General Assembly Approves Budget Compromise; Bills Await Governor’s Action

The state budget process advanced toward completion on June 1 as the General Assembly approved compromise conference reports on both the FY 2022 “caboose” budget and the 2022-2024 biennium budget.  General Assembly leadership indicated that the bills will be signed and submitted to the Governor within the next several days; the Governor will then have seven days to suggest amendments or veto specific items.  The legislature will return later in the month if needed to consider any gubernatorial actions on the budget.

The large infusion of revenues into state coffers allowed the legislature to make significant deposits to the state’s reserves and the Virginia Retirement System, as well as providing across-the-board and targeted compensation increases.  Budget negotiators also fashioned a compromise that provides approximately $4 billion in tax relief, including a significant increase in the standard income tax deduction, one-time income tax rebates, a phased-in income tax subtraction for a portion of military benefits, partial refundability of a state earned income tax credit, and elimination of the accelerated sales tax requirement for businesses.  Of particular importance to local governments, the budget conference report eliminates the state portion of the sales and use tax on food for home consumption and essential personal hygiene products, effective January 1, 2023, and replaces the revenue distribution that would have otherwise been made to localities based on school-age population.  The 1 percent local option portion remains in place.

The budget agreement makes significant investments in county priorities such as school capital needs, K-12 staffing, and behavioral health.  An overview of key items of interest to local governments follows below:

K-12 Education

• Provides $109.3 million GF in FY 2023 and $162.3 million GF in FY 2024 to increase the number of recognized support positions. Since FY 2010, funded support positions have been calculated as a linear weighted average of support positions to funded SOQ instructional positions as reported by divisions. This would increase the funded ratio from 17.75 support positions per 1,000 students to funded SOQ instructional positions to 20 support positions per 1,000 ADM to funded SOQ instructional positions in the first year, and 21 support positions per 1,000 ADM to funded SOQ instructional positions in the second year.  This increases state support for support positions and partially removes the funding cap placed on support positions beginning in fiscal year 2010.  Removal of the funding cap has been a long-held priority for VACo.  (Item 137 #10c)
• Maintains $177.1 million GF in FY 2023 and $177.4 million GF in FY 2024 from the introduced budget to hold divisions harmless for rebenchmarking data. VACo is appreciative that rebenchmarking considers the unusual nature of K-12 costs during the pandemic.
• Provides $10 million GF in FY 2023 and $10.3 million GF in FY 2024 for the state share of one school principal position per elementary school. Current law provides that elementary schools with fewer than 300 students are provided a half-time principal position; however, many localities staff beyond the current required ratio.  VACo supports state funding for education costs aligned with prevailing local practice. (Item 137 #5c)
• Establishes the School Construction Assistance Program and provides $400 million GF and $50 million from the Literary Fund in FY 2023 to provide competitive grants for school construction and modernization, based on demonstrated poor building conditions, commitment, and need. Grants would cover 10% to 30% of reasonable project costs, depending on a locality’s local composite index and fiscal stress score. VACo supports additional state resources for school construction costs.  (Item 137 #15c)
• Funds the School Construction Grant Program at $400 million in FY 2023. Provides $1.0 million base funding to each school division with remaining funds distributed based on weighted March 2022 ADM.  Language allows funds to be used for debt service payments on projects that have been completed or initiated in the last ten years.  Funds are not to be used for parking lots or facilities for extracurricular athletic activities.  Funds unexpended at the end of FY 2023 or FY 2024 are to be carried on the locality’s books in escrow.  VACo supports additional state resources for school construction costs. (Item 137 #2c)
• Maintains increases in school construction loans from the Literary Fund by implementing recommendations of the Department of Education and the Department of the Treasury to make Literary Fund construction loans more competitive and attractive to school divisions as a viable source for funding school construction projects. Replaces Literary Fund dollars in FY 2022 and in both years of the biennium that would otherwise have supported teacher retirement contributions with General Fund dollars, thus enabling the Board of Education to offer up to $200 million in FY 2023 and up to $200 million in FY 2024 from the Literary Fund. Modifies the loan program to increase the maximum project amount to $25.0 million; benchmarks interest rates to the market with the rate capped at 2.0 percent for divisions with a LCI less than 0.3000; and offers a loan add-on for projects that result in school consolidation.
• Removes $25,000 Literary Fund closing cost grants.  This amendment also eliminates subsidy grants from the $200 million per year that the Board of Education may issue. This was $200 million in loans or subsidies per year, but now is only loans. (Item 137 #16c)
• Provides clarification that the Required Local Effort for Infrastructure and Operations Funds shall include local funds used for nonrecurring expenses. Funds may also be used for projects initiated but not yet completed. Any funds unexpended at end of FY 2023 or FY 2024 are to be carried on the locality’s books in escrow.  (Item 137 #3c)
• Allows local funds for nonrecurring expenses to be counted towards required local effort for Infrastructure and Operations Funds. (Item 145 #1c, in the caboose)
• Provides $132,932 GF/year for the Department of Education to develop a data collection tool to determine the age of school buildings and maintenance reserve funds needed pursuant to Chapter 650, 2022 Acts of Assembly.  (Item 135 #1c)
• Increases the At-Risk Add-On maximum from 26% to 36% in FY 2023. The introduced budget proposed establishing the maximum add-on at 49.5% in FY 2023. This amendment captures $123 million in FY 2023. This funding allocates additional dollars to school divisions with high concentrations of students living in poverty. (Item 137 #9c)
• Provides $100 million GF in FY 2023 for college partnership lab schools. A “college partnership laboratory school” means a public, nonsectarian, nonreligious school in the Commonwealth established by a baccalaureate public institution of higher education. The amendment further requires the Board of Education to establish CPLS Fund guidelines before the release of funds and reverts any unobligated funds at the end of the 2022-24 biennium to the general fund. Final action on legislation regarding college partnership laboratory schools is still pending. (Item 137 #20c)
• Backfills funding for the school-age population distribution as a result of the elimination of the state portion of the grocery tax ($104 million GF in FY 2023 and $257.2 million GF in FY 2024). These payments are distributed to localities based on the estimate of school age population consistent with sales tax. The funding for this amendment is fully contained within the introduced budget since the introduced budget contained a hold harmless payment for the loss in dedicated K-12 sales tax from exempting food after the Basic Aid offset and contained the entire distribution of sales tax from essential personal hygiene products. (Item 137 #12c)
• Provides $30.8 million GF in FY 2023 and $31.6 million GF in FY 2024 for the state share to provide one reading specialist for every 550 students in kindergarten through third grade, and provides flexibility for school divisions to employ other instructional staff working toward obtaining the training and licensure requirements prescribed in HB 319 (Coyner) that will become effective in the 2024-2025 school year. This amendment also eliminates $31.5 million the first year and $31.6 million the second year that was included in the introduced budget to expand Early Reading Intervention from kindergarten through third grade to kindergarten through fifth grade. (Item 137 #25c)
• Provides $4.9 million GF in FY 2023 and $4.6 million GF in FY 2024 for implementation of the Virginia Literacy Act, which makes several changes relating to early student literacy, including, among other provisions, requiring each local school board to establish a division wide literacy plan; each local school board to employ one reading specialist for each 550 students in kindergarten through grade three, among other provisions.  (Item 129 #6c)
• Reduces proposed funding for English Learner (EL) teacher ratio by $10.3 million GF in FY 2023 and $11.7 million GF in FY 2024. This maintains the current EL teacher ratio of 20 such teachers per 1,000 identified EL students. The introduced budget proposed increasing the staffing standard to 22 EL teachers per 1,000 EL students. (Item 137 #4c)
• Provides $1.5 million GF in FY 2023 for educator workforce initiatives to increase the supply of qualified educators and support educator recruitment and retention efforts. These funds can support provisionally licensed staff to receive a full teacher licensure, professional development, and mentoring for early career teachers. (Item 136 #22c)
• Provides $28,040 GF in each year of the biennium to fund the School Health Services Committee created by enactment of SB 62 (Favola), which will review and provide advice to the General Assembly and other policy makers regarding proposals that require local school boards to offer certain health services in a school setting. (Item 1 #2c)
• Directs JLARC to review the cost of competing adjustment (COCA) as part of its review of SOQ standards and funding. (Item 36 #4c)
• Provides $1.7 million GF in FY 2023 for one-time support to Accomack and Northampton for teacher recruitment and retention efforts. (Item 137 #11c)
• Removes Accomack and Northampton from the cost of competing adjustment (COCA) as was proposed in the introduced budget and captures $3.7 million GF in each year of the biennium. (Item 137 #17c)
• Provides $150,000 GF in each year of the biennium to the Weldon Cooper Center for Public Service to fund additional demographic review of K-12 enrollment trends. (Item 195 #3c)

