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S&P upgrades Virginia’s financial outlook to stable after budget approval

S&P upgrades Virginia’s financial outlook to stable after budget approval

Posted by on Jun 11, 2018 in News | 0 comments

BY MICHAEL MARTZ Richmond Times-Dispatch, June 8, 2018

S&P Global Ratings has restored Virginia’s financial outlook to stable and reaffirmed the state’s coveted AAA bond rating, the day after Gov. Ralph Northam signed a new budget that the national rating agency credited for rebuilding revenue reserves and investing in core services such as public education.

“The outlook revision reflects the adoption of a structurally aligned 2018-2020 biennial budget, planned reserve fund deposits, and stronger projected revenues and economic indicators,” the agency said in its report on Friday.

S&P’s action ends a year of uncertainty for state officials and legislators who were alarmed by the agency’s decision more than a year ago to downgrade Virginia’s financial outlook to negative, raising concerns about a potential loss of the AAA rating that enables the state to pay lower interest on bonds to finance capital projects.

“It’s fantastic news!” said House Appropriations Chairman Chris Jones, R-Suffolk, who negotiated the two-year, $117 billion budget with Senate Finance Co-Chairman Emmett Hanger, R-Augusta, to end an impasse over expansion of Virginia’s Medicaid program.

“The most important responsibility I have as chairman is to protect our AAA bond rating,” Jones said. “S&P was very clear when we met with them last year about what needed to be done. The budget addressed those concerns, so it is extremely gratifying to see the results of those efforts acknowledged so quickly.”

Hanger called the upgraded outlook “extremely good news” and added, “I knew we were heading for solid footing, but it is great that they reacted that quickly.”

Northam, whose administration pushed legislators to pledge any revenue windfall this year to the state’s reserves, said, “This demonstrates the fiscal health of the commonwealth and affirms the work we have done over the course of the session to ensure our critical AAA bond rating remains intact.”

House Speaker Kirk Cox, R-Colonial Heights, called the report “vindication that the hard work we put in to crafting the budget has paid off.”

S&P noted the risk to Virginia and other expansion states if the federal government cuts back Medicaid spending, but said the budget plan to accept federal funds under the Affordable Care Act and impose a tax on hospital revenues to pay the state’s share would offset the costs and “mitigate” potential pressure on the general fund for core services.

“We always wanted to do it in a fiscally responsible way,” Finance Secretary Aubrey Layne said Friday.

Layne had pushed publicly for Medicaid expansion because of the additional federal funding that would result in nearly $371 million in state savings that could be used to bolster reserves and invest in core public services.

Senate Majority Leader Tommy Norment, R-James City, has maintained that Virginia could have bolstered reserves and satisfied rating agency concerns without expanding Medicaid, which he and the majority of Senate Republicans strongly opposed.

After Moody’s Investors Service affirmed Virginia’s AAA rating and stable financial outlook this week, Norment called arguments that expansion was necessary to protect the state’s bond rating “complete poppycock.”

Cash reserve

S&P credited Virginia for using the new budget and anticipated windfalls in tax revenues to bolster its depleted financial reserves, which had fallen to the bottom of the 14 states that have a AAA bond rating from the agency.

The budget adds $90 million to the state’s new cash reserve, on top of the $156.4 million carried over from the last fiscal year. It projects more than $500 million in unanticipated revenues in this fiscal year, ending June 30, most of it a one-time windfall related to a surge in income tax payments tied to the adoption of comprehensive federal tax reforms in December.

Any additional revenues would be held in reserve.

Altogether, S&P expects the state to boost its revenue stabilization fund, known as the rainy day fund, by $193.2 million and its cash reserve by $412 million in the next biennium to bring the combined reserves to $976.3 million, close to the pre-recession peak of $1.2 billion in 2007.

“This is a home run,” Layne said.

Defense spending

The rating agency also predicted an improved economic outlook for Virginia with the end of federal budget sequestration as a threat to the defense-dependent state economy and the likelihood of higher military spending.

