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House Republicans propose fund to return $300 million to taxpayers

House Republicans propose fund to return $300 million to taxpayers

Posted by on Jan 28, 2019 in News | 0 comments

BY MICHAEL MARTZ Richmond Times Dispatch, January 27, 2019

House Republicans have an answer to calls by Gov. Ralph Northam and his Democratic allies to immediately conform the state tax code to federal tax law as the filing season begins: bring it on.

House Appropriations Chairman Chris Jones, R-Suffolk, said he plans to amend his legislation on tax conformity on Monday to include the creation of a “Taxpayer Relief Fund” that would capture more than $300 million in estimated new revenues from the 2018 tax year and return them to taxpayers who pay more to the state because of federal tax reform.

The General Assembly would determine in a fall special session — before November elections that will determine partisan control of both narrowly divided chambers — how to refund the revenues in the new fund and change tax policy for future years under the substitute bill the House Finance Committee will consider early on Monday.

“Conformity is very important,” Jones said in an interview, “but just as important is protecting the taxpayers from the unintended consequences of the Tax Cuts and Jobs Act.”

The law, which President Donald Trump signed 13 months ago, has created a dilemma for Virginia policymakers by generating an anticipated $1.2 billion in additional state revenues, primarily from taxpayers who traditionally itemize their deductions, including deductions for state and local taxes that the federal law would cap.

It also sets up a showdown between House Republicans and Northam, a Democrat, who has proposed to return a portion of the anticipated windfall to families earning less than $55,000 a year and investing the rest of “limited time” revenues generated by temporary provisions of the federal law on state budget priorities, including its reserves.

The Appropriations Committee already has taken the additional revenues out of the two-year budget.

“This will ensure that we don’t spend it, but we will send it back to taxpayers,” Jones said of his new proposal.

House Finance Chairman Lee Ware, R-Powhatan, called for a similar approach in a speech on the House floor last week. Ware called for the legislature to immediately conform the state and federal tax codes, sequester the additional revenues, and then debate changes to tax policy, including refunds for taxpayers who get hurt this year.

The new proposal by Jones would “fall along the lines I laid out,” Ware said, but he still wants the House and Senate to produce their own tax plans during the legislative session that is scheduled to adjourn Feb. 23, rather than in continuing special session in the fall.

“It would be my desire for it to happen sooner,” he said.

The Senate Finance Committee is poised to produce its proposed income tax policy as early as Monday as it prepares revisions to the state budget for public release next Sunday. Currently, Senate Republican leaders say they are focusing on changes that would help affected taxpayers in the simplest way for the state to carry out while ensuring relief for those who pay the most for core services of state government.

They have rejected Northam’s proposal to refund money to lower-earning taxpayers under the Earned Income Tax Credit, but Senate Majority Leader Tommy Norment, R-James City, said last week that he favors a solution that would help all classes of taxpayers.

“They can’t be totally left out of the equation,” Norment said of those who would benefit from the governor’s plan, “but those who are paying the most ought to get greater relief.”

House Speaker Kirk Cox, R-Colonial Heights, and other House Republican leaders have thrown their weight behind legislation proposed by Del. Tim Hugo, R-Fairfax, that would effectively “decouple” the decision by taxpayers on whether to itemize deductions on their state returns from how they define their income for federal taxes.

Under current Virginia law, taxpayers cannot itemize deductions on their state returns if they claim the standard deduction on their federal taxes. The federal deduction doubled under the Trump tax law, making it more attractive to taxpayers, including about 600,000 who would lose a portion of their deductions on state tax returns.

Hugo’s legislation also includes a modest increase in the state standard deduction — from $3,000 to $4,000 for individual taxpayers and from $6,000 to $8,000 for married couples — and no cap on deduction of local property taxes from taxpayer income, which is a major concern in affluent suburbans where real estate taxes are high.

Cox had challenged a state estimate of the costs of the proposed legislation, but the Joint Legislative Audit and Review Commission has confirmed the tax department projections that the bill would increase the cost of administering the tax system by $1 million and reduce revenues by $611 million in the first fiscal year.

