General Assembly Adopts Budget

March 16, 2020

The General Assembly approved compromise conference reports on the FY 2020 “caboose” and 2020-2022 biennium budgets on Thursday, March 12.  Conferees struck an agreement on the budgets late on Saturday, March 7, and legislators agreed to return on March 12 in order to allow time for members to review the conference report prior to voting on it.  Both budget bills passed by comfortable margins; however, several members of the Senate expressed concern in floor debate about potential economic repercussions of the coronavirus outbreak and urged that the legislature pause to reassess market conditions before approving the budget and sending it to the Governor.  Senate Finance and Appropriations Chair Janet Howell suggested that the budget conferees continue to meet in advance of the April reconvened session to prepare recommendations for the Governor to revise the budget in case revenue projections need to be reassessed.  It is important to note that the compensation actions included in the budget are contingent on revenues meeting projections.

Below is a summary of the key provisions of the budget conference report of interest to county governments.  In addition, an analysis of the conference report’s provisions related to Constitutional officers prepared by the Executive Secretary of the Compensation Board is available at this link.  The Superintendent of Public Instruction’s memorandum of March 13, 2020, is available at this link; calculation templates for projected state payments are available at this link.  VACo will provide FY 2021 estimates of local option sales and use tax and recordation and grantor’s taxes to be distributed to localities when those estimates are available from the Department of Taxation.

The Governor’s deadline for action on the budget and on bills that passed the General Assembly in the last week of the session is midnight on April 11.  The General Assembly is scheduled to meet on April 22 to consider the Governor’s amendments and vetoes.

K-12 Education

  • Subject to revenue contingency language providing that no downward revision of the biennium revenue forecast is made after the close of FY 2020, provides for 2 percent salary increases in each year for the state share of funded SOQ instructional and support positions. The state share of the salary increases would be given to school divisions that certify that increases of at least an average of 2 percent have been or will have been provided during each year of the 2020-2022 biennium, either in the first year or in the second year, or through a combination over both years. Provides $95.2 million General Fund (GF) in FY 2021 and $49.9 million GF in FY 2022 to the compensation adjustment proposed in the Governor’s introduced budget. This is not intended as a mandate to increase salaries.  (Item 145 #21c)
  • Provides $8.7 million in GF in the second year to increase the at-risk add-on from 25 percent to 26 percent. This is in addition to the Governor’s investment of $50.1 million in FY 2021 and $90 million in FY 2022. (Item 145 #16c)
  • Amends the Lottery Proceeds forecast to $657.9 million in FY 2021 and $666.1 million in FY 2022 following the prohibition of Games of Skill pursuant to HB 881 (Bulova) / SB 971 (Howell) and increases following the implementation of online lottery tickets sales pursuant to HB 1383 (Sickles) / SB 922 (Norment). Provides $0.5 million GF in FY 2021 and $19.7 million GF in FY 2022 and $41.8 million Non-General Fund (NGF) in FY 2021 and $43.8 million NGF in FY 2022. (Item 145 #22c)
  • Provides $9.6 million GF in FY 2021 and $10 million GF in FY 2022 to partially restore Cost of Competing Adjustment (COCA) funds to eligible school divisions (nine school divisions in Planning District 8 and nine adjacent school divisions). (Item 145 #12c)
  • Provides relief to school divisions with fewer than 10,000 students experiencing unexpected enrollment loss greater 2 percent over the summer between school years. Provides $2.5 million GF in FY 2021 and $2.1 million GF in FY 2022. (Item 145 #15c)
  • Provides for the state share of an increased ratio of one counselor for every 325 students for K-12 for FY 2022 and thereafter. This provides for approximately 615 additional school counselors pursuant to HB 1508 (McQuinn) / SB 880 (Locke) and is $53.2 million GF in FY 2022 less than the Governor’s original proposal for a ratio of one counselor for every 250 students. (Item 145 #14c).
  • Provides $6.7 million GF in the first year and $14.3 million in the second year, pursuant to the passage of HB 975 (Guzman) / SB 910 (Hashmi). This will provide funding to increase the English Language Learner student-teacher ratios from 17 positions per 1,000 students to 18.5 positions per 1,000 students in fiscal year 2021, and to 20 positions per 1,000 students in fiscal year 2022 and thereafter. (Item 145 #13c).
  • Directs the Superintendent of Public Instruction to convene a workgroup to establish a plan to transfer the Child Care Development Fund grant from the Virginia Department of Social Services to the Virginia Department of Education by July 1, 2021. This amendment includes the same participants from the workgroup created by HB 1012 (Bulova) to oversee planning and implementation of a statewide unified early childhood care and education system. (Item 137 #3c)
  • Provides $34,000 GF in each year to establish the Commission on School Construction and Modernization, pursuant to SB 888 (McClellan). (Item 27.10 #1c)
  • Provides $5 million GF in each year to support mixed-delivery of pre-kindergarten pilot programs for at least 500 at-risk three- and four-year-olds. No local funding match is required for these slots. The amendment also requires pilot program applications to address how each pilot will transition to a level of state support similar to the state support provided for VPI slots. (Item 144 #9c).
  • Directs the Department of Education to develop a mechanism to allocate regional alternative education program slots to participating school divisions. Allocation of the existing slots to participating divisions shall be based upon the number of students in a division requiring regional alternative education. The Department will report the planned by August 1, 2021. (Item 145 #2c).
  • Waives certain staffing standards for several categories of instructional positions the first year only and requires school divisions to report the extent which these flexibility provisions were utilized to waive staffing standards. This amendment partially restores waivers for the first year that had been included in the Appropriation Act since 2010 that were eliminated in the introduced budget. VACo requested restoration of this language. (Item 145 #18c).
  • Modifies Lottery Proceeds funding to establish the Infrastructure and Operations Per Pupil Fund, which would provide $263.0 million the first year and $266.2 million the second year from the Lottery Proceeds fund to provide the state share of per-pupil payments of $375.27 the first year and $378.52 the second year, and payments to ensure that each school division receives at least a $200,000 payment. Unlike current Lottery Proceeds funding, this language would require local matching funds based on composite index of local ability to pay (LCI) and require certain percentages be used for non-recurring and recurring costs. VACo has expressed concerns over this language. (Item 145 #17c).