“Given boosts to defense spending in the recently enacted federal omnibus spending bill, we view it as likely that Virginia’s economy will benefit,” S&P said while noting some risk to the state from federal trade policy and “the threat of retaliatory tariffs.”

The agency noted that Virginia’s revenues were growing at almost twice the annual forecast of 3.4 percent, but agreed with state officials and legislators that much of the increase could be one-time gains from “tax planning related to federal tax policy changes.”

S&P said that while the forecast in the next biennium does not consider higher tax revenues because of changes in tax policy, the budget does reflect an increase of about $60 million a year from higher income tax collections withheld from paychecks and other, sustainable sources of revenue.

The additional money, combined with state savings from accepting more than $2 billion in federal funds to expand Medicaid, helped pay for what the rating agency called “additional spending on several policy initiatives,” such as public education, raises for state employees and teachers, and infrastructure projects such as dredging Hampton Roads Channel and the Elizabeth River.

“This is a positive sign for Virginia’s economy, and I look forward to continuing to work with the General Assembly to make the commonwealth work better for every family,” Northam said.

Pension obligations

S&P also credited the state’s progress in funding pension obligations for state employees and teachers, primarily by fully funding the contribution rates certified by the Virginia Retirement System to pay ongoing costs and unfunded liabilities for the retirement plans it administers.

“This is an improvement and gets the state to full funding of the [actuarial contribution] one biennium budget ahead of schedule under its pension reform,” the report states.

The agency warns that it would consider lowering its rating if Virginia backtracks on its commitment to rebuilding reserves, maintaining a structural budget balance, or “experiences consistently weaker economic performance relative to the U.S.”

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Ahead of budget signing, Moody’s affirms Virginia AAA bond rating

Ahead of budget signing, Moody’s affirms Virginia AAA bond rating

Posted by on Jun 11, 2018 in News | 0 comments

BY MICHAEL MARTZ Richmond Times-Dispatch, June 6, 2018

Virginia’s new budget just passed its first test, even before it is signed by Gov. Ralph Northam.

Moody’s Investors Service reaffirmed the state’s AAA bond rating and stable financial outlook on Wednesday, a day before Northam is expected to sign a pair of budget bills that will boost the state’s financial reserves to allay jitters on Wall Street.

The budgets, one for the current fiscal year that ends June 30 and the other for the next two years beginning July 1, also will expand Virginia’s Medicaid program and pay for the state’s share of the cost with money from a new tax on hospital revenues.

Moody’s said the arrangement will leave Virginia “less exposed to potential future cutbacks in federal Medicaid spending” than most other states.

The decision by Moody’s, one of three national bond-rating agencies that advise investors on their potential risks, represents the first hurdle Virginia has cleared in reassuring Wall Street financial institutions that the state is operating with a structurally balanced budget and ample reserves against future economic risks.

Finance Secretary Aubrey Layne privately relayed Moody’s decision to Northam and said the governor called the report “very positive” for the state.

“Governor Northam is pleased that the passage of a balanced and fiscally prudent budget that expands Medicaid has already affirmed Moody’s confidence in Virginia bonds,” spokesman Brian Coy said in a statement. “He looks forward to continuing to work with the General Assembly and all Virginians to build on this momentum and make our commonwealth work better for every family.”

Virginia is one of 12 states with AAA ratings from all three national agencies for the bonds it sells to investors for a wide variety of state capital projects, from a new General Assembly Building to dormitories and research buildings at public colleges and universities. The AAA rating enables the state to borrow money at lower interest rates, saving public tax dollars over the life of the bonds.

“This is not just academic stuff,” Layne said. “The rating is very serious to our citizens.”

Protecting the AAA rating has been a top priority for state officials and legislative budget leaders since S&P Global Ratings downgraded Virginia’s financial outlook from stable to negative in April 2017. S&P has not yet reacted publicly to the General Assembly’s adoption of a new budget, which Northam will sign on Thursday in a ceremony on the South Portico of the Capitol.