Virginia’s suburbs are likely to be the major political battleground for elections on Nov. 5 for all 140 seats in the General Assembly, as Democrats seek to win majorities in both chambers, now narrowly controlled by Republicans. Republicans hold 51 House seats to Democrats’ 48 pending the outcome of a Feb. 19 special election. In the Senate, Republicans hold 21 seats and Democrats 19.

With tax filing season about to begin Monday, Democrats have sought to blame Republican legislators for failing to conform the state tax code to federal law in time for taxpayers and their accountants to prepare returns for the 2018 tax year, which has a May 1 deadline.

Northam rolled out his tax plan, including $216 million in proposed refunds for lower-earning taxpayers, in mid-August when he updated the assembly money committees on Virginia’s revenues for the fiscal year that ended June 30 and the biennium that began July 1.

“This is normally a very smooth process, but the General Assembly this year has failed to act, despite knowing of the short timeline that we have,” Del. Rip Sullivan, D-Fairfax, said in a speech on the House floor Friday.

“We have jeopardized the entire collection process, potentially throwing the filing season into chaos and needlessly delaying the refunds many of our constituents are expecting and on which many of them rely,” Sullivan said.

The Northam administration and the state’s certified public accountants have warned that it is too late to make changes in tax policy for the 2018 tax year, with more than 600,000 returns expected to be filed in the next week without guidance from the state or the ability to issue refunds.

Under the substitute bill proposed by Jones, the assembly would conform the state and federal tax codes immediately, which would require 80 percent approval by each chamber to enact emergency legislation that would take effect as soon as the governor signs it, rather than on July 1.

The additional revenues that Virginia would collect because of the federal tax law would be held in the “Taxpayer Relief Fund,” rather than be included in the budget.

The substitute bill would require the Department of Taxation to report to the General Assembly in mid-August with a plan for returning additional state income tax revenues to the taxpayers who paid them. That would allow “a robust debate” on tax policy before the elections in November, Jones said.

If the assembly and governor do not reach an agreement on tax policy this year, the proposed legislation would direct that additional revenues collected in 2020 for the 2019 tax year also go into the fund, as well as money in subsequent tax years until the temporary federal provisions for individual taxpayers expire at the end of 2025.

“This ensures there will be a debate on tax policy,” Jones said. “It will not be allowed to happen by default.”

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New House panel formed to shepherd Amazon package through assembly

New House panel formed to shepherd Amazon package through assembly

Posted by on Jan 17, 2019 in News | 0 comments

BY MICHAEL MARTZ, Richmond Times Dispatch, January 15, 2019

As Amazon’s plan for a new headquarters in Arlington County moves from vision to reality, a new House Appropriations subcommittee has formed to shepherd a proposed package of state commitments through the General Assembly to ensure Virginia lives up to its promises, especially in developing a higher education pipeline for high-tech talent.

Appropriations Chairman Chris Jones, R-Suffolk, will chair the five-member subcommittee that he is appointing to oversee the implementation of a $1.85 billion incentive package for the $2.5 billion Amazon headquarters, which must create at least 25,000 high-paying jobs for the money.

“This is to make sure we get it right,” said Jones. He also is carrying one piece of legislation to create a new state fund for $550 million in cash incentives that Virginia would begin to pay four years after the jobs are created and begin to generate new income tax revenue for the state.

Most of the package, about $1.1 billion over the next 20 years, represents broad investments in Virginia colleges and universities to produce 25,000 to 35,000 degrees in computer science and related fields for Amazon and other high-tech companies that need highly skilled talent to grow.

“It’s bigger than Amazon,” Jones said.

The higher education package would include more than $700 million in funding for production of bachelor’s degrees, most of them at institutions outside of Northern Virginia, as well as up to $375 million for master’s degree programs that Virginia Tech and George Mason University would establish in the region around Amazon.

The state’s higher education commitments are not part of its written agreement with Amazon, but would be guided by proposed legislation to create the “Tech Talent Investment Program and Fund.” The legislation has been introduced by Del. Nick Rush, R-Montgomery, and Sen. Frank Ruff, R-Mecklenburg.