Compensation

• Retains funding in the introduced budget for the state’s share of a 5 percent salary increase in each year of the biennium for SOQ-recognized instructional and support staff. School divisions must provide salary increases of at least 2.5 percent in each year of the biennium to draw down state funds.  Language in the conference report requires school divisions to certify that local matching funds for salary increases are derived from local sources.  The conference report adjusts the timing of the salary increase so that it takes effect August 1, consistent with other salary actions in the budget.  (Item 137 #13c)
• Directs $124.7 million in ARPA funds for a one-time bonus of $1000 on December 1, 2022, for SOQ-recognized instructional and support positions. No local match for these funds is required.  (Item 137 #23c and Item 486 #21c)
• Provides for salary increases for state employees of 5 percent per year (except employees who are receiving targeted salary increase at or above 7.5 percent in FY 2023, who will receive increases of 2.5 percent in FY 2023 and 5 percent in FY 2024); also provides similar salary increases for Constitutional officers and state-supported local employees, beginning August 1, 2022. (Item 483 #3c)
• Provides $66.5 million GF in FY 2023 for a $1000 bonus for state employees on December 1, 2022. (Item 483 #4c)
• Includes several targeted compensation actions, including:
  • Directs $10 million in ARPA funding in FY 2023 for teacher recruitment incentive payments. (Item 486 #10c)
  • Accepts introduced budget’s proposal to increase the entry-level salary of sworn deputy sheriffs and regional jail officers to $42,000; adjusts funding to reflect an effective date of August 1, 2022. (Item 72 #3c).  Retains funding in the introduced budget ($15.6 million over the biennium) for a compression adjustment for sworn personnel with three or more years of service.
  • Provides $4 million GF in FY 2023 and $4.4 million GF in FY 2024 to increase salaries for general district court and juvenile and domestic relations court clerks by $2000, effective July 10, 2022 (for August 1 payday). Retains $7.8 million per year in introduced budget for additional general district court clerk positions, salary increases for general district court clerks, or a combination of the two.  (Item 45 #1c)
  • Retains $3.9 million GF in FY 2023 and $4.1 million GF in FY 2024 to implement the Office of the Executive Secretary of the Supreme Court’s magistrate retention plan; directs the Executive Secretary to report on the allocation of these funds and their effectiveness at addressing workforce challenges by October 15, 2023. Conference report adjusts the effective date such that the compensation initiative takes effect July 10, 2022 (for the August 1 payday), consistent with other compensation actions in FY 2023.  (Item 48 #1c)
  • Includes $1.3 million GF in FY 2023 and $1.5 million GF in FY 2024 for a $1250 salary increase for all circuit court employees, effective August 1, 2022. (Item 77 #1c)
  • Reduces funding in introduced budget for Department of Corrections correctional officers’ compensation by $15.5 million in FY 2023 and $13.1 million in FY 2024 to set the starting salary for correctional officers at $42,000 (equal to the level for deputy sheriffs and regional jails) rather than $44,000, as included in the introduced budget. Remaining funding addresses compression issues and increases salaries for supervisory ranks.  (Item 402 #2c).  Provides $3.3 million GF in FY 2023 and $3.6 million GF in FY 2024 for a $3000 salary increase for probation and parole officers; directs the Department to conduct a review of staffing levels, employee compensation, and employment conditions, and report by October 1, 2022.  (Item 399 #3c)
  • Reduces the salary increase for direct care staff at state hospitals that was included in the introduced budget from the 75th percentile of market rates to the 50th percentile. Language directs DBHDS to assess the effectiveness of the compensation actions in reducing vacancies and turnover in the state hospital system.  (Item 318 #1c).  Amendments in Item 323 #1c and Item 328 #1c take similar actions on compensation increases for staff at training centers and at the Virginia Center for Behavioral Rehabilitation.
  • Directs DBHDS to collect information on CSB employee compensation to assist in developing a compensation proposal for the 2023 session. (Item 311 #9c)
  • Retains the compensation plan for sworn positions in the Virginia State Police in the introduced budget; the plan addresses pay compression and increases the starting salary for newly-hired troopers from $47,843 to $51,500. Adjusts the funding levels to reflect a July 10 effective date.  (Item 431 #1c)

