Governor Presents Biennium Budget Proposals

December 20, 2019

Governor Northam presented his proposed 2020-2022 biennium budget to the “money committees” on December 17, along with his amendments to the 2018-2020 biennium budget.  The Governor characterized his proposal as a “strong, forward-looking budget” that makes “generational investments” in key areas such as water quality, broadband, early childhood, K-12 education, workforce development, and mental health.  He saluted legislators for working to protect the state’s credit rating by building up its reserves, announcing that with the inclusion of the proposed deposits to reserves in the introduced budget, the state is ahead of schedule to meet the Governor’s goal of setting aside 8 percent of revenue to weather future economic downturns.  He previewed several legislative initiatives which would affect state revenues if enacted, notably a transportation funding package, which is expected to include an increase in the gas tax, a reduction in vehicle registration fees, and the elimination of vehicle inspections (the proposed increase in transportation revenues would also free up General Fund dollars that are used for transportation debt service payments).  The Governor also outlined a proposal to increase Virginia’s cigarette tax by 30 cents per pack and use this revenue to fund a reinsurance program designed to reduce health insurance premiums.  In an unusual gesture, the Governor reserved $100 million in each year of the biennium for legislators’ priority spending items, suggesting that these dollars would provide the new General Assembly leadership with some flexibility to address funding needs not included in the Governor’s proposal.

Secretary of Finance Aubrey Layne provided an overview of the revenue forecast embedded in the introduced budget, which was developed in consultation with the Joint Advisory Board of Economists and the Governor’s Advisory Council on Revenue Estimates.  General Fund (GF) revenue collections continued to perform well in November, growing by 8.4 percent, but concerns remain about the performance of individual income tax non-withholding in the remainder of FY 2020; as a result, FY 2020 GF revenue growth is projected at 1.8 percent — up from the previous forecast of 1.2 percent, but still a conservative estimate.  The introduced budget assumes GF revenue growth of 4.3 percent in FY 2021 and 3.6 percent in FY 2022, projections the Governor characterized as “cautious.”  Secretary Layne’s presentation may be found at this link.

Daniel S. Timberlake, Director of the Department of Planning and Budget, presented an overview of the major components of the biennium budget and the “caboose” bill, which makes amendments to the current biennium budget.  He explained that the lion’s share of new spending was dedicated to education (including rebenchmarking of the Standards of Quality, providing a salary increase for SOQ-recognized positions, and the proposed “Get Skilled, Get a Job, Give Back” initiative), followed by funding the Medicaid forecast and depositing $300 million to the state’s cash reserves.  Director Timberlake’s presentation may be found at this link.

(Chart provided by Jim Regimbal, Fiscal Analytics, Ltd.)

The following provides a preliminary analysis of items in the “caboose” and biennium budgets of interest to local governments.

K-12 Education

  • Provides $808.5 million in additional funding over the course of the biennium for formula-driven enrollment and program updates associated with rebenchmarking the state cost of Direct Aid to Public Education to reflect changes in enrollment, funded instructional salaries, employee retirement and other post-employment benefits, inflation, and other measures.
  • Provides $145.1 million in FY 2022 for the state share of a three percent salary increase, effective July 1, 2021, for funded Standards of Quality instructional and support positions.  The funding is not intended as a mandate to increase salaries and eligible school divisions must certify that average salary increases of a minimum of three percent have been or will be provided either in the first year, the second year, or through a combination of the two years of the biennium.
  • Provides $21.2 million in FY 2021 and FY 2022 for the state share to align school counselor staffing ratios with the Standards of Quality as prescribed in § 22.1-253.13:2 of the Code of Virginia.
  • Effective with the 2021-2022 school year, provides $56.7 million in FY 2022 for the state share to reduce the required Standards of Quality ratio to one school counselor for every 250 students at every grade level.
  • Historic investment of $50.1 million in FY 2021 and $90 million in FY 2020 to increase the “At-Risk Add-On” for educationally at-risk students.  Also raises the amount of aid disbursed based on the concentration of children qualifying for the federal Free Lunch Program to between one and 23 percent in FY 2021 and between one and 25 percent in FY 2022.
  • Provides $50 million in NGF in FY 2021 and $75 million in NGF in FY 2022 for per pupil allocation payments to local school divisions from projected “Games of Skill” revenues.  If regulation and taxation of these games is enacted, local school divisions shall have flexibility to use such funds in a manner that best supports the needs of local school divisions.
  • Provides $13.3 million in FY 2021 and $14.3 million in FY 2022 for the state share of additional instructional positions supporting limited English proficiency students.
  • Provides $5.3 million in FY 2021 and FY 2022 to reduce or eliminate the cost of school breakfast and school lunch for students who are eligible for reduced price meals.
  • Provides $2.6 million in FY 2021 and $2.3 million in FY 2022 for no-loss funding to ensure that no locality loses state funding for public education as compared to that locality’s FY 2020 sate distribution.
  • Additional details on K-12 funding are available in the Superintendent of Public Instruction’s December 17, 2019, Memorandum.