Ruff also has introduced legislation, as a companion bill to Jones’ measure, to create the “Major Headquarters Work Force Grant Program” for cash incentives, potentially including an additional $200 million if Amazon creates an additional 12,850 jobs at the National Landing site at Crystal City in Arlington.

In addition to Jones, the new subcommittee will include Rush, chairman of the Appropriations subcommittee on higher education; Del. Luke Torian, D-Prince William, chairman of the capital outlay subcommittee; Del. Riley Ingram, R-Hopewell, chairman of the economic development subcommittee; and Del. Steve Landes, R-Augusta, vice chairman of the full committee.

Jones, Landes and Rush also are members of the Major Employment Investment Committee that vetted the Amazon deal for the legislature, as is Ruff.

The budget that Gov. Ralph Northam introduced last month includes $8.3 million as an initial state investment in the tech talent pipeline, but Jones said he expects the state to require “significantly more” to enable participating colleges and universities to establish and expand degree programs in the desired fields.

“The universities are going to need to present plans that deliver so many degrees, at an affordable cost, in a reasonable time frame,” he said.

The state already included $28 million in the two-year budget adopted last year, before Amazon chose the Arlington site, to boost production of degrees in high-tech fields at public colleges and universities.

Northam also included Virginia Tech’s proposed $1 billion “Innovation Campus” for master’s degrees in the capital budget, which would require $250 million in state money that the university would match while raising an additional $500 million from various non-state sources to pay for the project in the Potomac Yard area of Alexandria.

The package the state unveiled in mid-November also includes $125 million in state money that George Mason would match to expand its master’s degree programs and facilities in Arlington.

Virginia’s commitment to boosting higher education development of high-tech talent was a decisive factor in Amazon’s decision to choose Arlington as one half of its much-ballyhooed $5 billion plan to build a second headquarters. Long Island City, N.Y., was chosen for the second location.

“It’s clear they ultimately weighed talent far greater than cost,” Stephen Moret, president and CEO of the Virginia Economic Development Partnership, said in a presentation on Monday to the State Council of Higher Education for Virginia.

Moret said the Amazon deal would generate an additional $3.8 billion in gross state revenues over 20 years, before considering incentives and other state costs for educating children of new employees. The jobs it creates must pay at least $150,000 a year on average and no more than 10 percent can rely on federal government funding.

“It’s a big diversification opportunity,” he told SCHEV.

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Appropriations chairman won’t consider $1.2 billion tax windfall in budget until Northam, lawmakers reach tax policy deal

Appropriations chairman won’t consider $1.2 billion tax windfall in budget until Northam, lawmakers reach tax policy deal

Posted by on Jan 14, 2019 in News | 0 comments

BY MICHAEL MARTZ Richmond Times Dispatch, January 9, 2019

The House Appropriations Committee quickly dismissed Gov. Ralph Northam’s plan to spend $1.2 billion in “limited time” revenues from federal tax reform without first reaching an agreement with the General Assembly on state tax policy.

Appropriations Chairman Chris Jones, R-Suffolk, opened the committee’s first meeting of the legislative session on Wednesday by declaring that the House won’t consider the so-called windfall as it prepares its own version of the budget over the next 3½ weeks.

“In fairness to the process, we’re not Washington, D.C., we’re Richmond, so we cannot assume revenues that we do not have,” Jones said.

If the legislature reaches an agreement with Northam on tax policy before the committee acts on the budget Feb. 3, he added, “we will, in fact, make adjustments.”

That means the committee will have, at most, about $950 million in new revenue and projected savings to spend, with about half already devoted to filling a $462.5 million shortfall in the Medicaid program that emerged in early November because of a faulty forecast.

“It’s not an easy exercise,” Jones said at the end of the two-hour budget briefing, “but we have to play it where it lies.”

Solving the impasse over tax policy also won’t be easy: Some taxpayers are likely to face higher state taxes this year because of changes in federal tax policy in the Tax Cuts and Jobs Act, which President Donald Trump signed in late 2017.

