BY MICHAEL MARTZ Richmond Times Dispatch, February 3, 2019.
Gov. Ralph Northam’s political fate hangs in the balance, but that did not slow the General Assembly from introducing versions of the state budget on Sunday that both include 5 percent raises for teachers.
The House Appropriations Committee led off by passing its version of a revised two-year budget that includes extra funds for teacher and state employee pay, an offer of money to colleges and universities to forestall tuition increases, and big down payments on high-tech education initiatives for Amazon and the state’s growing technology business sector.
The Senate Finance Committee followed with a budget approach that focuses on carrying out its proposed tax relief plan and putting more money into the state’s financial reserve funds to guard against an economic downturn.
Mounting calls for the governor’s resignation over a racist photo on his medical school yearbook page didn’t slow the legislature’s most pressing business.
“We get the job done and get our budget out,” said House Appropriations Chairman Chris Jones, R-Suffolk.
House Speaker Kirk Cox, R-Colonial Heights, a former member of House Appropriations who attended the budget rollout, declined to answer questions afterward. Senate Majority Leader Tommy Norment, R-James City, made clear from the outset that he would not talk about anything but the budget.
“We are not going to engage in any conjecture about the situation the governor finds himself in,” Norment said.
Norment said assembly budget leaders would continue to rely on Secretary of Finance Aubrey Layne to address differences with the executive branch over the budget and tax policy.
“The continuity is there,” Norment said.
One high-ranking House Democrat said he expects the governor’s priorities to remain in the budget process even if Northam is no longer there to push them.
“There’s going to be a governor to sign the bill at the end of the process,” said Del. Mark Sickles, D-Fairfax, the second highest-ranking Democrat on the Appropriations Committee. “If we have a different governor, the priorities are going to be mostly, if not 100 percent, the same.”
The House proposal
The proposed House budget does not include any of the $1.2 billion that Northam proposed in “limited-time spending” because of an unintended increase in state income taxes from federal tax reforms.
For the House, the top priority of Republican leaders was removing money from the budget that would come from higher state taxes paid by Virginians because of the Tax Cuts and Jobs Act that President Donald Trump signed 13 months ago.
“This is not a windfall as some have described it, but they are the taxpayers’ hard-earned dollars and not the state’s,” Jones said in his opening remarks.
The Appropriations chairman faces a daunting challenge on Monday, when the full House will act on emergency legislation that would conform Virginia’s tax code to the new federal law so that the state can advise taxpayers who are already filing returns on last year’s income.
The legislation would require approval by 80 percent of both the House and the Senate in order for it to take effect immediately upon signature by the governor, rather than on July 1, two months after the tax filing deadline.
The Senate plan
Senate Democrats blocked a proposed tax conformity bill on Friday because it included major changes in tax policy that Republicans proposed without their agreement. Senate Republicans then passed the legislation without the emergency clause on a 21-19 party-line vote.
Norment said the proposed budget includes all of the elements of the Senate tax plan — including a tax reform fund that would send $420 million in refunds to taxpayers in October and hold about $80 million in reserve.
It also reflects about $470 million in reduced revenues in the second year to pay for a proposed 50 percent increase in the standard deductions for individual taxpayers and couples, as well as to protect businesses from two provisions of the new federal law.
He pledged to work with Senate Democrats on the elements of the plan, but he said embedding it in the budget makes an emergency clause unnecessary.
“The budget becomes effective on signing by the governor,” Norment said.
The bill Jones proposed in the House does not include tax policy changes, but House Democrats oppose it because it would sequester new tax revenues from the federal law during the biennium until lawmakers decide on how to send it back to affected taxpayers.
The proposed House Appropriations budget does the same thing, but uses existing revenue and savings to fund a number of the initiatives that Northam had proposed to address with money from the temporary provisions of the federal law.
These include expanding access to broadband telecommunications networks in rural Virginia and improving water quality in the Chesapeake Bay watershed, areas that the Senate Finance plan also addressed with existing revenues.
“I believe it was a false choice that was put before us that in order to make new investments we had to raise taxes,” Jones told the committee.
The proposed House budget relies upon nearly $1.2 billion in available revenues from projected growth in tax collections and about $222 million in additional savings identified by committee staff to address almost $680 million in mandatory and high-priority spending needs.
That left a little more than half a billion dollars for the committee to spend on priorities. For example, the House budget would:
- add 2 percent to the 3 percent raises for teachers in the current budget, as Northam proposed, but the raises would take effect on Jan. 1 instead of July 1 in order to allow local school divisions more time to produce matching money;
- add 1 percent to the 4 percent raises for state employees in the budget — an additional 0.75 percent to the 2 percent across-the-board increase and 0.25 percent to the 2 percent pool for merit raises;
- add 1 percent to the 2 percent raises already promised to college faculty and state-supported local employees; and
- eliminate a one-time, 1 percent bonus that Northam proposed for state employees.
The Senate plan includes money for a 5 percent teacher raise and a 3 percent increase for general registrars, but no additional money for state employees.
The House plan also would help local school divisions pay their share of raises by giving them an additional $62.1 million from the Virginia Lottery that they can use for whatever priorities they choose, without having to match the state funds with local money.
In higher education, the proposed House budget would give colleges and universities an additional $45.7 million, but only if they don’t “continue on the well-worn path of tuition increases,” said Del. Nick Rush, R-Montgomery, chairman of the higher education subcommittee.
The proposal also includes major investments in higher education research initiatives, including nearly $28 million to boost production of degrees in computer science and related fields as part of Virginia’s commitment to Amazon in landing its $2.5 billion project in Arlington County.
Northam had proposed $8.6 million as the first installment in the so-called “tech talent pipeline.” Senate Finance included about $8 million for the degree initiative.
The House budget includes $34 million as the first payment into a pending new fund to pay $550 million in cash incentives to Amazon as it creates at least 25,000 high-paying jobs at its new headquarters in Crystal City.
The Appropriations Committee also provides $11.4 million in capital and $6.1 million in operating funds to rescue the financially struggling Commonwealth Center for Advanced Manufacturing in Prince George County.
The Senate Finance budget focuses primarily on improving the state’s financial reserves. It would boost total reserves to $1.3 billion by mid-2020, about the same as in the proposed House budget.
“This is an amount that is crucial should our economy weaken at all,” Norment said.