Compensation and Retirement

  • Provides $837,291 GF in FY 2021 and $993,932 GF in FY 2022 to fund the state share of costs associated with providing a retiree health insurance credit of $1.50 per year of service to certain retired school division employees who are not teachers, pursuant to HB 1513 (McQuinn). (Item 145 #8c)
  • Provides $3.9 million GF in FY 2021 and $4 million GF in FY 2022 to reduce the amortization period for the retiree health care credit for state employees by five years. (Item 477 #3c)
  • Subject to revenue contingency language providing that no downward revision of the biennium revenue forecast is made after the close of FY 2020, funds the following compensation actions:
  • For state employees, provides a three percent bonus effective December 1, 2020, and a three percent salary increase effective June 10, 2021.
  • For Constitutional officers and their employees and state-supported local employees, provides a two percent bonus, effective December 1, 2020, and a three percent salary increase, effective July 1, 2021.
  • For sworn employees of the Department of State Police with three or more years of continuous state service, provides $110 for each year of service up to 30 years, effective August 10, 2020, as well as a two percent salary increase effective the same date. (Item 477 #5c)
  • Directs the Chief Workforce Development Advisory and the Secretary of Commerce and Trade to study the development of a statewide paid family and medical leave program for all employers. (Item 111 #1c)
  • Provides $144,000 in each year pursuant to passage of HB 1495 (Torian) / SB 54 (Cosgrove) to allow retired law-enforcement personnel to return to work as school security officers. (Item 477 #6c).