The heart of the debate is whether the state should spend that extra money or find a way to give it back to taxpayers.

Jones and other House leaders made clear last week that they will seek changes in state policy to allow taxpayers to itemize deductions on their state tax returns even if they claim the standard deduction that the Trump tax cuts doubled at the federal level.

If they don’t, taxpayers who benefit on their federal returns might give savings back to the state, which expects a $594.2 million increase in the first year and $611.1 million in the second, primarily from provisions of the federal tax law for individual taxpayers that will expire after 2024. The business provisions of the tax law are permanent.

The House GOP leadership also proposes to increase the state standard deduction to help taxpayers who don’t itemize their returns, which will compete with a number of other legislative solutions proposed by Republicans and Democrats to adjust the state’s tax policy in the 46-day session that began Wednesday.

Northam served notice in August that he wants to return more than $200 million from the expected windfall to Virginians earning less than $54,000 a year by refunding the portion of the earned income tax credit they don’t use to cover their state tax liability.

The governor then unveiled a series of spending proposals that culminated in his presentation of a revised budget on Dec. 18 that includes plans to spend “limited time” revenues from individual income tax returns to, among other things: bolster the state’s cash reserve; begin a five-year plan for expanding access to broadband telecommunications networks in rural areas; improve water quality in the Chesapeake Bay; and jump-start a bipartisan plan to make $2.2 billion in desperately needed improvements to Interstate 81 primarily with toll revenues.

The additional money also freed Northam to propose a number of budget initiatives with recurring revenues, such as an additional 2 percent pay raise for teachers and a 1 percent, one-time bonus for state employees, state-supported local employees and college faculty.

The budget adopted last year already includes a 3 percent raise for teachers, which local school divisions would have to share, and a 2 percent raise for state employees, with an additional 2 percent for merit pay increases.

“When you’ve got $1.2 billion … it gives you a lot of flexibility so you can make a lot of promises to people,” said Jones, who promised after the meeting that the committee would be “looking carefully at all the spending items in his budget.”

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No time to waste on tax policy as General Assembly convenes for short session

No time to waste on tax policy as General Assembly convenes for short session

Posted by on Jan 14, 2019 in News | 0 comments

BY MICHAEL MARTZ Richmond Times Dispatch, January 5, 2019

The Virginia General Assembly will face a fast start to a short session when it returns to Richmond to tackle the most perilous of issues in an election year: the balance between tax relief and government spending.

A simmering debate over state tax policy finally reached a boil Friday, as Republican leaders in the House of Delegates proposed a plan that targets tax relief for what they call middle-class Virginians — two-income families making between $125,000 and $150,000 — while offering some help to lower-income earners.

The proposal was a challenge to Gov. Ralph Northam, who has proposed to use $1.2 billion in additional state tax revenues from federal tax reforms to help low-income working households and pay for widely sought investments such as improving water quality in the Chesapeake Bay and expanding access to broadband networks in parts of rural Virginia that lack it.

The timing requires immediate attention if the legislature has any hope of making major tax policy changes available to taxpayers who soon will file state returns for 2018. The assembly also needs immediate clarity to determine how much money it has to spend on its priorities in the state’s two-year budget.

“Until we resolve the tax policy issues, we will be unable to produce a budget,” House Appropriations Chairman Chris Jones, R-Suffolk, said during a press conference call Friday led by House Speaker Kirk Cox, R-Colonial Heights.

Jones had called publicly for a special session on tax policy last year in response to the Tax Cuts and Jobs Act, which President Donald Trump signed in December 2017, but the opportunity was lost in the bitter aftermath of the pitched political battle over Medicaid expansion last spring.

The General Assembly has been in special session ever since, but it hasn’t elected judges or filled a long-vacant seat on the State Corporation Commission, much less tackled comprehensive tax reforms.

“They’re already in special session — we could have done this in November,” Secretary of Finance Aubrey Layne said Saturday.