Judiciary/Public Safety

• Provides $500,000 GF in FY 2022 to contract with the National Center for State Courts to evaluate judicial caseloads; a report is due October 15, 2023. (Item 39 #2c, caboose)
• Directs the Commission on the Virginia Alcohol Safety Action Program to review its organizational and financial structure and develop recommended actions needed to achieve long-term fiscal stability. This amendment addresses VACo’s concerns about earlier language considered during the budget process which would have required localities to contribute to the operating costs of these organizations; a study is a preferable approach.  (Item 3 #1c)
• Provides $859,920 GF per year to the Indigent Defense Commission for eight positions to address workload increases; directs the Commission to convene a workgroup to assess the feasibility of creating an Appellate Defender Office. (Item 51 #1c).  Provides $100,000 GF in FY 2023 for JLARC to contract for a study of the feasibility and costs of a statewide system of public defender officers and the staffing and pay associated with court-appointed legal counsel and defense.  Legislation that would have required localities to provide pay supplements to public defenders’ offices commensurate with supplements for Commonwealth’s Attorneys’ offices was incorporated in the bill sent to JLARC to study.  (Item 36 #2c)
• Provides an additional $22.5 million GF per year for School Resource Officer incentive grants; language waives local matching requirements in the first year. (Item 408 #2c)
• Provides $13 million over the biennium for grants supporting violence intervention and prevention. (Item 408 #5c)
• Provides an additional $500,000 GF per year for local pretrial services and community corrections. (Item 408 #7c)
• Increases funding for aid to localities with police departments (“HB 599”) by $19.1 million GF in FY 2023 and $27.9 million GF in FY 2024. VACo worked with partner organizations in support of additional funding for this program, which is statutorily required to increase along with the growth in the General Fund, but was level-funded in the introduced budget. (Item 410 #1c)
• Dedicates $75 million in American Rescue Plan Act (ARPA) funding in FY 2023 for one-time grants to state and local law enforcement, with at least $60 million directed to local law enforcement. (Item 486 #4c)
• Directs the Department of Juvenile Justice to review staffing levels, compensation, vacancies, and turnover rates, including an analysis of the impact of reductions in census levels on staffing requirements. (Item 428 #1c)
• Provides $10 million GF in FY 2023 and $5 million GF in FY 2024 for cybersecurity initiatives identified by the Secretary of Administration; funds are to remain unallotted until a report is submitted to the Governor and the “money committee” chairs detailing planned use of funds. (Item 484 #2c)

Administration – Compensation Board (Constitutional Officers and Jails)

• Provides $7.3 million in FY 2023 and $9.9 million in FY 2024 for 125 new behavioral health case manager positions and 127 partially-funded medical/treatment positions to assist local and regional jails to comply with behavioral health standards that are in the process of being implemented. The introduced budget provided $18 million in the first year and $19.7 million in the second year; the conference report would phase in this new staffing.  Language directs the Compensation Board to report on the implementation of these positions.  VACo has worked with advocacy partners to support state assistance with the resources that will be required to comply with the behavioral health standards.  (Item 72 #1c)
• Increases the per diem rate for state-responsible inmates by $3/day (provides $4.6 million in FY 2023 and $7 million in FY 2024 for this purpose). VACo has worked with advocacy partners for the last several years in support of per diem increases.  (Item 73 #1c)
• Language provides clarification regarding ordering of sheriffs’ deputies for courtroom security. (Item 72 #2c)
• Retains $1.6 million over the biennium included in the introduced budget to support participation in Constitutional officers’ career development programs.
• Retains additional $978,476 GF per year for Clerks’ operating budgets included in the introduced budget to replace the Technology Trust Funds that had been used to support operating costs.
• Restores $673,767 GF in FY 2023 and $735,018 GF in FY 2024 in state funding for Compensation Board-allocated positions in Commissioners’ offices that were previously de-funded. (Item 75 #1c)
• Restores $165,667 GF in FY 2023 and $180,728 GF in FY 2024 in state funding for 120 underfunded deputy treasurer positions. (Item 78 #1c)

Administration – Elections

• Provides $2.2 million GF in FY 2023 for voter notification mailings to all registered voters regarding new districts as a result of redistricting. VACo supported this funding.  (Item 89 #1c)
• Unallots $1.1 million in balances that would otherwise be used for reimbursing localities for postage costs associated with providing prepaid postage with absentee ballots. (Item 86 #1c in the caboose).  The conference report removes language regarding reimbursement for prepaid postage for absentee ballots in the biennium budget as well.  (Item 89 #4c)
• Eliminates funding included in the introduced budget in the second year to reimburse localities for 2024 presidential primary expenses (Item 485 #2c)