Early Childhood

  • Provides $36 million in FY 2021 and $49.4 million in FY 2022 to increase the Virginia Preschool Imitative (VPI) per pupil allocation to $6,959 in FY 2021 and to $7,655 in FY 2022, provide additional support for students on waitlists, and create a pilot program for at-risk three-year-olds.
  • The Virginia Department of Social Services (VDSS) and the Virginia Department of Education (VDOE) are directed to develop a plan to transfer the Child Care Development Fund grant from VDSS to VDOE by July 1, 2021. The goal of this transfer is to house responsibility of child care and education programs under one agency.

Workforce Development

  • Provides $72.5 million in FY 2021 and FY 2022 for the Get Skilled, Get a Job, Give Back Program (G3) to offer financial assistance to low and middle-income Virginians enrolled in a Community College program that leads to an occupation in a high-demand field.
  • Provides $17.5 million in FY 2021 and FY 2022 for the New Economy Workforce Credential Grant program, an increase of $4 million relative to FY 2020.
  • Retains $240,000 each year for the Grow Your Own Teacher pilot program, which was established in 2019.

Constitutional Officers

  • Provides $821,028 GF in FY 2021 and $1.6 million GF in FY 2022 for underfunded and unfunded positions in Treasurers’ offices. This appropriation is expected to support funding of approximately 50 percent of underfunded positions and 10 percent of unfunded positions in FY 2021 and 100 percent of underfunded positions and 20 percent of unfunded positions in FY 2022.
  • Provides $950,656 GF in FY 2021 and $1 million GF in FY 2022 for underfunded and unfunded positions in Commissioners’ offices. This appropriation is expected to support funding of approximately 100 percent of underfunded positions and 10 percent of unfunded positions in each year.
  • Provides $1.8 million GF in FY 2021 and $1.98 million GF in FY 2022 to increase salaries of Circuit Court Clerks’ staff to address pay equity with district court clerks’ staff, and provides $358,578 GF in FY 2021 and $391,176 GF in FY 2022 to set a minimum staffing level of three positions in each Clerk’s office. Provides an additional $500,000 GF per year to reduce the amount of Technology Trust Fund revenues currently diverted to support Clerks’ operating budgets.
  • Provides approximately $1.4 million GF per year for 29 additional assistant Commonwealth’s Attorney and support staff, which is projected to fund approximately 25 percent of unfunded positions based on FY 2020 staffing standards.
  • Provides $979,399 GF in FY 2021 and $1.1 million GF in FY 2022 for 29 additional court services positions in sheriffs’ offices, which is expected to meet 25 percent of needed positions based on staffing standards.
  • Additional details on funding for Constitutional officers is available in a memorandum from the Executive Secretary of the Compensation Board, which may be found at this link.

Elections

  • Provides $2.5 million GF in each year of the biennium to fully reimburse localities for general registrars’ salaries and electoral board members’ compensation.
  • Provides $5.8 million GF in the “caboose” bill in FY 2020 to reimburse localities for costs associated with the 2020 presidential primary.

Agriculture and Forestry:

  • Appropriates $726,340 GF in FY 2021 and $176,340 GF in FY 2022 to support and monitor the commercialization of industrial hemp in Virginia.  This funding creates a new position in the Virginia Department of Agriculture and Consumer Services (VDACS) and will support the development of a database to manage and track the registration and inspection of registered industrial hemp growers, registered industrial hemp dealers, and registered industrial hemp processors in Virginia.  Additionally, support is provided for the department for the collection of cannabis samples for tetrahydrocannabinol (THC) testing.
  • Provides $433,016 GF in both FY 2021 and FY 2022 to achieve the Commonwealth’s tree planting and forest conservation commitment in support of the Phase III Watershed Implementation Plan (WIP)

Commerce and Trade

  • Provides $7 million GF in FY 2020, $23 million GF in FY 2021, and $33 million in FY 2022 for the Virginia Housing Trust Fund, for total funding of $30 million GF in FY 2021 and $40 million GF in FY 2022.  The Trust Fund provides loans for affordable housing-related projects and grants for targeted efforts to reduce homelessness.
  • Provides an additional $16 million GF in each year of the biennium for the Virginia Telecommunication Initiative (VATI) to supplement costs to extend broadband to areas currently unserved by a broadband provider, bringing state support for the program to $70 million over the biennium.
  • Provides level funding of $68.9 million – $34.45 million each year of the biennium – to the Virginia Growth and Opportunity Fund (GO Virginia). The GO Virginia program provides grants to create private-sector growth and jobs through regional collaboration by business, education, and local government.
  • Provides $2 million in FY 2021 and $3 million in FY 2022 for the Virginia Business Ready Sites program.