Del. Richard “Dickie” Bell, R-Staunton, tried to jump-start the debate in September, when he filed a bill that would allow Virginia taxpayers to continue itemizing deductions on their state returns even if they claim the fattened standard deduction on their federal taxes.

The same proposal is the linchpin of the tax plan unveiled by Cox and other House Republican leaders on Friday. It includes an emergency clause so that tax policy changes could benefit taxpayers who will file state returns this spring for their 2018 taxes.

“It was filed September 17 in hopes that it might be part of the Republican conversation, but was never part of any conversation on tax reform by the caucus,” said Bell, who said he will not run for re-election after this year.

Now, with political control of both assembly chambers at stake in next November’s election, legislators will grapple with a choice of whether to spend an unintended state income tax windfall from Trump’s tax bill or give it back to taxpayers.

Or both.

“I want to give some back and invest some,” said Del. Mark Sickles, D-Fairfax, second-ranking Democrat on the Republican-controlled Appropriations Committee.

Senate Republican leaders haven’t shown their hand on how they want to play the game, but they generally insist on protecting middle- to upper-income taxpayers who could pay more in state taxes because of the federal law.

“That’s the crux of the session,” said Sen. Ryan McDougle, R-Hanover, chairman of the Senate Republican Caucus. “Virginians will not take advantage of the federal tax reforms unless we make some changes. I think we need to return that money to Virginians and let them spend it.”

But McDougle and other legislators who represent rural areas also want their constituents to have an opportunity to get their share of economic growth through access to high-speed broadband communications networks, especially in light of state incentives for big companies such as Amazon and Micron Technologies to locate or expand operations in Northern Virginia.

In a pre-Christmas spree of budget announcements, Northam proposed a five-year, $250 million investment in broadband — beginning with $50 million in the fiscal year that begins July 1. He would pay for it with “limited-time” money from increased state income taxes under new federal tax provisions for individuals that will expire after 2024.

Senate Republicans support the spending priority, but not necessarily the source of money to pay for it.

“You can make some decisions on priorities with current resources, as well,” said McDougle, a member of the Senate Finance Committee. “It doesn’t have to be new money.”

Democrats back the governor’s proposal to give about $216 million from the temporary federal tax provisions to low-income taxpayers who qualify for the earned income tax credit, but whose state tax liability isn’t large enough to use the entire amount.

They also think Northam’s proposal to give teachers an additional 2 percent raise — on top of the 3 percent increase they are due to receive in July under the current budget — represents a crucial investment in K-12 education that would be financed by recurring tax revenues that have been growing robustly.

“He would return the money to where the impact is the greatest,” said Del. Vivian Watts, D-Fairfax.

However, Watts is preparing legislation that would raise the state standard deductions to offset the effect of the new federal cap on deducting state and local taxes. It’s a big issue for homeowners in Northern Virginia, where property values and taxes are high, but it’s also part of the House Republican tax plan unveiled on Friday as both parties prepare for suburban political warfare.

“It’s going to be your suburban voter,” said House Appropriations staff director Robert Vaughn.

Those same voters are likely to be the lion’s share of the estimated 600,000 taxpayers whom Republicans expect to pay higher state taxes because they could no longer itemize if, under current Virginia law, they choose to claim the standard deduction on their federal returns, which doubled under the new tax law.

Vaughn predicts those voters will discover their higher state tax liability around February, as they are preparing tax returns for 2018.

“I think that’s when you’re going to hear the racket,” he said.

Decoupling the option of itemizing deductions from conformity with other provisions of the federal tax law is the linchpin of the House Republican tax plan. The legislation will be carried by House Republican Caucus Chairman Tim Hugo, R-Fairfax, one of two GOP delegates remaining in Northern Virginia after a Democratic electoral wave in 2017.

Hugo says the legislation would prevent “a hidden tax increase” that Northam’s budget would use to help lower-income earners and pay for new spending initiatives.

“Our proposal keeps more money in the pockets of Virginians without costing the state one penny,” he said Friday.

However, Layne said House Republicans have significantly underestimated the amount of lost state revenue under their plan, which also would increase the state standard deduction by $1,000 for individual taxpayers and $2,000 for couples.