Agriculture and Forestry

• Eliminates proposed increase of $2.5 million GF per year for the Virginia Farmland Preservation Fund that was included in the introduced budget. (Item 98 #1c)
• Reduces proposed increase to the Agriculture and Forestry Industries Development Fund by $1.5 million GF in FY 2023 and $500,000 GF in FY 2024 (for a net increase of approximately $900,000 over the biennium). (Item 99 #1c)
• Reduces proposed new funding for an invasive species detection program by $300,000 GF/year (funds at $300,000 GF in FY 2023 and $275,000 GF in FY 2024). (Item 100 #1c)
• Capitalizes the newly-created Forest Sustainability Fund with $1 million GF in FY 2023, consistent with legislation passed during the 2022 session that provides for reimbursements to localities for revenue forgone due to the placement of real estate devoted to forest use in a use value assessment program. VACo supported this legislation.  (Item 108 #1c)
• Eliminates proposed $3 million GF per year in supplemental funding for grants to localities for local tree planting and maintenance. (Item 108 #2c)
• Directs the Department of Forestry to prepare an assessment of the environmental benefits of Virginia’s forests and its forest economy. (Item 108 #4c)

Economic Development/Workforce

• Provides $2.5 million GF in FY 2022 for grants to GO Virginia regions to identify and address business needs for workers in regional industry clusters. (Item 114 #1c in the caboose).  Language in the biennium budget directs the Department of Housing and Community Development to continue the program.  (Item 115 #3c)
• Directs $130 million in ARPA funds to the Rebuild Virginia program in FY 2022. (Item 479.20 #4c in the caboose; Item 486 #36c transfers $100 million from the biennium to the caboose)
• Provides $75,000 GF in FY 2023 for a comprehensive review of workforce development in the state. Directs the Governor to designate a member of the Executive Branch to be an advisor on health workforce development.  (Item 55 #1c)
• Provides $54.5 million GF per year for the Virginia Business Ready Sites Program Fund, with direction to the Virginia Economic Development Partnership to consider investing funds in sites over 1,000 acres and smaller sites of at least 50 acres concentrated in GO Virginia Regions 1 and 2. Allows reimbursement to localities, without a local match requirement, for fees associated with rezoning land for the purpose of building a portfolio of strategic economic development sites.  (Item 113 #3c)  Earmarks an additional $50 million for deposit to the Fund from FY 2022 surplus dollars.  (Item 485 #7c)
• Removes proposed increase of $1.5 million GF per year for the Virginia Main Street Program in the introduced budget. (Item 115 #10c)
• Earmarks $200,000 GF per year for the Lenowisco and Cumberland Plateau Planning District Commissions for economic development efforts that align with federal funding opportunities. (Item 115 #11c)
• Reduces proposed increase for Enterprise Zone Grant Program by $2 million GF/year (the introduced budget included an increase of $3.7 million per year). (Item 116 #1c)
• Eliminates the $30 million proposed in the introduced budget for the Solar Loan and Rebate Program. (Item 121 #1c)
• Reduces proposed funding increase for the Regional Innovation Fund by $2 million per year (leaving an increase of $1 million per year). (Item 127 #6c)
• Provides $16 million GF in FY 2023 and $17 million GF in FY 2024 for workforce development training. (Item 487.50 #1c)

Broadband

• Includes language allowing public broadband authorities to apply directly for Virginia Telecommunication Initiative (VATI) funds without investment by the private sector, with a cap of 10 percent of total available funding in any fiscal year. (Item 115 #1c)
• Includes an annual reporting requirement for VATI grant awards. (Item 115 #7c)

Housing/Community Development

• Deposits an additional $40 million over the biennium into the Virgina Housing Trust Fund (the introduced budget proposed an additional $190 million over the biennium). Language authorizes the Governor to transfer funding from Housing Trust Fund to the General Fund if Virginia Housing Opportunity Tax Credit claims exceed revenue loss assumptions.  (Item 114 #3c)
• Directs the Department of Housing and Community Development (DHCD) to assess the feasibility of using Housing Trust Fund resources to develop manufactured home parks as a source of affordable housing. (Item 114 #4c)
• Directs DHCD to convene a workgroup to develop model guidelines for the creation of a program to provide long-term rental assistance to low income, very low income, and extremely low income renters to enable them to afford housing costing 30 percent of their income. (Item 114 #7c)

Education – Child Care/Early Childhood

• Directs the Department of Education to maximize Child Care Development Funds (CCDF) to eliminate the waitlist for child care subsidy and to maintain expanded income eligibility requirements for the biennium, which would otherwise expire May 31. (Item 129 #5c)
• Removes $1.1 million GF/year for the grow-your-own licensed early childhood educator program. (Item 136 #23c)
• Maintains from the introduced budget $13.7 million GF in each year of the biennium to rebenchmark the Virginia Preschool Initiative per pupil amount in a manner similar to the rebenchmarking formula for K-12.
• Maintains from the introduced budget $6.1 million GF in FY 2023 and $13.4 million GF in FY 2024 to expand access to Virginia Preschool Initiative for three‐year‐old children on a competitive basis and subject to available appropriation.

Aid to Local Public Libraries

• Provides $2.5 million GF/year in aid to local public libraries. Language states that it is the objective of the Commonwealth to fully fund the formula for state aid to local libraries, with phase-in complete by FY 2026.  (Item 240 #1c)

HHR – Adult and Aging Services

• Directs the Secretary of Health and Human Resources to continue the workgroup on aging services established during the 2021 session; adds legislators and other stakeholders to the workgroup. (Item 283 #2c)
• Provides $250,000 GF in FY 2023 for the Department of Aging and Rehabilitative Services to determine the potential cost of addressing unmet needs for in-home services and home modifications provided by Area Agencies on Aging and local departments of social services. (Item 331 #1c)
• Retains funding in the introduced budget for five regional positions to support additional oversight of adult protective services being provided by local departments of social services ($599,207 GF per year).
• Retains proposed funding in the introduced budget of $2.7 million GF in FY 2023 and $2.6 million GF in FY 2024 for additional public guardianship slots.

