How will the Northam drama affect critical tax and budget issues facing Virginia?

BY MICHAEL MARTZ Richmond Times Dispatch, February 2, 2019.

Whether Gov. Ralph Northam resigns or not, the General Assembly’s money committees will meet on Sunday to issue their versions of the two-year state budget that are sure to contain $1 billion less than the spending plan the governor introduced less than two months ago.

Nor will the drama affect a political impasse in both legislative chambers over widely differing approaches to changing Virginia tax policy, even as hundreds of thousands of Virginians file tax returns that the state cannot process or issue any refunds owed without conforming the state tax code in some fashion to federal law under the Tax Cuts and Jobs Act to allow the state and federal tax departments to work together.

But the governor’s personal crisis comes at a crucial time in a process built on a three-legged stool supported by the executive branch and two legislative chambers that are sharply divided after a bitter budget battle last year that ended with Northam’s greatest triumph — expansion of Virginia’s Medicaid program.

Ahead of Tuesday’s procedural midpoint for the General Assembly session, lawmakers must hash out a host of complex issues on matters, from redistricting to a funding fix for Interstate 81.

“I serve at the pleasure of the governor, but I work for the people of Virginia,” Secretary of Finance Aubrey Layne, a longtime friend of Northam from Virginia Beach, said Saturday. “I’m just going to keep doing my job.”

Part of Layne’s job is working on both sides of the Capitol with House and Senate leaders who oppose the governor’s plan to return $216 million in anticipated new revenues to lower income earners and invest the rest either in bolstering state financial reserves or expanding major programs with “limited time” money from provisions of the federal tax law that will expire after 2025.

“The task remains the same,” House Appropriations Chairman Chris Jones, R-Suffolk, said Saturday in response to a potential gubernatorial resignation.

The House Appropriations and Senate Finance committees will meet consecutively on Sunday afternoon to propose changes to the 2018-2020 budget that will rely on more than $900 million in projected state revenues without any of the money anticipated from the unintended consequences of the tax law signed by President Donald Trump in December 2017. The House and Senate will act on the budget proposals on Thursday and ultimately reconcile the differences in a conference committee that will send a compromise budget to the governor, whomever that will be.

But Northam’s potential resignation could undermine the ability of the government’s executive branch to broker a deal on tax policy, which would require emergency legislation to take effect immediately on the governor’s signature to conform the tax codes and give guidance to taxpayers who began filing state tax returns Monday on income from the 2018 tax year. The Senate failed to pass emergency legislation on Friday that includes sweeping tax policy changes opposed by Democrats, and the House faces a crucial vote Monday on its tax conformity bill with similar opposition by Democrats who want to address policy after conformity.

Emergency legislation requires approval by 80 percent of each body — 80 members of the House and 32 in the Senate — to take effect immediately instead of on July 1, two months after the state tax filing deadline.

“The problem this year is the conformity thing,” Layne said.

Should Northam resign, his sudden departure also could throw into doubt the process of acting on legislation already adopted by both chambers of the assembly, including the approval of an incentive package of up to $700 million for Amazon to create as many as 38,850 jobs at the new East Coast headquarters that it plans in Arlington County. Northam announced the $2.5 billion Amazon investment with company officials in mid-November at the Crystal City site of the project. The General Assembly swiftly approved the incentive package, which had been vetted by a legislative commission that includes top Republican leaders in both chambers.

Even if the governor remains in office, his ability to lead has been cast into doubt by calls for his resignation by his closest allies, including Democrats in both chambers of the assembly. He would have to bargain from a weakened political position with Republican legislators who already have shown they are collecting fodder for upcoming legislative elections in November that will determine partisan control of both sides of the General Assembly.

mmartz@timesdispatch.com

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