House Republicans say their plan would reduce state revenues by $441 million in the next fiscal year, almost all of the additional money expected from the tax law’s temporary provisions for individual taxpayers, but the finance secretary says the true cost to the state could be “a couple hundred million dollars” higher than Republicans estimate.

Critics say the plan also would defeat the purpose of conforming state and federal tax definitions by requiring Virginia to create its own system for taxpayers to itemize deductions instead of relying on the IRS to define and police them.

“What do you itemize and who’s going to check up on it?” asked Watts, a member of the House Finance Committee.

The lower-income earners who would benefit under Northam’s proposed budget also make up a growing chunk of the population in suburban districts — more than 23,000 in Chesterfield County and 26,000 in Henrico County — said Michael Cassidy, president and CEO of the Commonwealth Institute for Fiscal Analysis, a liberal policy organization that favors a “refund” of the full earned income tax credit due to those who are eligible.

“It ain’t your grandpa’s suburbs anymore,” Cassidy said. “There are a lot of working-class people trying to make ends meet in these suburban districts, which are also swing districts.”

The legislative outlook is further complicated by a competing proposal, introduced in the House by Del. Chris Peace, R-Hanover, that would double the state’s standard deductions and drop its corporate income tax rate by a percentage point over two years.

Those proposals — which Layne estimated would cost $440 million and $160 million a year, respectively — echo a plan pushed by the Thomas Jefferson Institute, a conservative policy outfit that sponsored a poll which found taxpayers strongly in favor of the state returning the money instead of spending it.

“Hugo’s approach is to try to make everybody whole and go back to where we were before the Tax Cuts and Jobs Act,” said Steve Haner, a former state Republican party official who is a senior fellow at the institute. “Our goal is tax reform.”

“It would give broader tax cuts to millions of people, as opposed to a few hundred thousand,” Haner said.

But trying to address comprehensive tax reforms in a short legislative session “would be folly,” said Jones, the House Appropriations chairman.

The assembly’s failure to address tax policy in special session last year “may have been a wasted opportunity to address Virginia’s tax code,” said Nicole Riley, Virginia director of the National Federation of Independent Business.

The NFIB, with 6,000 small-business members in Virginia, prefers doubling the standard deductions as a simpler way to return additional tax revenues to taxpayers, but its biggest concern is immediate conformity between the state and federal tax codes to ensure that the federal law’s business provisions are enacted here.

“We want to see conformity to the federal changes,” said Riley, citing provisions that allow businesses to write off more capital expenses and lowering the tax rate on pass-through income.

House Finance Chairman Lee Ware, R-Powhatan, acknowledged that the House plan falls short of comprehensive tax reforms, but he called it “a good step in tax policy.”

However, Layne said it’s not likely to help taxpayers on their 2018 state returns because the legislation comes too late to enact many of the provisions, particularly for itemizing deductions by taxpayers who take the federal standard deduction.

“There’s no way we can get that done this year,” he said.

Instead, House Republicans propose a one-time deduction that taxpayers could use next year in preparing their 2019 returns — months after the legislative elections.

Jones has not given up hope that the General Assembly and governor could negotiate an agreement that could take effect on an emergency basis, which would require approval by 80 percent of each chamber’s representatives. They would have to act within the first two weeks after the legislature convenes Wednesday.

“We need the governor to come to the table,” he said.

But Haner, who has been involved in General Assembly sessions for more than 30 years, cautioned that “getting an emergency bill passed would require a lot more consensus than anyone expects.”

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Statement of House Appropriations Chairman S. Chris Jones on Governor Northam’s $1.6 billion spending package

Statement of House Appropriations Chairman S. Chris Jones on Governor Northam’s $1.6 billion spending package

Posted by on Dec 17, 2018 in News | 0 comments

December 14, 2018

Virginia House of Delegates Appropriations Committee Chairman S. Chris Jones released the following statement Friday on the $1.6 billion in multi-year spending proposed by Governor Ralph Northam.