Judiciary/Public Safety

  • Provides $3.9 million GF per year, in addition to the $5.6 million over the biennium included in the introduced budget, to hire a total of 120 new deputy district court clerks over the biennium. The additional funding in the conference report is generated by an increase in general district court filing fees.  (Item 42 #2c, Item 4-14 #1c)
  • Continues the workgroup convened by the Secretary of Public Safety and Homeland Security on the effects of body-worn cameras on the state’s public safety and judicial agencies. (Item 391 #3c)
  • Provides $8.6 million GF per year in state aid to localities with police departments (“HB 599” funding). (Item 408 #1c)
  • Provides $2.5 million in FY 2021 for the Emergency Shelter Upgrade Assistance Fund (SB 350 (Lucas)), which provides funding to local governments in proactively preparing for emergency sheltering situations. (Item 410 #1c).
  • Provides $4.5 million GF in FY 2021 and $1.5 million GF in FY 2022 for the Community Policing Act, which requires certain data related to motor vehicle or investigatory stops to be collected by law enforcement (HB 1250 (Torian)). (Item 425 #5c)

Agriculture and Forestry

Elections

  • Retains the Governor’s proposal to include $2.5 million GF per year in FY 2021 and FY 2022 to provide full reimbursement for the salaries of general registrars and electoral board members, as well as $5.9 million GF in FY 2020 to fund costs associated with the presidential primary.
  • Directs the federal Help America Vote Act funding awarded to Virginia in December 2019 to be used for replacement of the Virginia Election and Registration Information System (VERIS) and provides required state match. Permits the Department of Elections to consider using any leftover funds to assist localities in complying with the IT security standards established as part of 2019 legislation.  Budget amendments had been introduced in the House and Senate at VACo’s request to direct these funds to localities to assist with IT compliance, but were not successful. (Item 83 #2c in caboose, Item 86 #3c in biennium budget)

Economic Development

  • Provides an additional $10.5 million GF in FY 2021 for the Virginia Business Ready Sites Program; reduces funding in FY 2022 by $3 million, for a total of $12.5 million over the biennium when added to funding levels in the introduced budget. (Item 130 #3c)
  • Provides $250,000 GF per year for the Enterprise Zone Grant program in order to reduce proration of the Real Property Improvement Grant program. (Item 115 #1c)
  • Reverts $12.7 million in unused FY 2018 and FY 2019 balances for competitive GO Virginia grant funds and reduces GO Virginia funding by $4.5 million GF in FY 2022. Directs the Department of Housing and Community Development to report quarterly on grant awards and expenditures from the Virginia Growth and Opportunity Fund.  (Item 3-1.01 #2c in the caboose, Item 114 #1c and Item 114 #5c in the biennium)
  • Increases funding for the Industrial Revitalization Fund by $500,000 GF per year. (Item 114 #6c)
  • Consolidates the Innovation Entrepreneurship Investment Authority (IEIA) and the Virginia Research Investment Council (VRIC) into one newly created entity, the Virginia Innovative Partnership Authority (VIPA), pursuant to HB 1017/SB 576. Funding for VIPA includes proceeds from the sale of the Center for Innovative Technology (CIT) building, including $10.0 million from the non-general fund allocated to the Commonwealth Commercialization Fund and $10.0 million from the non-general fund allocated to the Commonwealth Cyber Initiative. (Item 135 #1c)

Broadband

  • Retains Governor’s proposal for additional appropriations to the Virginia Telecommunication Initiative (VATI) of $16 million GF per year, for total funding levels of $35 million per year; sets aside additional $275,000 per year from this appropriation for administrative costs. (Item 114 #2c)
  • Includes language specifying that language specifying that appropriate levels of investment from private sector partners are to be part of the criteria for making Virginia Telecommunication Initiative awards. (Item 114 #2c)

Housing Trust Fund

  • Reduces proposed deposit to the Housing Trust Fund by $10 million, which would result in a total deposit of $30 million in each year. Adds the expansion of permanent supportive housing as a priority in awarding grants from the Trust Fund. (Item 113 #4c, Item 113 #2c)

Aid to Local Public Libraries

  • Provides $1 million GF per year in additional aid to local public libraries. Eliminates $500,000 per year set-aside for the Eastern Shore Public Library. (Item 247 #1c)