The General Assembly adopted the budget May 30 after seven weeks in a special session that Northam called after the legislature adjourned its regular 60-day session March 10 without a budget because of a political impasse over Medicaid expansion. The new budget represents a compromise that House Appropriations Chairman Chris Jones, R-Suffolk, and Senate Finance Co-Chairman Emmett Hanger, R-Augusta, negotiated in order to win approval in a sharply divided Senate.

“I am very pleased that Moody’s has reaffirmed Virginia’s bond rating,” Jones said Wednesday. “I believe their actions are reflective of the General Assembly’s commitment to build up our cash reserves, make investments in education and meet the needs of Virginia business through workforce development.”

Senate Majority Leader Tommy Norment, R-James City, said via text message that the Moody’s report was “no surprise to me. I repeatedly said during the session the threat of losing AAA was demagoguery and false assertion to try to scare legislators into voting for expansion. Complete poppycock.”

S&P downgraded the state’s financial outlook last year while reaffirming its AAA rating because of concern over Virginia’s depleted Revenue Stabilization Fund — also called its rainy day fund. Withdrawals from the fund to balance the current budget lowered the reserve to $281.7 million, or about 1.4 percent of state general funds. That level is the lowest among the 14 states that S&P rates AAA.

Similarly, Moody’s previously had cited low reserves “as a factor that could lead to a downgrade,” Public Resources Advisory Group, an outside state consultant, said in a report shared with legislators last month.

The pending budget appropriates an additional $90 million for the cash reserve, on top of the $156.4 million already pledged from excess revenues carried over from the fiscal year that ended June 30.

However, Layne said a surge in income tax payments after President Donald Trump signed the Tax Cuts and Jobs Act on Dec. 22 could produce additional revenues of more than $500 million in one-time payments of income taxes not withheld from paychecks, such as those paid on capital gains.

The budget projects the combined revenues held in the new cash reserve and the rainy day fund could exceed $976 million at the end of the biennium in mid-2020. That would represent about 5 percent of the state’s general fund revenues.

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Virginia budget includes $350 million for Norfolk port-deepening project

Virginia budget includes $350 million for Norfolk port-deepening project

Posted by on Jun 6, 2018 in News | 0 comments

BY GORDON RAGO The Virginian-Pilot, June 5, 2018

In a race for the largest and deepest East Coast port, Virginia is about to leap ahead.

The budget about to be signed by Gov. Ralph Northam includes $350 million to kick-start a major dredging project in the shipping channel. If the project goes forward, shipping channels in the port of Hampton Roads will go from 50 feet to 55 feet in some places, surpassing Los Angeles, the busiest port in the nation.

The dredging project, headed up by the U.S. Army Corps of Engineers, will also widen shipping channels in Hampton Roads up to 1,400 feet.

The push to dredge is fueled by ultra-large container vessels more frequently criss-crossing the world, and the ability of ports along the East Coast like Virginia, Charleston and Savannah to accommodate them. Charleston is in the middle of a deepening project, and Savannah is pushing for the same.

“The port has always been an economic engine for the commonwealth, not just Hampton Roads,” said Del. Chris Jones, R-Suffolk, chairman of the Virginia House Appropriations Committee.

Currently, the Coast Guard temporarily closes shipping channels in Norfolk when an ultra-large vessel passes through, sometimes for hours, because the channels aren’t deep or wide enough to allow for two-way traffic.

The money in the budget includes $20 million for design, while the remainder would be in state bonds the Port of Virginia could use as the project progresses. Dredging would take place in a channel ships use to come into the port, as well as channels closer to shipping terminals in Norfolk and Newport News.

There are still hurdles to clear. The Corps of Engineers will pass its final report up the chain for review and, if all goes well, the project would be included in a report to Congress for review and authorization of funds.

State officials see the project as keeping Norfolk competitive, especially since a 2016 expansion of the Panama Canal.

A Northam spokeswoman said the expansion would increase the port’s capacity by 40 percent or, put another way, 1 million more containers.

