January 17, 2018

The Republican budget leader in the House of Delegates promised a “nonpartisan” spending document after an hourlong breakfast meeting with Gov. Ralph Northam on Wednesday, signaling a return to harmony after the Democratic governor’s inaugural speech to legislators sparked a GOP backlash.

House Appropriations Chairman Chris Jones, R-Suffolk, who was among the Republican leaders who expressed disappointment with the partisan tone of Northam’s speech to the General Assembly on Monday night, said he was heartened by his lengthy conversation with the governor on “the budget and other topics.”

“As you know, the budget is the most important thing we do,” Jones said in a speech on the House floor on Wednesday. “It is a nonpartisan document and it is our best opportunity to work together across the aisle.”

Earlier on Wednesday, Del. Luke Torian, D-Prince William, chaired his first meeting of the Appropriations subcommittee on general government and capital outlay since his appointment by Jones as the top ranking Democrat on the powerful money committee despite a 51-49 GOP majority in the House.

In an interview after the House adjourned Wednesday, Jones said he and Northam had “a very productive and good meeting.”

“I’ve worked with the governor on issues in the past,” he said. “I’m confident we will have a very good working relationship during his term.”

Brian Coy, the governor’s communications director, said Northam agreed that he and Jones had “a productive conversation” during the breakfast meeting.

“He thinks they can get a lot of good work done together,” Coy said.

Jones also promised to begin meeting with small groups of delegates to talk about their budget concerns, but on a regional basis instead of by party as the committee has done in the past. He hopes the regional approach “will give us a better feeling what is going on in other parts of the state.”

The broad goals that the chairman outlined Wednesday include: increasing the share of Virginia Lottery revenues to bolster K-12 education, pay increases for state employees, and putting a new cash reserve fund into state code with the aim of setting aside 2 percent of the general fund budget, or $400 million.

Then-Gov. Terry McAuliffe proposed a $115 billion budget last month that included money to increase state employee and teacher pay in the second year of the budget, and to boost the new reserve to $427 million by the end of the biennium. However, those proposals would depend on $421.7 million in savings McAuliffe estimated from accepting more than $3.2 billion in federal funds to expand Medicaid and relying on a new tax on hospital profits to pay the state’s projected $306.9 million share of the costs.

Republicans have refused repeatedly to expand Medicaid since 2013, but their majority in the House has shrunk from two-thirds to two votes. The Virginia Hospital & Healthcare Association said this week that it does not support the provider assessment proposed by McAuliffe as long as it is part of the budget instead of state law, which runs counter to the Appropriations chairman’s position on the issue.

Jones repeated his public vow that the House would not consider revising the state revenue forecast upward during the session, based on a surge in estimated income tax payments in December that boosted revenue growth to 5.9 percent for the fiscal year, or 2.5 percentage points ahead of the annual forecast used in the current budget.

He has discussed his position with Senate Finance Co-Chairmen Tommy Norment, R-James City, and Emmett Hanger, R-Augusta, as well as new Secretary of Finance Aubrey Layne.

“I do believe we are on the same page,” Jones said.

“This means there will be less money than the outgoing governor might have led us to believe last week,” he said, referring to McAuliffe’s suggestion that the state could collect an additional $500 million by the end of the fiscal year on June 30.

Jones reminded delegates that in his first year as chairman of the Appropriations Committee, the budget that then-Gov. Bob McDonnell proposed had assumed a big increase in estimated income tax payments, which had risen sharply the previous year after investors cashed in stock in late 2012 to avoid a higher capital gains tax the next year.

“We were doing well until the end of April, but the bottom fell out in the month of May,” he said, leading to a projected $2.4 billion shortfall for that biennium.

This year, Jones and other budget officials are wary of big increases in estimated tax payments, including multimillion-dollar checks from high-income taxpayers, in December and January in response to the Tax Cuts and Jobs Act that President Donald Trump signed on Dec. 22.

“Some very good accountants told their clients, ‘You could advantage yourself by paying taxes in 2017’ ” rather than 2018, the chairman suggested.

Jones said he wants a clearer picture of how federal tax reforms will affect the state and its taxpayers before the General Assembly commits to spending money it may not have.

“While it is a rosy picture as we see it, we want to be conservative and cautious in our approach,” he said.