Governor Northam Presents Budget Proposal

December 20, 2018

Governor Northam presented his proposed amendments to the 2018-2020 biennium budget to the House Appropriations, House Finance, and Senate Finance Committees on Tuesday, December 18. The Governor described his proposal as meeting three major goals: shoring up the state’s reserves, investing in shared priorities, and meeting known obligations, such as the revised Medicaid forecast. The Governor’s budget invests significant dollars in K-12, VACo’s top legislative priority, as well as in other areas of major importance to county governments.

The introduced budget assumes ongoing revenue growth due to overall strength in Virginia’s economy as well as short-term revenues associated with the effect of changes to the federal tax code enacted in the Tax Cuts and Jobs Act (TCJA) in 2017. Following the Governor’s presentation, Secretary of Finance Aubrey Layne briefed money committee members on the development of the revenue assumptions in the introduced budget. Secretary Layne reported on meetings during the fall of the Joint Advisory Board of Economists and the Governor’s Advisory Council on Revenue Estimates (GACRE), which help to develop the revenue forecasts incorporated in the introduced budget. In November, GACRE members recommended a forecast of 2.6 percent growth in FY 2019 (ahead of the current 1.5 percent forecast) and 3.7 percent growth in FY 2020, based in part on revenue collections to date. This forecast was revised to assume an additional $70 million per year in payroll withholding, as well as the effects of several policy changes incorporated into the budget: expected collection of $82.5 million in FY 2020 in sales and use tax from remote sellers; conformity with federal income tax provisions; making the Earned Income Tax Credit fully refundable; and increasing the threshold at which retailers are required to submit sales tax collections early at the end of the fiscal year, in addition to several minor changes. As a result, the budget assumes total revenue growth of 5.7 percent in FY 2019 and 3.0 percent in FY 2020. Secretary Layne’s presentation is available at this link.

Director of the Department of Planning and Budget Daniel Timberlake provided an overview of major spending and savings items in the budget, making a distinction between one-time spending or other shorter-term investments and ongoing spending commitments. Since the majority of the revenues projected to be generated by the effect of conformity with the federal income tax code result from federal tax provisions that expire in 2025, the introduced budget directs those revenues toward short-term items, including investments in broadband expansion through the Virginia Telecommunication Initiative, deposits to the Revenue Reserve Fund, and funding for the Stormwater Local Assistance Fund. Other major spending items, such as salary increases for SOQ-recognized positions and funding for additional school counselors, are funded with ongoing revenues.

The following is a preliminary analysis of major spending items of importance to local governments.

K-12 Education

  • $39.9 million NGF in FY 2019 and $30.4 million NGF in FY 2020 to reflect increased estimated Lottery proceeds allocated to funding for the At-Risk Add-On and Supplemental Lottery per Pupil Allocation
  • $87.6 million GF in FY 2020 for a two percent salary increase for funded Standards of Quality instructional and support positions, effective July 1, 2019. This is in addition to the existing three percent increase effective the same date.
  • Increases GF support for school employee retirement by $80 million to free up Literary Fund dollars for school construction loans.
    $36.0 million GF in FY 2020 for modified school counselor staffing ratios (1:500 to 1:375 in elementary school, 1:400 to 1:325 in middle school, and 1:350 to 1:300 in high school) with an intent to provide additional funding in subsequent fiscal years to achieve a ratio of 1:250 for all public schools.
  • $9.6 million GF in FY 2020 for the Virginia Preschool Initiative Plus program to replace the loss of federal funding through the expiration of funds in the Preschool Development Grant.
  • Several Direct Aid spending reductions, including
    • $20.4 million GF in FY 2019 and $34.8 million GF in FY 2020 to reflect updated student enrollment projections.
    • $9.7 million GF in FY 2019 and $2.8 million GF in FY 2020 to reflect updated cost of Special Education Regional Tuition based on updated enrollment data.
    • $2.5 million GF in FY 2019 and $3.6 million GF in FY 2020 to reflect updated cost of Remedial Summer School and English as a Second Language SOQ programs based on updated enrollment data.

Compensation

  • $40.2 million GF in FY 2020 to provide a one percent bonus for full-time state employees and state-supported local employees, effective December 1, 2019. Retains current provisions in the 2018 Appropriations Act for the state share of a two percent salary increase for state-supported local employees, effective July 1, 2019, as well as funding for a two percent salary increase for state employees, effective June 10, 2019.
  • $8.1 million GF in FY 2020 to support an increase in the retiree health insurance credit benefit for public safety personnel. Increases the health insurance credit for sheriffs and deputies from $1.50 to $5.00 per month for each year of service.

School Safety

  • $427,630 GF in FY 2020 at the Department of Criminal Justice Services (DCJS) to expand training for school resource and security officers.
  • $515,630 GF in FY 2020 for DCJS to continue to administer an annual School Climate Survey and analyze school safety data.
  • $720,630 GF in FY 2020 for DCJS to develop a case management tool for school threat assessments and to expand technical assistance and training available for threat assessment team members.
  • $1.3 million GF in FY 2020 to provide funding and positions at DCJS to expand agency capacity to provide training and technical assistance related to school safety.
  • $280,000 GF in FY 2020 to enable DCJS to continue to provide active shooter training to schools and communities.
  • Language increasing the division cap for School Security Equipment grants from $100,000 to $250,000.