HHR – Children’s Services Act

• Provides an additional $500,000 GF per year for local administrative costs for CSA. VACo and advocacy partners requested an increase in these resources, which are currently funded at $2.1 million per year and have not been increased since FY 2017.  (Item 284 #1c)
• Delays the implementation of rate setting for private special education day placements by one year (until July 1, 2023); directs the Office of Children’s Services to use the first year funding to develop a fiscal impact estimate of rate changes on expenditures. (Item 285 #1c)

HHR- Health

• Maintains the $8.5 million included in the introduced budget over the biennium to complete the three-year phase-in of updates to local match rates for the local health department funding formula.
• Maintains the $878,435 GF/$650,411 NGF in FY 2023 and $892,559 GF/$661,967 NGF in FY 2024 in the introduced budget for rent increases for local health departments.
• Maintains $482,400 GF in the introduced budget in FY 2022 to reallot state matching dollars for Drinking Water State Revolving Fund projects. Provides an additional $3 million GF in FY 2023 in state matching funds.  (Item 296 #1c)
• Reduces proposed comprehensive harm reduction funding by $620,000 GF in the second year (resulting in additional funding of $1.1 million per year). (Item 291 #1c)
• Retains funding in the introduced budget to consolidate small community waterworks ($1 million GF per year).
• Retains $800,00 GF in FY 2023 and $300,000 GF in FY 2024 for the Virginia Health Workforce Development Authority. The first year funding includes $500,000 for a workgroup to study primary care workforce issues and potential solutions, including loan forgiveness programs.  The conference report adds $100,000 GF in FY 2023 to support an expanded review of nursing education programs.  (Item 292 #2c)
• Funds the newly-established Joint Subcommittee to Examine the Commonwealth’s Pandemic Response ($178,400 GF/year). (Item 6 #4c)

HHR- Behavioral Health

• Retains $2 million GF in FY 2022 in the introduced budget for the operations of crisis assessment centers that have converted into crisis receiving center (which offer a broader array of services).
• Retains $4.2 million GF in FY 2022 in the introduced budget for overtime costs at state hospitals.
• Retains provisions in the introduced budget to use $9 million GF in FY 2022 in one-time funds to continue temporary staffing contracts to address staffing shortages at state behavioral health facilities.
• Retains $3 million GF in the introduced budget in FY 2023 for a contract with the Virginia Health Care Foundation for a pilot project to remove barriers to the mental health workforce, including the payment of supervision costs for individuals seeking degrees in social work or counseling.
• Retains $1.9 million GF per year in the introduced budget for the remaining costs of the contract for alternative transportation of individuals under a Temporary Detention Order to ensure 24/7 coverage statewide.
• Modifies proposal to direct the Department of Behavioral Health and Developmental Services, in consultation with affected stakeholders, to create a plan to provide alternative custody options for individuals under temporary detention orders to require that a plan be implemented. Adds $2 million GF in FY 2023 to the $3.4 million GF in FY 2024 in the introduced budget to implement the plan’s recommendations. (Item 312 #9c)
• Retains $1.65 million GF in FY 2024 in the introduced budget to continue a pilot program for individuals with dementia who may otherwise be admitted to a state facility (the pilot program is funded through American Rescue Plan Act State Fiscal Recovery Fund dollars in FY 2023).
• Retains $1 million GF per year in the introduced budget for regional dementia behavioral specialists to provide training and consultative services and support.
• Retains $3.7 million GF in FY 2023 and $3.3 million GF in the introduced budget in FY 2024 for discharge assistance planning (funding in the first year includes the costs of a contract to study and implement rates for services provided with these funds, as well as the costs of information technology for tracking these funds).
• Retains $11.25 million GF in FY 2023 and $19.1 million GF in FY 2024 in the introduced budget for permanent supportive housing ($2.5 million per year of this funding is set aside for individuals with serious mental illness residing in Northern Virginia).
• Retains $1.1 million GF in FY 2023 and $2.7 million GF in FY 2024 in the introduced budget for the state rental assistance program for individuals with intellectual or developmental disabilities.
• Retains $2 million GF in FY 2023 and $22 million GF in FY 2024 in the introduced budget for crisis services, including support for the expansion of Crisis Intervention Team Assessment Centers or Crisis Stabilization Units into 23-hour crisis receiving or observation centers. $20 million in ARPA Fiscal Recovery Funds supports these efforts in FY 2023. Conference report adds $2.5 million in FY 2023 for start-up costs for crisis receiving centers in three regions (Item 312 #2c, Item 312 #4c, Item 312 #5c) and designates an allocation for funding necessary to implement a crisis receiving center in the Region 2000 area (Item 313 #3c).
• Reduces proposed increase to the Virginia Mental Health Access Program to provide $2.9 million over the biennium (rather than $2.9 million per year, as introduced). This program expands access to mental health services for children.  (Item 312 #8c)
• Retains appropriation of $1.7 million per year from the Crisis Call Center Fund (generated by a surcharge on wireless service charges enacted in 2021) for costs associated with the establishment and operation of the 988 Crisis Call Center. In addition to serving as the National Suicide Prevention Lifeline (988 will be the new federally-designated number to reach these resources, effective in July 2022), the call center is envisioned to be a key element of the Marcus Alert system for resolution of low-acuity calls for service and an avenue for access to behavioral health supports in times of crisis.
• Retains $3 million GF per year in the introduced budget to continue the phased implementation of the Marcus Alert system (each local or regional implementation area will receive $600,000 per year).
• As proposed in the introduced budget, funds the remaining three services in STEP-VA, as well as funds for local infrastructure and regional management ($22.2 million in FY 2023 and $28.3 million in FY 2024 and $4.7 million NGF in FY 2023 and $7.5 million NGF in FY 2024 from 988 call center funding). Conference report uses $22.2 million in ARPA funding in the first year instead of GF dollars (Item 313 #4c).
• Retains introduced budget funding of $650,000 GF per year to expand and provide additional support to existing mental health dockets.
• Retains $5 million GF in FY 2024 in the introduced budget for substance use disorder-specific training of the intellectual disability and developmental disability provider workforce, the development and implementation of substance use disorder services specific to transition-age youth (up to age 25), and additional substance use disorder services related to the COVID-19 pandemic. Funding in the first year is provided through American Rescue Plan Act State Fiscal Recovery Fund dollars.
• Reduces proposed funding increases for grants to members of the Virginia Association of Recovery Residences to provide an increase of $1.2 million per year (rather than $2.2 million as introduced). (Item 312 #7c).  Directs DBHDS to monitor credentialed recovery homes for regulatory compliance and to consult with the Virginia Association of Recovery Residences to keep the agency’s public website’s list of credentialed recovery homes up to date.  (Item 312 #1c)
• Directs the Behavioral Health Commission to study how to maximize school-based mental health services, to include forming a stakeholder task force; a report is due December 1, 2023. (Item 33 #1c)
• Provides up to $25 million in FY 2023 to defease outstanding bonds at the Central Virginia Training Center. (Item 280 #2c)
• Directs the Secretary of Health and Human Resources to establish a workgroup to review the current structure of DBHDS and make recommendations on modifications to the department’s structure that improve the delivery of behavioral health and developmental disability services. Provides $750,000 GF in FY 2023 for a feasibility study of transforming Catawba Hospital into a campus at which a continuum of substance abuse treatment and recovery services are provided.  (Item 283 #1c)
• Provides $2.9 million GF per year to support Community Services Boards commensurate with the 12.5 percent increase in Medicaid reimbursement for Part C Early Intervention services for children that have Medicaid. This funding accounts for Part C Early Intervention services provided to infants and toddlers who do not have Medicaid as a funding source.  (Item 313 #2c)
• Expands eligible uses of the existing $3.7 million per year in jail discharge assistance planning funds (allowing use of emergency client assistance resources) and strikes the current limit on the number of jails where the funds may be used. (Item 313 #5c)