Children’s Services Act

  • Removes two percent cap on growth in rates for private special education day placements in FY 2022. Moves funding for a second round of data collection for the rate study that was partially completed in 2019 from the second year of the biennium to the first year and directs the Office of Children’s Services to implement statewide rate-setting, effective July 1, 2021.  (Item 292 #2c, Item 293 #1c)

Behavioral Health

  • Eliminates proposed supplemental payment to incentivize private hospitals to accept more individuals under Temporary Detention Orders (TDOs) and instead provides $7.5 million GF per year for the Department of Behavioral Health and Developmental Services (DBHDS) to fund pilot projects to reduce census pressures on state hospitals. Provides $150,000 GF per year for a pilot project to provide for the transportation costs of patients discharged from a state hospital.  Authorizes DBHDS to accept proposals from private providers for a pilot project for acquisition of housing options for individuals ready to leave state hospitals or to prevent unnecessary hospitalizations.  Removes funding in the introduced budget for additional beds at Catawba Hospital; provides up to $5 million in special funds for transition costs.   (Item 313 #34c, Item 320 #5c, Item 321 #3c, Item 321 #2c, Item 326 #1c)
  • Funds an additional 250 Family and Individual Support Medicaid waiver slots in FY 2022. Requires DBHDS to report quarterly on the allocation of waiver slots by Community Services Board (Item 313 #15c, Item 320 #10c)
  • Directs DBHDS to develop a plan to convert Crisis Intervention Team Assessment Centers (CITACs) to 24-hour, seven-day operations and move toward regional CITAC sites. (Item 320 #9c)
  • Eliminates language in the introduced budget allowing DBHDS to establish up to 20 new child and adolescent inpatient psychiatric beds at a state hospital if alternatives are not developed by September 1, 2020. Directs DBHDS to develop a Memorandum of Understanding with the Children’s Hospital of the King’s Daughters to dedicate a portion of future bed capacity of a 60-bed mental health hospital for use in treating children who might otherwise be admitted to the Commonwealth Center for Children and Adolescents (Item 321 #5c, Item 320 #13c)
  • Provides $5.6 million GF in FY 2021 and $11.4 million GF in FY 2022 for permanent supportive housing for individuals with serious mental illness. (Item 322 #1c)
  • Directs the Department of Medical Assistance Services to review the reimbursement of services provided by local education agencies to Medicaid-eligible children, including evaluating options to allow school divisions to draw down additional federal resources. (Item 313 #38c)

Social Services

  • Reduces proposed funding for salary increases for staff in local departments of social services by $3.4 million GF per year and $3.5 million NGF per year, leaving $2.2 million GF and $2.2 million NGF per year to provide a pay band minimum increase in FY 2021 of 20 percent for family services positions and 15 percent for benefit program services, self-sufficiency services, and administration positions, as well as $3.4 million GF and $3.5 million GF per year for a 1.5 percent salary increase in FY 2021 for all positions in local departments. State-supported local employees in local departments are eligible for the FY 2021 bonus and FY 2022 salary increase discussed in the “Compensation and Retirement” section earlier.  (Item 351 #1c)
  • Reduces funding in the introduced budget that was included to assist local departments of social services in hiring staff to create prevention departments as part of the changes to federal foster care funding included in the Family First Prevention Services Act. The conference report reduces proposed funding by approximately $20 million GF and $6.4 million NGF over the biennium, leaving funding of $30 million GF and $9.4 million NGF over the biennium.  (Item 351 #2c)
  • Requires the Commissioner of Social Services to establish a five-year plan to prevent child abuse and neglect. (Item 354 #7c)
  • Directs the Department of Social Services to develop a plan to provide access statewide to a Kinship Navigator Program to help support kinship caregivers. Provides $75,000 GF per year for the development of an emergency approval process for kinship caregivers and the development of foster home certification standards for kinship caregivers.  (Item 354 #1c, Item 354 #3c)
  • Provides $1.5 million in Temporary Assistance to Needy Families funding per year for a third round of competitive grants for community employment and training programs. (Item 356 #2c)