Workforce Development

  • $4.0 million GF in FY 2020 for the New Economy Workforce Credential Grant program to support an additional 1,800 individuals annually to earn a workforce credential. Language limits eligibility for the program to students with family income at or below $50,000 per year and provides that no more than 25 percent of grant funds may be used in one occupational field.
  • $5.5 million GF in FY 2020 for 79 authorized career navigator positions across the community college system.
  • $8.0 million GF in FY 2019 to integrate workforce case management systems across state agencies.
  • $124,635 GF in FY 2019 and $1.9 million in FY 2020 to develop and implement a strategic workforce dashboard to provide tools and information on labor market conditions, workforce program outcomes, and projected employment growth or decline.

Commerce and Trade

  • $20.0 million GF in FY 2019 to provide additional support for the Virginia Business Ready Sites program.
  • $46.0 million GF in FY 2020 to increase funding to $50 million for the Virginia Telecommunication Initiative to supplement costs to extend broadband to areas currently unserved by a broadband provider.
  • $10.0 million GF in FY 2020 to provide financing of the development of a public/private partnership program for energy efficiency and renewable energy loans for both private and local government properties and entities.
  • Provides $14.5 million GF in FY 2019 and $4.5 million GF in FY 2020 for the Virginia Housing Trust Fund. The Trust Fund provides loans for affordable housing-related projects and grants for targeted efforts to reduce homelessness.

Health and Human Resources

  • Adjusts Children’s Services Act appropriation by $5.9 million GF per year to account for expected reduction in growth in use of services; deletes outdated language capping the amount of administrative funds that may be received by an individual locality at $50,000.
  • Requires additional oversight of the Medicaid forecasting process.
  • Directs the Department of Behavioral Health and Developmental Services to monitor the impact of Medicaid expansion on Community Services Boards and authorizes the Department to allocate up to $7 million in special funds at the end of the fiscal year to replace GF reductions in the event that new Medicaid revenues fall at least ten percent short of the expected GF savings included in the current budget.
  • Provides $1.6 million GF per year for naloxone kits, which are used to reverse opioid overdoses.
  • Provides $256,248 GF in FY 2020 to establish a State Overdose Fatality Review Team.
  • Provides $459,258 GF in FY 2019 and $661,288 GF in FY 2020 to fund growth in Early Intervention/Part C.
  • Provides $9 million GF in FY 2020 for Community Services Boards to provide crisis services for children and adults.
  • Provides $2.5 million GF in FY 2020 to continue jail mental health pilot projects; language allows DCJS to expand the number of pilot sites based on its assessment of progress.
  • Adjusts foster care and adoption payments in accordance with salary increases for state employees; funds a position at the Virginia Department of Social Services to facilitate recruitment of foster parents, and provides funding for staff at VDSS to implement the new federal Family First Prevention Services Act.

Natural Resources

  • Appropriates the mandatory deposit of $74 million GF in FY 2020 to the Water Quality Improvement Fund (WQIF) and provides an additional $20 million GF in FY 2019 and $15 million GF in FY 2020.
  • Provides $50 million GF in FY 2020 for the Stormwater Local Assistance Fund (SLAF) in addition to the $20 million already in FY 2019.
  • Provides $267,853 GF in FY 2020 for dam safety grants to local governments and private owners of dams.
  • Provides $5.5 million GF in FY 2019 and an additional $5.5 million GF in FY 2020 for the Virginia Land Conservation Fund.
  • Provides $1.5 million NGF in FY 2019 and $750,000 NGF in FY 2020 to support land acquisition for state parks and $651,431 NGF in FY 2019 and $7.7 million NGF in FY 2020 to support land acquisition for Natural Area Preserves.

Transportation

  • Provides $75 million GF in FY 2019 to the Virginia Transportation Infrastructure Bank; language provides that a portion may be used for startup costs associated with I-81 improvements.

Reserves

  • Deposits $235 million GF in the new Revenue Reserve Fund in FY 2019 as required by the 2018 Appropriations Act; provides an additional $504 million GF in FY 2019 and $50 million GF in FY 2020. Language allows balances in the Fund to exceed two percent of total GF revenues for the prior fiscal year and sets out purposes for which the Governor may appropriate moneys from the Fund.
  • Appropriates the mandatory $263 million GF deposit to the Revenue Stabilization Fund in FY 2020.

Other Items

  • Eliminates the transfer of $2 million from the Communications Sales and Use Tax Trust Fund to the General Fund in FY 2020. VACo had requested that the Governor eliminate this action from the budget, which set a worrisome precedent for future diversions from the Trust Fund.
  • Provides $723,420 GF in FY 2020 to address workload issues in Commonwealth’s Attorneys’ offices due to the use of body-worn cameras.
  • Appropriates $3 million in federal Help America Vote Act funds in FY 2020 for election security enhancements.
  • Provides $607,500 GF in FY 2020 for training programs for local election officials.
  • Provides $1.5 million GF in FY 2019 for outreach activities regarding the 2020 Census.
  • Provides $5.9 million GF in FY 2020 for costs associated with the presidential primary.

VACo Contact: VACo Legislative Team

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