Gordon Rago, 757-446-2601,


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Virginia set to expand Medicaid as Senate and House back budget deal

Virginia set to expand Medicaid as Senate and House back budget deal

Posted by on May 31, 2018 in News | 0 comments

BY MICHAEL MARTZ Richmond Times Dispatch May 30, 2018

Six years after the U.S. Supreme Court left the decision to states on whether to expand their Medicaid programs under the Affordable Care Act, Virginia is about to extend health care coverage to hundreds of thousands of Virginians without it.

Gov. Ralph Northam has left no doubt he will sign a pair of budget bills that will begin a two-phased process of receiving federal approval to expand Medicaid in Virginia on Jan. 1, relying on billions of dollars in long-available federal funds and a pair of taxes on hospital revenues to pay for it.

The decisive vote came in the Senate just after 7 p.m. on Wednesday, when a bitterly divided chamber voted 23-17 to adopt a two-year budget that includes Medicaid expansion. Earlier in a grueling six-hour debate, the Senate adopted a revised budget for the current fiscal year that ends June 30, by the same margin, that directs the state to move forward on expansion.

A little more than an hour later, the House of Delegates adopted identical budget bills embodying a compromise negotiated by House Appropriations Chairman Chris Jones, R-Suffolk, and Senate Finance Co-Chairman Emmett Hanger, R-Augusta, to resolve an impasse that had left Virginia without a budget for the next biennium when the General Assembly adjourned its regular session on March 10.

“It’s not about the House. It’s not about the Senate. It’s about Virginia,” Jones said on the House floor. “And the 8.3 million people we represent.”

The victory was especially hard-fought for Hanger, a moderate Republican from the Shenandoah Valley who had been thwarted by fellow Republicans from expanding health coverage in 2014. This year, he had to overcome fierce opposition from Senate Republicans led by Majority Leader Tommy Norment, R-James City, who bitterly denounced the outcome and the backdoor negotiations with the House that produced it as “a degradation of the customs, usage and traditions of the Senate.”

Norment issued a statement saying the legislature had approved a budget “that abandons Virginia’s long-standing reputation for fiscal responsibility” and “marks a stark departure, both from the conservative fiscal policies observed by the commonwealth for generations and in the manner in which it was approved by the General Assembly.”

Hanger called Norment’s remarks “unfounded,” and Sen. Janet Howell, D-Fairfax, said the budget deal was necessary after the legislature failed to adopt a budget in March and the Senate Finance Committee didn’t propose its own amendments until seven weeks after the assembly convened in special session.

“Something had to happen,” Howell said. “You can’t just stand around and wait until we go over the cliff.”

In the end, three other Republican senators — Frank Wagner of Virginia Beach, Ben Chafin of Russell County and Jill Vogel of Fauquier County — joined Hanger and the Senate’s 19 Democrats in adopting the pair of budget bills to end a standoff that has been watched closely by national bond-rating agencies and institutional investors who hold the state’s AAA-rated bonds.

“We should be in much better position with our bond-rating agencies now,” Hanger said after the vote.

While Norment and other Republican opponents denounced the budget bills as anything but conservative, Wagner defended his decision to vote for them as a way to gain concessions that would allow the state to seek federal waivers that would impose work and other requirements on Medicaid recipients and fashion ways to lower commercial insurance premiums for middle-class Virginians.

“It’s a helluva lot more conservative than it was initially,” Wagner said after the vote.

House Speaker Kirk Cox, R-Colonial Heights, also defended his decision to support Medicaid expansion after almost five years of opposing it and after House elections last fall that almost cost the GOP its majority.

Cox said the budget “includes what I consider the most conservative set of reforms to Medicaid in the nation as part of a plan to expand health care coverage to working Virginians,” but Senate Republican opponents scoffed at the proposed work requirement and other reforms, while predicting future tax increases to pay for the expanded health care entitlement.

“In the 17 years I’ve been here, this is the one budget that scares me to death,” said Sen. Bill Carrico, R-Grayson.