Renewable Energy and Energy Efficiency

  • Provides $50,000 GF in both FY 2021 and FY 2022 to establish a statewide C-PACE program to assist localities with implementation of the program. C-PACE allows property owners to finance energy and water efficiency improvements, stormwater management improvements, and renewable energy systems using private capital. Funding supports initial start-up costs and the selection of a statewide program administrator.
  • Provides $10 million GF in FY 2021 to establish a clean energy financing program consisting of a revolving loan fund and a loan loss reserve fund to support local government and private sector projects.
  • Removes $50,000 GF in FY 2021 and FY 2022 for the Virginia Solar Development Authority energy storage capacity study.
  • Provides $275,000 GF in both FY 2021 and FY 2022 to establish the Office of Offshore Wind within the Division of Energy to promote and expedite the Coastal Virginia Offshore Wind (CVOW) project, to promote Virginia’s unique port and workforce advantages in attracting offshore wind supply chain business, and to support activities of the Virginia Offshore Wind Development Authority (VOWDA).

Health and Human Resources

  • Provides $6.6 million GF in FY 2020, $18 million GF in FY 2021, and $26 million GF in FY 2022 to fund Children’s Services Act program growth.
  • Provides $175,000 GF in FY 2021 and $75,000 GF in FY 2022 for a continuation of a study of private special education day placement rates; language requires providers receiving public funds through CSA to supply requested information. A report is due by June 1, 2021.
  • Provides $1.6 million GF in each year for distribution of the opioid overdose reversal drug Narcan and personal protective equipment to at-risk populations.
  • Funds increases in rent for local health departments ($75,889 GF and $49,195 NGF each year).
  • Authorizes the Department of Medical Assistance Services to seek federal authority to establish a home visiting benefit for pregnant and postpartum women at risk of poor health outcomes, and provides $1 million GF/$3.5 million NGF in FY 2021 and $11.8 million GF/$34 million NGF in FY 2022 to support the program.
  • Adds 1,135 new developmental disability waiver slots over the biennium.
  • Eliminates language allowing the Department of Behavioral Health and Developmental Services to provide funding to Community Services Boards whose Medicaid reimbursements fell short of the General Fund reductions incorporated in the 2018 Appropriations Act.
  • Addresses caseload growth in Part C/Early Intervention services by providing $1.2 million GF in FY 2020, $2.5 million GF in FY 2021, and $3.9 million GF in FY 2022.
  • Provides $19.7 million GF in FY 2021 and $30.1 million GF in FY 2022 for partial implementation of the remaining services in the STEP-VA plan (an additional $486,951 GF in FY 2021, $2.3 million GF in FY 2022, and matching amounts of federal funds support these elements of STEP-VA in the Medicaid program). Budget language overrides the statutory deadline of July 1, 2021, for the initiation of targeted case management, care coordination, and psychiatric rehabilitation.
  • Provides $9 million GF and $9.1 million NGF each year to increase minimum salaries for staff in local departments of social services and provide a three percent compression increase. Provides $24.9 million GF and $7.9 million NGF each year for local departments to staff prevention services departments to prepare for implementation of the federal Family First Prevention Services Act.  Also provides $8.4 million GF each year and matching NGF for prevention services that are eligible for federal reimbursement due to their inclusion in the federal Title IV-E Prevention Services Clearinghouse.