Natural Resources

  • Provides $50 million for the Stormwater Local Assistance Fund (SLAF). (Item C-70 #1c)
  • Provides $231,000 GF in FY 2021 and $231,000 GF in FY 2022 for regional water resource planning activities at DEQ, pursuant to HB 542 (Carr). (Item 377 #3c)
  • Directs DEQ to convene a workgroup to review the assumptions used in estimating the effluent nutrient concentrations and trends of wastewater facilities and to identify cost-effective options to achieve wastewater nutrient load levels with reasonable assurance consistent with the needs of the Chesapeake Bay TMDL Phase III Watershed Implementation Plan (WIP). (Item 377 #6c)
  • Directs DEQ to assess alternative reimbursement models and reimbursement amounts for nutrient removal grants provided to projects serving a locality or localities with: (i) high fiscal stress as defined by the Composite Fiscal Stress Index; (ii) median household incomes below the Commonwealth’s average; and (iii) the capacity of ratepayers to absorb the additional costs of financing nutrient removal projects. (Item 377 #5c)
  • Directs DEQ to analyze current provisions of the Virginia Erosion and Sediment Control Act, Storm Water Management Act, and the Chesapeake Bay Preservation Act and identify any areas of inconsistency, conflict, and duplication within and among the existing administrative regulations across the three regulatory programs and assess the impact on locally administered programs for MS4 permit localities under the Virginia Stormwater Management Act. (Item 377 #2c)

Transportation

  • Directs the Secretary of Transportation and the Secretary of Natural Resources to evaluate the issue of drainage outfalls originating from VDOT-maintained roads without an assigned maintaining entity and recommend cost-effective funding solutions. VACo requested this study language.  (Item 430 #3c)
  • Provides $47.1 million NGF in FY 2021 and $51.4 million NGF in FY 2022 pursuant to the passage of HB 1541 (McQuinn) which creates the Central Virginia Transportation Authority, composed of the counties and cities located in Planning District 15, which will administer transportation funding generated through an additional regional sales and use tax and wholesale gas tax. (Item 440 #1c).

Reserves

  • Corrects amount appropriated for a voluntary deposit to the Revenue Reserve Fund to reflect a reduction in the deposit of $74 million in FY 2020. (Item 266 #1c in caboose)
  • Deposits an additional $182 million to the Revenue Reserve Fund in FY 2020, which may be used for any mandatory deposit to the Revenue Stabilization Fund if necessary. When added to the deposits proposed in the 2019 Appropriations Act and the Governor’s introduced budget, a total of $601.2 million would be deposited in the Revenue Cash Reserve. (Item 266 #2c)

Other

  • Directs the Secretary of Finance and the Secretary of Administration to convene a workgroup to study collective bargaining for state employees and report by November 1, 2020. (Item 264 #1c)
  • Directs the Secretary of Finance to convene a workgroup to examine procedures and requirements necessary for entities with the authority to issue state tax-supported debt to report to the Debt Capacity Advisory Committee prior to issuing such debt. (Item 264 #2c)
  • Provides $294,000 GF per year in additional support for Planning District Commissions (Item 114 #7c)
  • Provides $78,000 in GF each year for the Line of Duty Act premiums to reflect the passage of HB 169 (Tyler) /SB 345 (Bell), HB 783 (Askew) /SB 9 (Saslaw), and HB 438 (Heretick)/ SB 561(Vogel), legislation related to workers’ compensation.
  • Provides $418,000 in GF each year for increased Workers’ Compensation Claims related to Post-Traumatic-Stress- Disorder to reflect passage of HB 438 (Heretick)/ SB 561(Vogel).
  • Provides $1.3 million in GF in FY 2021 and $4.6 million in FY 2022 to fund the impact on state agencies from the increase in the minimum wage. (Item 477 #4c).

VACo Contacts: Katie Boyle; Jeremy Bennett; Chris McDonald, Esq.; Joe Lerch, AICP

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