His seatmate, Sen. Bill Stanley, R-Franklin County, denounced the budget as “a ticking time bomb” and a “$1.2 billion bailout to our hospitals.” Private hospitals would receive an estimated net benefit of about $880 million over the next two years from a pair of provider assessments that raise money for the state’s share of expansion and an increase in reimbursement rates for treating Medicaid patients.

Stanley also contended the state would not be able to reverse course and take back benefits for new recipients if the federal government reduces its share of the funding. “Once you ring this bell, you cannot unring this bell,” he said.

But Chafin and Vogel defended their decisions as necessary to invest in core public services, while expanding health coverage to people who need it and the hospitals that provide it.

“I came to the conclusion that ‘no’ just wasn’t an answer anymore,” he said.

Like Chafin, Vogel said she has opposed Medicaid expansion in the past, but supports the budget proposal because of the reforms it includes, as well as funding for her priorities.

“There’s a lot more in this budget than just Medicaid expansion,” she said.

For Democrats, victory was sweet after years of disappointments. “I can’t say enough good things about Emmett Hanger,” Minority Leader Dick Saslaw, D-Fairfax, said at a news conference of Democrats who applauded and replied, “Yes!”

“And also, Frank Wagner. It took a lot of guts,” Saslaw said.

Before the Senate could act on the budget bills that Hanger negotiated with Jones and Northam, the Senate first had to reject a package of amendments proposed by Norment and adopted in a tense Finance Committee meeting on Tuesday. The package embodied the budgets the Senate had adopted in February without Medicaid expansion or hospital assessments, with additional money from higher tax collections and spending on pay increases for public employees.

The Senate voted 22-18 to reject the committee amendments, with Vogel supporting them.

Hanger then fought off a series of amendments proposed to his substitute bills, including two by Sen. Steve Newman, R-Bedford, to the budget for the current fiscal year in an attempt to require approval of the federal waiver before the program could expand and to make the proposed work requirement more stringent.

The Senate then considered and rejected 18 amendments proposed to the biennial budget, including three Newman offered to put in further safeguards in case the federal government reduces state Medicaid funding or the state’s program takes up too much of the state general fund budget.

Hanger blocked each amendment in order to preserve his agreement with the House and governor and avoid amendments that could require a conference committee to reconcile the House and Senate budgets.

“We’ve got a responsibility in this chamber to get this right,” Newman complained, adding, “I don’t care about the agreement with the House. I don’t care about the agreement with the governor.”

In the end, however, the adoption of the budgets without amendments in both chambers cleared the way for quick action by Northam, who told reporters the legislature’s action was “a proud day for Virginia.”

“This is a budget that I really am proud of,” the governor said. “I think it’s good for all Virginians. It’s structurally sound. It expands health care in the commonwealth of Virginia and it protects our triple A bond rating.”

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Staff writers Graham Moomaw and Patrick Wilson contributed to this report

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Virginia school safety panel sets broad mandate for work

Virginia school safety panel sets broad mandate for work

Posted by on Apr 26, 2018 in News | 0 comments

By DAVE RESS Daily Press

April 26, 2018

The House of Delegates’ first Select Committee in 155 years got down to business with a briefing on Virginia’s extensive efforts to boost school safety — and a promise to look at school safety in the broadest possible way.

That includes looking at ways of preventing violence and addressing behavioral issues, as well as thinking about security measures — such as the unexpected new safety curtains installed in the glassed-in office that Speaker Kirk Cox found when he stopped by at the place where he used to teach.

“There’s more to school safety than higher walls and stronger locks,” Cox said, convening the Select Committee’s first meeting Thursday.

Cox said it was heartening to hear nearly 90 minutes of briefing on steps the state has taken in recent years.

They range from one of the nation’s most robust School Resource Officer programs and being the only state to require threat assessment teams in K-12 schools and colleges, to the longest-lived clearing house for school safety concerns and training at the Department of Criminal Justice Services.

But there’s more to do, he said.