Natural Resources

  • Historic $367 million investment in new water quality funding in FY 2021 (via bond authorization)
    • $182 million for the Stormwater Local Assistance Fund (SLAF)
    • $120 million for the Water Quality Improvement Fund (WQIF) for Publicly Owned Treatment Works
    • $65 million for the City of Alexandria’s combined sewer overflow (CSO) control project
  • Provides general fund appropriation in FY 2021 of $47,025,697 for the mandatory deposit to the Water Quality Improvement Fund (WQIF) associated with the FY 2019 year-end surplus designated for deposit to the WQIF and WQIF Reserve.
  • Provides an additional $41,820,000 deposit in FY 2022 to WQIF.  Of the amount provided, $39.6 million is designated for the Virginia Natural Resources Commitment Fund, a subfund of WQIF, of which $35.0 million is for the implementation of Agricultural Best Management Practices (BMP) and $4.6 million is for the Soil and Water Conservation Districts to assist in the implementation of the BMPs.
  • Provides $1,839,500 GF in both FY 2021 and FY 2022 to fund nine unfilled positions and contractual work to reduce backlogs in land and water program activities, including water protection permitting, land permitting, and stormwater plan review.
  • Provides $2,327,500 GF in both FY 2021 and FY 2022 to fund 15 positions to support the Department of Environmental Quality’s (DEQ) regulatory activities in air, water and land protection.
  • Provides $386,646 GF in FY 2021 and $504,380 in FY 2022 for two positions to provide technical assistance for localities to implement the Chesapeake Bay Preservation Act and to offset adjustments in federal funding for nutrient reduction projects.
  • Provides $2,695,000 GF in both FY 2021 and FY 2022 to fund 18 positions and contract work to support environmental justice and outreach in the DEQ’s overall communications strategy.
  • Provides $822,000 GF in FY 2021 and $1,644,000 GF in FY 2022 to increase operational capacity for the DEQ to carry out water permitting activities, including pollutant discharge elimination system permits, pollution abatement permits, water protection permits, ground water withdrawal permits, and surface water withdrawal permits
  • Provides $5,759,152 GF in FY 2021 and $5,929,152 GF in FY 2022 to fund 15 unfilled vacancies, equipment, and contractual work for the DEQ’s air and water monitoring and compliance activities. Funding will support the purchase of equipment through the state’s Master Equipment Lease Program.
  • Provides $10 million in bond proceeds in FY 2021 to accelerate oyster reef restoration.
  • Provides $10 million GF in both FY 2021 and FY 2022 to support the Dam Safety, Flood Prevention, and Protection Assistance Fund.
  • Removes budget language which limits the use of funds for participation in the Regional Greenhouse Gas Initiative, or the expenditure of any proceeds resulting from participation in a climate compact without express legislative approval.

Judicial/Public Safety

  • Provides $2,701,065 GF in both FY 2021 and FY 2022 to fund 35 public defenders and support staff to operate a new public defender office in Prince William County.
  • Provides $3,798,726 GF in FY 2021 and $5,698,089 GF in FY 2022 to fund 59 additional public defenders and support staff positions.
  • Provides $1,864,020 GF in FY 2021 and $3,728,040 GF in FY 2022 to fund 60 additional district court clerk positions.
  • Provides $2,272,500 GF in both FY 2021 and FY 2022 to cover the costs associated with providing constitutionally mandated legal defense for indigent persons in general district courts.
  • Provides $2,272,500 GF in both FY 2021 and FY 2022 to cover the costs associated with providing constitutionally mandated legal defense for indigent persons in juvenile and domestic relations courts
  • Provides $17,268,677 NGF in FY 2021 and $21,268,677 NGF in FY 2022 for the Victims of Crime Act (VOCA) program, which funds support grants to local programs that provide services to victims of domestic abuse, sexual assault, victim witness program, and child abuse.
  • Provides $3,691,684 NGF in FY 2021 and $5,610,644 NGF in FY 2022 for anticipated distributions from the Fire Programs Fund to localities.
  • Provides $1.5 million GF in both FY 2021 and FY 2022 for competitive grants to localities to assist with security measures intended to address vulnerabilities related to hate crimes.
  • Provides $1 million GF in both FY 2021 and FY 2022 to fund pre-release and post-incarceration services.
  • Provides $2.3 million GF in both FY 2021 and FY 2022 for the expansion of pretrial and local probation services. The additional funding will enable these services to be provided in localities which currently do not have these services
  • Removes budget language prohibiting the expenditure of funds by any state agency or authority to purchase or implement body-worn camera systems.
  • Maintains the FY 2020 level of HB 599 funding for localities with qualifying police departments for both FY 2021 and FY 2022.

Jails

  • Expands forensic discharge planning to three additional jails (two jails previously received funding) with $1.4 million GF in FY 2021 and $2.1 million GF in FY 2022.
  • Provides $347,803 GF in FY 2021 and $465,440 GF in FY 2022 (matched with $11.4 million and $16.4 million NGF in FY 2021 and FY 2022, respectively) for care coordination for Medicaid-eligible individuals 30 days prior to release from incarceration
  • Funds a salary increase for entry-level regional jail officers, effective July 1, 2020, to match the increase provided to entry-level deputy sheriffs effective February 1, 2019 ($2.7 million GF in FY 2021 and $2.9 million GF in FY 2022).

Transportation

  • Details of the Governor’s transportation proposal will be provided in separate legislation, but according to his remarks on December 17, the key components include:
    • Eliminating vehicle safety inspections
    • Reducing vehicle registration fees by half
    • Raising the Gasoline Fuel Tax by four cents per gallon each year for the next three years to a state average of approximately 34 cents per gallon.

VACo Contact:  VACo Legislative Team

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