“Every year governors are eager to roll out their proposed spending priorities ahead of the General Assembly session, but the proposals we’ve seen from Governor Northam so far this year are aggressive to say the least. While my colleagues on the House Appropriations Committee and I are eager to work with the governor on areas of agreement, I am wary of the long-term and recurring nature of the commitments he is proposing.

“All told, the governor has proposed over $1.6 billion in long-term, recurring spending — including millions in spending after his term is over. In fact, the governor is proposing more new spending in the second year of the budget than was included in the entire two-year budget originally passed this year. It’s highly unusual to see this level of spending proposed in the middle of the two-year cycle. While we must always be looking toward the future, we cannot make promises in perpetuity.

“The need for caution is especially true given the status of our bond rating and that many economists foresee an economic slowdown in the not-too-distant future. Just six months ago, the rating agencies applauded our fiscally-responsible approach to budgeting. We must continue to prioritize fiscal steps that shore up our bond rating while focusing on one-time spending and capital projects.

“Unfortunately, it appears much of the proposed spending is predicated on allowing over 600,000 middle-class taxpayers to pay higher taxes. Before we can contemplate new spending, the General Assembly will have to resolve the governor’s willingness to allow by inaction a tax increase and the elimination of key deductions on mortgage interest and property taxes.

“As always, the House Appropriations Committee looks forward to working with the governor, his administration, and our colleagues in the Senate to craft a responsible, balanced budget that invests in Virginia’s future while safeguarding taxpayers, protecting our AAA bond rating, and preserving structural balance.”


Summary of Spending Announced by Governor Northam


Area Committed this Cycle Future Commitment “Envisioned” Total Spending
Broadband Access $50m $200m $250m
School Counselors $36m $72m $108m
Water Quality $140m $633m $773m
K-12 Education $268.7m Ongoing TBD $268m
Refundable EITC $250m Ongoing TBD $250m
Total Spending: $1.649 billion


Governor Northam Announces Major Investment to Accelerate Virginia’s Progress Towards Universal Broadband Access (12/14/18) — “Governor Northam envisions these commitments as the first installments of a multi-year investment totaling $250 million over the coming years…”


Governor Northam Announces Budget Proposals to Add School Counselors and Improve School Safety (12/13/18) — “The $36 million proposal would be the first installment of a three-year, phased strategy to hire enough school counselors…”


Governor Northam Proposes Major Investments to Protect Virginia’s Water Quality and Accelerate Chesapeake Bay Cleanup (12/12/18) — “Governor Northam envisions these commitments as the first installments of a multi-year investment. When added to other currently appropriated and proposed funds for fiscal years 2019 and 2020, Governor Northam’s proposal would total $492 million through FY 2022, and $773 million through 2024…”


Governor Northam Announces Budget Proposals to Invest $268.7 Million in New Money for K-12 Education (12/11/18) — “Governor Northam today announced his proposed budget will feature $268.7 million in new money for investments in Virginia’s K-12 education system.”


Northam says he wants to use $250M from federal tax cuts on refunds for low-income families (RTD, 8/10/18) — “Gov. Ralph Northam wants to take roughly $250 million in extra state revenue caused by federal tax cuts and redirect it to low-income families through tax refunds.”

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Virginia looks to boost Medicaid reimbursement to attract more doctors

Virginia looks to boost Medicaid reimbursement to attract more doctors

Posted by on Nov 27, 2018 in News | 0 comments


With Virginia’s Medicaid program poised to expand coverage for hundreds of thousands of people, the state is considering a proposal to increase reimbursement rates for doctors to encourage them to provide care to more patients under the program.

The Department of Medical Assistance Services has asked Gov. Ralph Northam to include $19.1 million in his proposals next month for the two-year budget to boost Medicaid reimbursements for primary care doctors and reduce the gap with the federal Medicare program for the elderly.

The proposal, limited to the second year of the budget, is part of an emerging state plan to attract more doctors who are willing to participate in Medicaid, a shared state and federal health care program for poor, elderly and disabled Virginians.

