said Tuesday. “We are an anomaly — Virginia is one of the few states that have experienced revenue growth.”
The state’s economic recovery still depends on bringing the pandemic under control. Faced with a Dec. 31 deadline to spend federal CARES Act money and uncertain prospects for additional emergency relief, Northam is proposing to use money from the state’s $46 billion general fund, supported by state taxes for core government services, to pay for distribution of vaccines and other public health measures.
The governor’s proposed budget includes more than $89 million to distribute and administer vaccines against the virus that the federal government will provide for free.
“This is the light at the end of a very long and dark tunnel,” he said. “Vaccines are the only way we can end this pandemic and get back to a more normal life. But to do that, we must vaccinate millions of Virginians.”
Northam also considers the preservation of a half-billion dollars for K-12 education part of the state’s response to the pandemic. State funding of public education is tied to enrollment, so a big drop in students would cost local school divisions money they cannot afford to lose. He also proposes almost $27 million to hire more school counselors to support student mental health and more than $11 million to improve access to prekindergarten programs.
“We want our school systems to come out of this strong,” Mercer said.
In higher education, the budget would restore $36 million in the next fiscal year for his G3 initiative to provide free or reduced community college tuition to low-income and middle-income students in high-demand fields. It also would provide additional operating money for several universities, including $6.1 million for Virginia State University in Ettrick.
Improved sales tax collections have eliminated the need for the state to use $95 million of new gaming revenues to fill a projected hole in sales taxes dedicated to K-12 education, so Northam plans to use the money from a new tax on so-called skill games to help small businesses survive the economic fallout from the pandemic.
The governor’s budget addresses the state’s increased unemployment in the pandemic by providing $10 million to the Virginia Employment Commission to support customer services and $7.5 million to pay for interest on federal loans necessary to keep the unemployment trust fund solvent.
Northam, entering his final year as governor, also is proposing more money for a wide range of progressive priorities, many of which were curtailed because of the public health emergency and drop in state revenues.
His budget includes an additional $25 million to expand the state supply of affordable housing and almost $16 million in rent and mortgage relief that is critical for families potentially facing eviction. He wants to add $15 million to the state initiative for expanding public access to broadband networks for work and learning, which would raise the total state commitment to $50 million a year.
Northam proposes to spend $23 million to enroll more Virginians in the new state-run health insurance marketplace, boost spending for environmental regulation and conservation programs, and use $50 to expand passenger rail service in western Virginia.
The governor already has announced $25 million in what he calls “historic justice initiatives,” including $11 million to redesign Monument Avenue to replace memorials to the Confederacy that fell during a summer of unrest over racial reckoning. Those monuments include a towering statue of Gen. Robert E. Lee that the state is fighting in court to remove from property it owns on the scenic thoroughfare.
Northam wants to give the Virginia Alcoholic Beverage Control Authority a line of credit to establish a new governance structure to oversee legalization of marijuana, a legislative priority that he supports in the upcoming assembly session.
The governor also proposes additional money to carry out criminal justice reforms adopted during the recent special session. The biggest of those is a bill that didn’t pass to expunge criminal records of convictions for certain offenses, including misdemeanor marijuana charges. His proposed budget includes $25 million to support those reforms if the assembly enacts them.
The governor also proposed $5 million to expand the Virginia Court of Appeals from 11 to 15 judges to allow greater opportunity for people to appeal lower court actions, which McDougle, the Senate Republican Caucus chairman, described as a “proposal to pack the Court of Appeals” that he will “adamantly oppose.”
House Appropriations Chairman Luke Torian, D-Prince William, applauded Northam’s proposals to restore some of the spending initiatives cut from the budget the assembly adopted in March and prevent local school divisions from losing money because of the drop in enrollment.
“I think it looks pretty decent right now,” Torian said Tuesday.