HHR- Medicaid

• Directs the Secretary of Health and Human Resources to establish a Task Force on Eligibility Redetermination to evaluate the state’s plan for the redetermination that will be required at the end of the federal Public Health Emergency. Allows use of ARPA funds for operational costs, including overtime for local departments of social services or emergency contracts.  Clarifies that ARPA funding provided in the introduced budget for operational backlogs at the Department of Medical Assistance Services (DMAS) may be used for IT system changes and overtime costs at local departments of social services. (Item 313 #1c and Item 479.20 #6c in the caboose; Item 283 #3c in the biennium contains similar language regarding the Task Force, with the addition of a reporting requirement)
• Removes funding in the introduced budget to provide managed care coordination services to incarcerated individuals 30 days prior to release. Language instead requires Medicaid managed care organizations to conduct a video or telephone conference to establish a transition plan during that same period with the individual.  (Item 304 #8c)
• Provides $4 million GF and $4.2 million NGF per year to adjust per diem rates for Psychiatric Residential Treatment Facilities; language authorizes DMAS to rebase rates every three years, beginning July 1, 2023. (Item 304 #20c)
• Delays adding developmental disability waiver slots in the second year to reflect limited capacity in the provider network. The introduced budget includes 600 new slots each year; the conference report maintains 600 slots in the second year. (Item 304 #7c).  Directs DBHDS to allocate any new waiver slots to the CSBs by the first day of the fiscal year, such that the slots can be assigned to eligible individuals on the Priority One waiting list as soon as possible.  (Item 311 #4c)

HHR- Social Services

• Retains proposed increase to the auxiliary grant rate from $1562 to $1609 per month in the caboose budget, effective January 1, 2022. (Localities pay a 20 percent match for the auxiliary grant.)  Captures $2 million in balances in the program in FY 2022.  (Item 353 #1c)
• Retains language in the introduced budget directing the creation of a workgroup on TANF block grant spending to recommend changes necessary to ensure annual structural balance in state TANF spending.
• Retains $3.5 million GF and $7.1 million GF (with matching amounts of NGF each year) included in the introduced budget to develop an updated child welfare information system to meet federal requirements.
• Eliminates proposed funding in the introduced budget to replace the Virginia Case Management System.
• Eliminates language in the introduced budget directing the Department of Social Services to establish an interagency task force to ensure state-level support for local criminal justice diversion initiatives. (Item 350 #1c)
• Retains $400,000 GF/$3.6 million NGF in FY 2023 and $831,410 GF/$4 million NGF in FY 2024 to fund implementation of the Family First Prevention Services Act, including fidelity monitoring and evaluation of evidence-based prevention services.
• Funds a 5 percent increase in TANF standards of assistance ($529,949 GF/$4.3 million NGF in FY 2023; $603,856 GF/$4.9 million NGF in FY 2024). (Item 341 #2c)
• Provides $1.5 million per year from the TANF block grant for Community Action Agencies. (Item 347 #4c)

Labor

• Directs the Secretary of Labor to prioritize improvements to the Virginia Employment Commission (VEC) outlined in JLARC’s November 2021 report. Directs the procurement of a national firm to conduct an efficiency review of the VEC’s unemployment insurance operations.  (Item 111.10 #1c in the caboose and similar language in Item 363 #1c in the biennium)
• Retains language providing that the VEC is to compute employer tax rates by excluding pandemic-related claim activity. Tax rates for any employer may be less than, but shall not exceed, the established rate for that employer for calendar year 2021.  Directs the fund builder unemployment insurance tax to be set for calendar year 2023 at a rate not to exceed the rate for calendar year 2020.  (Item 479.20 #5c in the caboose and Item 370 #7c in the biennium.)
• Directs the implementation of a series of JLARC recommendations:
  • Directs VEC to maintain at least two positions in the new Office of the Unemployment Compensation Ombudsman (Item 370 #1c)
  • Directs VEC to work with the Virginia Information Technologies Agency to provide an independent audit of VEC’s IT security systems and identify any necessary IT security improvements. (Item 370 #2c)
  • Directs VEC to fully transform all agency IT systems and servers to the state’s central IT infrastructure as soon as possible and no later than November 2024. (Item 370 #3c)
  • Directs VEC to develop a remediation plan for outstanding adjudication and claims issues. (Item 370 #4c)
  • Directs VEC to collect user feedback on the usability of the Unemployment Insurance benefits claim system. (Item 370 #5c)
  • Directs VEC to review federal Department of Labor guidance for any changes that may be needed. (Item 370 #6c)