With Medicaid expansion set to begin Jan. 1, “the experience of accessing care could still be a challenge across the commonwealth,” Dr. Jennifer Lee, director of the state Medicaid office, told a joint legislative subcommittee on Monday.

State legislators are concerned about the widening gap between state reimbursement rates to doctors in Medicaid and those in Medicare, but they want more information about the potential costs of closing the gap before they convene in January for a 45-day session that will include revisions to the two-year budget adopted this year.

“We need to know sooner than later,” said House Appropriations Chairman Chris Jones, R-Suffolk, who also chairs the Joint Legislative Subcommittee for Health and Human Resources Oversight. “We can’t hit what we can’t see.”

Widening gap

DMAS, as the state Medicaid office is known, says the gap between state reimbursements to doctors in Medicaid and Medicare has widened in the past eight years, especially for preventive pediatric services.

In the 2010-2011 fiscal year, Medicaid reimbursed doctors for those services at 94 percent of the rates paid for Medicare. Lee said the reimbursement has fallen to 71 percent of the rates paid for Medicare in the current fiscal year — a drop of 23 percentage points.

Similarly, reimbursement for other pediatric services has dropped from 83 percent of the Medicare rate eight years ago to 75 percent. The fall has been slightly less for reimbursement of adult preventive and primary care services, which went from 73 percent to 66 percent over the same period.

While the problem isn’t new, the urgency is greater because the state expects to enroll 360,000 people under expanded Medicaid eligibility in the first year, 375,000 by the end of the biennium in mid-2020 and ultimately 400,000 people.

“The combination of declining rates relative to other payers, significant limitations in primary care access throughout the state, and the increased demand for primary care services following Medicaid expansion to an additional 400,000 Virginians creates a pressing need to bring Medicaid rates closer to parity with the market,” DMAS states in its funding request to the governor’s budget office.

Northam isn’t saying what he’ll recommend until he submits his budget proposal to the General Assembly money committees on Dec. 18, but spokeswoman Ofirah Yheskel said, “As a provider, the governor is uniquely interested in discussions on health care in Virginia.” Northam is a former Army doctor and is a pediatric neurologist by occupation.

Estimated cost

In its budget request, the agency estimates that raising physician rates to 80 percent of what the state pays Medicare would cost about $40 million for the existing Medicaid population, with the expense split almost evenly between the state general fund and the federal government.

For the expansion population, the cost would be almost $25 million, with almost all of it borne by the federal government under the Affordable Care Act and the state’s share covered by a new provider assessment on hospital revenues.

Separately, DMAS responded to a legislative request about bringing reimbursement to 75 percent of the Medicare rate for the four specialty areas with the lowest rates. They are: pediatric, already at 74.9 percent; emergency room, at 69.8 percent; adult preventive and primary care at almost 66.8 percent; and anesthesia at 66.4 percent.

Underserved areas

Currently, Medicaid officials say access to care is inconsistent under the program. Parts of the state are left with less than two-thirds of their primary care needs served, primarily in rural Virginia, including the Eastern Shore and Northern Neck.

Lee said her agency estimates that 63 percent of physicians participate in Medicaid and 71 percent of those are taking new patients, but DMAS hopes to get a better understanding through a survey it is conducting with Virginia Commonwealth University.

The partners have sent the survey to all primary care physicians in the state “to assess capacity and willingness to care for [the] Medicaid expansion population.” A second survey has been sent to providers who had not responded to the first questionnaire.

The state also is working with free clinics, including CrossOver Healthcare Ministry in Richmond, and federally qualified health centers to expand their capacity to care for Medicaid patients.

But DMAS is relying most heavily on the six health insurance plans that will oversee 95 percent of the services delivered by the expanded program under managed care organizations.

Lee said an outside consultant, Health Services Advisory Group, confirmed independently that the six plans have adequate health care networks to serve the expanded population.

The private health plans say they are ready, but they acknowledge the limits of what they know about the people they will serve.

“The basic challenge is who’s going to seek care, where and when, and for what reason,” Doug Gray, executive director of the Virginia Association of Health Plans, said Monday.

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