Virginia’s top finance official says the state is likely to lose $1 billion in revenue in each year of the pending two-year budget — and that’s the best scenario, assuming significant aid from the federal government for workers and business owners who have lost their livelihoods because of the coronavirus pandemic.
Secretary of Finance Aubrey Layne shared the outlook with 140 state legislators in a conference call Friday, the day before Congress stalemated over a proposed $1.8 trillion emergency aid package. Critics said the measure would do too little to help state and local governments cope with economic damage of the ongoing public health emergency.
Layne based his estimate on a pessimistic scenario considered and rejected by the Governor’s Advisory Council on Revenue Estimates in the fall when state revenue growth appeared to be robust.
The pessimistic alternative would reduce state revenues by about $1 billion in the first year and $2 billion in the second, compared with the standard economic outlook adopted by the advisory group of business leaders and legislators.
The finance secretary hopes to limit the revenue loss to $1 billion a year, as the state attempts to recover from the economic damage it expects the coronavirus crisis to inflict in the coming months.
“That’s probably the most realistic option for us right now,” he said in an interview on Monday. “That’s probably the best case.”
However, Layne and other state officials are counting on substantial help from the federal government, especially direct financial aid to affected workers and businesses.
“We’ve got to prioritize our public health and core services,” he said. “A lot of it depends on what we get from the feds.”
Layne added, “I favor direct payments to workers.”
Sen. Janet Howell, D-Fairfax, chairwoman of the Finance and Appropriations Committee, said her panel is working closely with the Northam administration and the House Appropriations Committee to identify how to absorb the revenue loss without damaging core state services.
“We’re making all kinds of contingency plans and looking at programs that could be cut that do the least harm to people,” she said in an interview on Monday.
Howell said Virginia is in a better position than some states because it has close to $2 billion in combined reserves, thanks to the response of the General Assembly and governor to a warning shot from S&P Global Ratings three years ago about the state’s low reserves.
Northam has already delayed the deadline for state income tax payments from May 1 to June 1 and waived any penalties. Virginia also has deferred remittance of sales tax revenues collected the previous month.
Although some legislators have called for a special session to deal with the economic fallout of the health crisis, Howell sees no sense in physically convening in Richmond amid a fast-spreading pandemic.
“I don’t think there’s any gain for us to get together and give the disease to each other,” she said.
As the assembly nears the scheduled date for its one-day veto session on April 22, “we’ll have to make some difficult decisions,” she said.
At the end of the extended legislative session on March 12, Howell argued against delaying action on the two proposed budgets — one for the current fiscal year and the other for the next two years — as some Republican budget negotiators had urged.
However, she said Monday that she remains committed to working closely with GOP colleagues on the budget conference committee to plan for the expected drop in revenues.
Howell also is saddened by the sudden change in fiscal outlook in her first year as head of the finance committee.
“I came home so proud of the budget,” she said ruefully.