Cox said addressing concerns expressed Thursday by, among others, Del. Mike Mullin, D-Newport News, about bullying and the violence it can foreshadow will be part of the group’s task in the months ahead.

Del. Chris Jones, R-Suffolk, said enhancing safety means building trust.

During a recent tour of schools in South Hampton Roads — when he heard a lot about physical safety measures — Jones said he also heard about a social media post that promised something big was going to happen at a high school cafeteria.

It turned out to be an invitation to a prom. But it meant hours of anxiety for parents and school officials, he said. Making sure everybody feels safe and secure in school will be a big job, he added.

“We have a strong foundation we’ll be able to add to,” said vice chairman Danny Marshall, R-Pittsylvania County. “I was a little surprised at all that’s been done.”

And, he said, the public has lots of ideas and lots of worries. Marshall said he received more than 100 emails with suggestions about safety measures since the Select Committee’s formation last month.

The committee’s goal is to review state and local policies on school safety and make recommendations to the General Assembly for the 2019 session.

The committee will not discuss issues related to guns or broader behavioral health policy, Cox has said, because other General Assembly committees and commissions are looking at those issues.

Instead it will look at providing additional mental health resources for students and developing protocols for prevention of mental health crises at schools.

In addition, the committee will explore ways to harden school security systems.

It will also consider best practices for school security and at deploying additional security personnel.

Ress can be reached by telephone at 757-247-4535


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House committee adopts new budget, with changes for Medicaid work requirement, insurance and cash reserve

House committee adopts new budget, with changes for Medicaid work requirement, insurance and cash reserve

Posted by on Apr 16, 2018 in News | 0 comments

By MICHAEL MARTZ Richmond Times Dispatch

Apr 13, 2018

There are few surprises in the new state budget the House Appropriations Committee adopted Friday, but concern about protecting Virginia’s triple-A bond rating will loom over the coming battle with the Senate over whether the final spending plan will expand the state’s Medicaid program.

The committee made a number of important changes to the pair of budgets — one for the fiscal year that will end June 30 and the other for the biennium, and then adopted both by 16-5 votes that reflect a continued division among Republicans over Medicaid expansion.

The committee’s action paves the way for the full House to vote on its version of the budget Tuesday afternoon, when lawmakers return to continue the special session in an effort to resolve the impasse.

The amended House budget bills would tighten the requirement that able-bodied Medicaid recipients work or look for employment, seek a new federal waiver to allow Virginia to bolster its individual market for health insurance, and require all higher-than-predicted revenues at the end of this year go into the state’s new cash reserve.

However, Senate Republicans made clear that the proposed changes wouldn’t change their opposition to Medicaid expansion in the budget.

“The few changes to the House’s original proposal approved by the committee today do not narrow the chasm between our respective proposals,” Senate Majority Leader Tommy Norment, R-James City, said in a statement Friday afternoon.

Gauging revenues

Norment, who is co-chairman of the Senate Finance Committee, called again for “an up-to-date and comprehensive re-forecast” to help the assembly “in its efforts to reach an agreement on a fiscally responsible budget based on sustainable revenues.”

State Finance Secretary Aubrey Layne told the committee Friday that the governor and other assembly budget leaders were right in deciding to not revise revenues in order to reflect higher income tax collections from affluent taxpayers who don’t have taxes withheld from their paychecks, but instead submit estimated payments in response to capital gains or other income gains.

Revenue growth fell by 1 percentage point last month, to 5.2 percent, compared with the previous March, primarily because of the state had one fewer deposit day for payroll income taxes.

Total revenues still are tracking ahead of the forecast of 3.4 percent annual growth with three months left in the fiscal year, but Layne said most of the increase came from nonwithholding tax collections in December, after President Donald Trump signed a tax reform bill that will eliminate the ability to write off state income taxes on federal tax returns next year.

Those gains could be offset by a big surge in refunds beginning in May and declines in other revenues, such as sales tax, Layne said. “It looks like the numbers are not telling us as of right now that a [revised] forecast … based on economic data is warranted.”