Natural and Historic Resources

• Retains introduced budget’s appropriation of $313 million GF for a mandatory deposit to the Water Quality Improvement Fund in FY 2023.
• Provides an additional $3.6 million GF per year for soil and water conservation districts. (Item 374 #1c)
• Moves the proposed supplemental deposit to the Natural Resources Commitment Fund totaling $26.5 million from the second year of the biennium to the first year to ensure the agricultural best management practices needs assessment for the 2022-2024 Biennium is fully funded in the first year. (Item 374 #3c)
• Uses $25 million from the Community Flood Preparedness Fund to capitalize the Resilient Virginia Revolving Loan Fund. (Item 374 #4c)
• Reprograms $1 million GF from Small Herd Initiative to a study of harmful algal blooms in Lake Anna. (Item 374 #7c)
• Provides $3.5 million GF in FY 2023 and $4.2 million GF in FY 2024 for state park management and operations (in addition to the $1.9 million provided over the biennium in the introduced budget). (Item 375 #3c)
• Reduces proposed deposit to the Virginia Land Conservation Fund by $4 million in FY 2023; increases funding by $6 million in FY 2024 to set the base budget at $16 million per year. (Item 375 #4c)
• Removes proposed $12 million GF in FY 2023 for the acquisition of land by federally recognized tribes. (Item 375 #6c)
• Removes $250,000 each year proposed in the introduced budget for two additional solar permitting positions at the Department of Environmental Quality. (Item 378 #1c)
• Provides $320,000 GF in FY 2023 to allow for continued surveillance of groundwater and surface water for certain contaminants. (Item 378 #2c)
• Provides one-time capitalization of the Black, Indigenous, and People of Color Preservation Fund of $5 million in FY 2023 (rather than $5 million per year as in the introduced budget). (Item 386 #9c)
• Provides $45 million GF in FY 2023 to the Department of Conservation and Recreation for Virginia State Park and outdoor recreation area deferred maintenance and construction needs. (Item C-42.10 #1c)
• Provides $25 million for the Stormwater Local Assistance Fund (a reduction of $75 million from the introduced budget). (Item C-80 #1c)

Transportation

• Refines language in the introduced budget exempting manufacturers who sell buses for public transportation from the requirement of having a manufacturers’ and dealers’ license. VACo supported this change, which allows local governments and transit authorities to purchase buses.  (Item 436 #1c in the caboose)
• Adds $171.7 million GF in FY 2022 and redirects $115.8 million GF that was included in the introduced budget for transportation projects ($30 million to Mid-Atlantic Spaceport; $37.5 million for multi-use trails; $210 million for I-64 between exit 205 and exit 234; $10 million for Nimmo Parkway). (Item 447.10 #1c in the caboose).
• Reduces multi-use trails funding by $155 million GF in FY 2023.  Directs $41.5 million to multi-use trails in FY 2023; $7 million per year from Transportation Alternatives for multi-use trails; $5 million in FY 2023 for Transit Ridership Incentive Fund; $5 million in FY 2023 for Norris Bridge replacement; $110 million in FY 2024 for I-64 between Exit 205 and Exit 234. (Item 452 #2c)

• Maintains from the introduced budget $30 million in additional funds to the Revenue Sharing Program in FY 2022.
• Maintains from the introduced budget $197.3 million in FY 2023 and $208.1 million in FY 2024 to the Revenue Sharing Program. This increases funding in each year by approximately $100 million, which could be used to expedite restoration of revenue sharing funds delayed by the General Assembly and Commonwealth Transportation Board (CTB) in order to respond to the pandemic.  Such action would still require CTB approval.  VACo supports this funding and action.
• Directs $150 million GF from undesignated FY 2022 surplus revenues for I-64 between exit 205 and exit 234. (Item 485 #7c)
• Various amendments reflect the impact of the elimination of the state portion of sales tax levied on food for human consumption and personal hygiene products, which reduce Commonwealth Transportation Fund revenues by $190.1 million over the course of the biennium.
• Increases VDOT’s appropriation by $647.4 million NGF in FY 2022 to reflect anticipated increases in state revenues from the December Commonwealth Transportation Fund (CTF) forecast and increases in federal formula funding under the Infrastructure Investment and Jobs Act (IIJA).
• Increases VDOT’s appropriation by $686.4 million NGF in FY 2023 and $864.7 million NGF in FY 2024 to reflect the revised December CTF forecast, and the increased formula funding anticipated under the IIJA.

