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Virginia budget negotiators reach deal
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Virginia budget negotiators reach deal

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It has taken almost as long as a regular 60-day session of the General Assembly, but budget negotiators have reached agreement on revisions to the two-year spending plan that appear not to cross lines that Gov. Ralph Northam had drawn for a budget bill he would be willing to sign in the face of economic uncertainly in a public health emergency.

The agreement was negotiated primarily by a group of six House and Senate members who have been meeting privately to resolve differences between the two spending plans adopted by the chambers, which formally appointed negotiators on Wednesday afternoon shortly before announcing the deal.

The compromise was posted online at 5:30 p.m. Wednesday, setting the stage for a potential final vote on the budget late Friday or Saturday under House rules require that the budget agreement become publicly available at least 48 hours before a vote.

“Given the challenges we faced with COVID-19, we believe the budget is good for the Virginia economy,” House Appropriations Chairman Luke Torian, D-Prince William, said on Wednesday night.

Adoption of the budget would allow the assembly to recess the special session, rather than adjourn it, to give Northam the opportunity to submit language to guide a new independent redistricting commission if voters approve a constitutional amendment on Nov. 3 to establish it.

The agreement includes money to carry out criminal justice and police reforms enacted by the assembly in response to public protests during the summer over police mistreatment of Blacks and other minorities. It also includes a $500 bonus for law enforcement officers and almost $7.5 million for local police departments to recruit and retain officers.

State worker bonus

It also includes almost $98 million in funding, contingent on revenues in the current fiscal year ending June 30, 2021, to provide a $1,500 bonus to state and state-supported local employees, and directs the governor to propose a “salary increase incentive” for teachers in the second year of the budget if revenues are sufficient to pay for it.

The proposed bonus and teacher salary plan appear to be the only contingency funding in the budget agreement. Northam had warned General Assembly leaders against including hundreds of millions in contingent spending, as they did in the House and Senate budgets, that would have used unappropriated revenues that he wants to save in case of a future economic downturn triggered by the COVID-19 pandemic.

“We made every effort to address his concerns,” Torian said.

Secretary of Finance Aubrey Layne said Wednesday night that, after preliminary review of the agreement, “It looks like they really backed off the contingency spending, which would have been problematic.”

“We appreciate them moving toward the governor’s positions,” Layne said.

The governor had proposed to cut more than $2 billion in new spending included in the budget the General Assembly approved on March 12. That was before the public health emergency nearly shuttered Virginia’s economy, reduced state revenues by more than $232 million in the last fiscal year, and led to a projected $2.8 billion gap that he called the special session to close.

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Health spending

The proposed budget agreement would restore about $75 million in spending on behavioral health initiatives that the Senate had sought — including plans to release people from state mental hospitals when they’re clinically ready to leave, and expand community mental health services statewide under the STEP-VA plan.

It includes $17.5 million to give adults a dental health benefit under Medicaid and almost $13 million for overtime pay to personal care attendants who care for Medicaid recipients in their homes.

Schools

The compromise also would restore $37.3 million for Virginia’s early childhood education programs and $35.2 million for schools, including many in Richmond, that are eligible for at-risk add-on funding because of the concentration of low-income students. And it would include about $80 million for colleges and universities, most of it to control tuition and make higher education more affordable, a priority for Torian and the House.

Assembly budget negotiators did not dip into the state’s reserve funds, but instead substituted an $89 million deposit to the cash reserve fund in the first year for a scheduled deposit in the Rainy Day Fund in the second. The maneuver would make the money more easily accessible in a modest economic downturn than it would be in the Rainy Day Fund, which is established and constrained by the Constitution of Virginia.

The agreement also includes compromise language on moratoriums on housing evictions and utility disconnections during the pandemic, which has threatened some of Virginia’s most vulnerable residents.

September revenues

The agreement came the same day that Northam announced a 7.6% increase in state revenues in September, compared with the same month a year ago. The September results were buoyed by an additional day of income tax payroll collections compared with a year ago, but revenues have grown almost 10% in the fiscal year that began on July 1.

State tax collections for the first quarter of the fiscal year are $570 million above the revised revenue forecast that Northam issued on Aug. 18 at the beginning of the special session and $482 million above the forecast adopted last year.

“Virginia’s general fund revenues are increasing, and we have been able to avoid the major revenue shocks that other states are experiencing because of the ongoing pandemic,” Northam said on Wednesday. “This is the result of the proactive measures we have taken to mitigate the impacts of the virus on our economy and put the commonwealth on the path toward a strong recovery.”

The $46 billion general fund budget relies on income, sales and other state tax revenues to pay for core services such as education, public safety and the state’s share of health care costs.

Layne urged legislators to “steady the course” to limit new spending commitments unless Congress acts on additional federal stimulus funding to support the economy until a vaccine is ready to end the COVID-19 pandemic.

“I don’t think we can count on this kind of growth without additional stimulus unless we get a vaccine and things go back to normal,” he said hours before they reached a budget agreement.

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