Bond rating

The cash reserve requirement, proposed by Gov. Ralph Northam and Appropriations Chairman Chris Jones, R-Suffolk, is aimed at quieting concerns among national bond-rating agencies, particularly S&P Global Ratings, which placed a negative outlook on Virginia’s financial condition just shy of a year ago.

“Triple-A bond rating is what we’ll be paying very close attention … and we will do what is necessary in the cash reserve arena to be sure we satisfy the requirements of the rating agencies in that context,” Jones told the committee.

Layne told the committee that S&P continues to ask questions about Virginia’s level of reserves, which was a primary reason the agency downgraded the state financial outlook from stable to negative on April 21 last year.

“They really didn’t like it that we pulled money out [of the rainy day fund] again in 2018,” Layne said, referring to a decision in 2016 to withdraw from the constitutionally established Revenue Stabilization Fund to help fill a projected gap in state revenues over the current biennium.

The finance secretary said earlier this month that he believes expanding Medicaid to accept billions of dollars in federal money under the Affordable Care Act is crucial to generating the resources for Virginia to bolster its financial reserves.

Norment called Layne’s concern “a toothless tiger,” since only four of the 12 states with the highest credit ratings by all three national agencies have expanded their Medicaid programs.

The Senate addressed concerns over state financial reserves in its version of the budget last month by proposing a deposit of about $180 million into the state’s new cash reserve — about $90 million more than the House and about $90 million less than then-Gov. Terry McAuliffe proposed in his parting budget in December.

“It isn’t a toothless tiger,” Quentin Kidd, director of the Wason Center for Public Policy at Christopher Newport University, said earlier this week. “We could be paying more for the money we borrow.”

Cash reserve

The new House proposal would require that if revenues exceeded the forecast by 1 percent or more in this budget — or almost $200 million — all of the money would be deposited in the new cash reserve, the rainy day fund or a state water quality plan.

Anne Oman, legislative fiscal analyst for the committee, estimated 1 percent in additional revenues would generate an additional $136 million for the new cash reserve, boosting it to about $382 million, as well as $38 million for the rainy day fund.

The amendments eliminate a previous House proposal to dedicate any additional revenues at the end of this fiscal year to a one-time bonus for state employees.

Work requirement

The committee also amended the budget to bolster the House’s proposed work requirement for Medicaid recipients, primarily the childless adults who would be covered by expanded eligibility. They would be dropped from benefits until the next annual open enrollment if they failed to look for work in some fashion in three months of the year.

Jones said the new provision is based on the same requirement in the Medicaid work requirement federal regulators approved for Arkansas this month. The previous House budget included money to oversee the requirement, much as the state already does for people who receive welfare and food stamp benefits.

“We’re trying to make sure it’s something that is complied with,” he said.

Federal waiver

The new budget proposal also would allow the state to seek a federal innovation waiver under Section 1332 of the Social Security Act for the state to develop ways to reduce soaring increases in commercial insurance premiums in the individual marketplace. Four states already have been granted such a waiver and others are considering it because many middle-income families and small businesses can’t afford health insurance without federal subsidies.

“States are trying it because it’s a big problem everywhere,” said Del. Mark Sickles, D-Fairfax, who commended Jones for the proposal to address the insurance issue as part of the budget package for expanding Medicaid.

Across town, Northam made his Medicaid pitch to a business-minded crowd at a luncheon hosted by the Virginia Chamber of Commerce and ChamberRVA. The governor said the state has a moral responsibility to help Virginians who could face financial ruin because of an illness. He said the safeguards in place to unwind expansion if federal money disappears make sense from “a business perspective.”

“If they renege in a year or four years, it is still resources that we have today,” Northam said. “So let’s act on today.”

Speaking to reporters afterward, Northam said he’s willing to talk to GOP leaders from both the House and Senate.

“We’ve got everything on the table right now,” Northam said.

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Staff writer Graham Moomaw contributed to this story.

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