Veterans and Defense Affairs

• Provides $5 million for the Virginia Military Community Infrastructure Program in FY 2023 (rather than $10 million as introduced). These grant funds are intended to serve as a local match for military communities to pursue Department of Defense grants to support infrastructure resilience projects in military installations and to enhance military readiness.  (Item 468 #1c)
• Retains proposed $5 million GF per year in the introduced budget for a suicide and opiate prevention and intervention program for veterans. Includes language directing the Department of Veterans Services to coordinate with the Department of Health, Department of Behavioral Health and Developmental Services, and Department of Criminal Justice Services as it establishes and implements the new program.  (Item 470 #1c)
• Retains proposed $150,000 GF per year in the introduced budget for the National Guard to conduct cybersecurity audits for local governments and state agencies.
• Provides $2.5 million GF in FY 2023 and $3.75 million GF in FY 2024 for the Department of Veterans Services to expand services to veterans. (Item 470 #3c)

Tax Policy

• Eliminates the state portion of the sales and use tax on food for home consumption and essential personal hygiene products, effective January 1, 2023, and provides for replacement of the revenue that would otherwise be distributed to localities based on school-age population (Item 4-14 #7c)
• Retains language from the introduced budget directing the Department of Taxation to study and develop a proposal to require that all individuals who conduct local property tax assessments receive state certification and ongoing recertification.
• Retains provisions in the caboose and biennium budgets allowing a one-time income tax refund of up to $250 for an individual or $500 for married persons filing a joint return.
• Reflects full conformity with the Internal Revenue Code regarding the tax treatment of Paycheck Protection Program loans, Emergency EIDL Grants and Targeted EIDL Advances, Shuttered Venue Operator Grants, and Restaurant Revitalization Grants.
• Eliminates the accelerated sales tax in FY 2022 (rather than FY 2023, as in the introduced budget). (Item 3-5.06 #1c in the caboose)
• Increases the standard deduction to $8000 for single filers, $16,000 for married filers, between January 1, 2022, and January 1, 2026, contingent on meeting revenue growth targets. (Item 4-14 #2c)
• Updates the Virginia Housing Opportunity Tax Credit to allow $60 million in credits per year between calendar years 2022 and 2025, to be claimed over ten years. (Item 4-14 #3c)
• Provides for an income tax subtraction for military benefits for veterans aged at least 55, beginning at $10,000 in tax year 2022 and increasing to $40,000 for tax year 2025 and beyond. (Item 4-14 #6c)
• Retains proposal in the introduced budget to establish a refundable state income tax credit equal to 15 percent of the federal earned income tax credit. Revises the language so that the credit applies to tax years 2022 through 2025.  (Item 4-14 #8c)
• Reflects the passage of legislation to increase the deduction allowed for business interest from 20 to 30 percent. (Item 0 #1c)

Reserves

• Retains the appropriation in the introduced budget of the mandatory deposit to the Revenue Stabilization Fund of $1.1 billion in FY 2023.
• Sets aside $498.7 million for an expected Revenue Stabilization Fund deposit in FY 2024 based on the FY 2022 revenue forecast. Includes language allowing the maximum combined amounts in Revenue Stabilization and Revenue Reserve Funds to be 20 percent (rather than 15 percent) of the average annual tax revenues derived from taxes on income and retail sales as certified by the Auditor of Public Accounts for the three fiscal years immediately preceding.  (Item 274 #1c in the caboose).  Similar language in the biennium budget also directs the Secretary of Finance to prepare recommendations for consideration of adjustments to, or a removal of, the existing cap on the combined balance of the Revenue Stabilization Fund and the Revenue Reserve Fund.  (Item 267 #1c)
• Eliminates the optional revenue reserve deposit of $563.9 million that was proposed in the introduced budget. (Item 275 #1c in the caboose)

Virginia Retirement System

• Removes proposed deposit of $924 million to VRS in FY 2023 (Item 269 #1c) and instead provides $750 million in FY 2022. (Item 277 #1c in the caboose)
• Earmarks $250 million of undesignated FY 2022 surplus revenues to VRS. (Item 485 #7c)
• Deposits $80.4 million GF over the biennium to VRS to increase the funded status for the retiree health credit plans for state employees, employees of the constitutional offices and local social service departments to 30 percent. (Item 483 #2c)
• Directs VRS to conduct a review of the state’s current provisions regarding individuals who have retired and wish to return to work in a VRS-covered positions. (Item 498 #2c)
• As in the introduced budget, maintains employer contribution rates from the previous biennium rather than accepting VRS Board of Trustees recommendations to lower rates.

American Rescue Plan Act and Infrastructure Investment and Jobs Act

• Includes language directing the Virginia Information Technologies Agency to take steps to obtain the cybersecurity grant funding available to the state under the federal Infrastructure Investment and Jobs Act of 2021. (Item 92 #1c in the caboose).  Appropriates the federal funding ($21.4 million) and the state match ($4.9 million GF) in FY 2023.  (Item 93 #1c)
• Directs the Secretary of Finance to develop a risk assessment of executive branch agency internal controls for administering and disbursing pandemic relief funds. (Item 257 #1c).  A companion amendment earmarks $600,000 in ARPA funding in FY 2023 for the Secretary of Finance to engage additional administrative oversight of executive branch expenditures of ARPA dollars.  (Item 486 #28c)
• Provides $500,000 GF in FY 2023 for efforts to pursue grants related to the Infrastructure Investment and Jobs Act (to be conducted in conjunction with entities identified by the Secretary of Finance, including local governments). (Item 257 #2c)
• Provides $3 million GF in FY 2023 as state match for federal Drinking Water State Revolving Fund grants from the Infrastructure Investment and Jobs Act. (Item 296 #1c)
• Retains funding in the introduced budget ($8.1 million GF in FY 2023 and $9.5 million GF in FY 2024) to meet anticipated matching requirements for additional federal funding for the Virginia Clean Water Revolving Loan Fund in the Infrastructure Investment and Jobs Act.

Other

• Revises the definition of “skill games.” (Item 4-14 #4c)
• Imposes labeling requirements for industrial hemp extract or food containing industrial hemp extract that contains tetrahydrocannabinol (THC); creates a class 3 misdemeanor for possession of more than four ounces but not more than one pound of marijuana outside of a person’s residence (and a class 2 misdemeanor for a second or subsequent offense). Prohibits selling products with THC to persons younger than 21, with certain exceptions for medical cannabis.  Imposes packaging and labeling requirements for products containing THC.  Prohibits selling industrial hemp extract or THC-containing products in the shape of a human, animal, vehicle, or fruit.  Language directs the convening of a task force on the regulation of industrial hemp extracts and other substances containing THC.  (Item 4-14 #5c)