Virginia budget negotiators have agreed on a plan that in one grand stroke provides a 3 percent raise this year for state employees and higher education faculty, saves money by paying off an old debt on state pensions, and reduces operating costs for public colleges and universities to help them keep down tuition.
The agreement, pending approval by the Senate and the House of Delegates on Friday, also would provide a 2 percent pay raise for teachers and state-supported local employees this year, help sheriff’s departments and state police keep veteran pay at pace with new hires, and allow constitutional officers to offer incentives for employee career development.
The budget package that negotiators unveiled Wednesday sets the stage for a new commission to take a comprehensive look at employee compensation and benefits in the face of a major turnover expected in the state workforce, although it no longer includes money for additional compensation pending the outcome of that study.
“There has been a widespread recognition that we need to move on pay issues,” said R. Ronald Jordan, executive director of the Virginia Governmental Employees Association. “It’s been a very good year for state employees.”
State workers’ pensions
The budget plan in large part has depended on a strategy by the House Appropriations Committee to use bonds instead of cash to finance building maintenance reserves. The money instead would be used to pay off $190 million in deferred contributions for state employee pensions six years ahead of schedule, saving the state about $44 million a year that the budget would use to improve employee compensation.
The early payoff of retirement contributions — deferred in 2010 to balance the state budget during the recession — would save colleges and universities almost 1 percent of their operating costs, which lawmakers hope will help hold down tuition increases, along with $114 million in additional aid to higher education in the spending plan.
“It really made the whole package work,” Appropriations Chairman S. Chris Jones, R-Suffolk, said of the strategy.
Jones outlined the budget agreement, which conferees from both chambers reached late Tuesday, in a House floor speech on Wednesday that described the spending plan as “a conservative, responsible and structurally balanced budget.”
Senate Finance Co-Chairman Emmett W. Hanger Jr., R-Augusta, said Wednesday that the strategy also enabled the state to accelerate teacher raises to the budget’s first year, as the Senate had proposed.
The raises are part of a joint plan to increase spending on K-12 education by more than $900 million, about $73 million more than the sweeping new education investments Gov. Terry McAuliffe had proposed in his budget.
“It was that kind of cooperative deal that allowed us to do it,” Hanger said.
Increasing legislators’ pay
The budget marks the debut of Hanger and Majority Leader Thomas K. Norment Jr., R-James City, as co-chairmen of the Finance Committee with the retirement of former co-chairmen Walter A. Stosch, R-Henrico, and Charles J. Colgan, D-Prince William, this year.
They succeeded in getting the budget deal to include a Senate proposal to raise out-of-session legislator pay from $200 to $300 a day. It also would increase the office allowances for Norment, as majority leader, and Sen. Richard L. Saslaw, as minority leader, by about $185,000 a year, or about two-thirds of what the Senate had proposed.
The agreement does not include a Senate plan to expand availability of state health insurance for legislative staff. “That was not a good policy,” Hanger said.
McAuliffe and his staff are reviewing the proposed budget agreement, but spokesman Brian Coy said the governor “is ecstatic to see the compromise reflect so many of the priorities he put on the table before this session, like record investments in public education, a pay raise for teachers and state employees and more resources for Virginia veterans and their families.”
House and Senate negotiators were still working Wednesday on a bond package that would spend about $300 million less than the governor had proposed, while providing some new funding for state parks, expansion of Norfolk International Terminal at the Port of Virginia, and initial planning for a new juvenile correctional center in Chesapeake.
One of the biggest initiatives in the budget would direct $197 million in new funding for public education that local school divisions would have flexibility in how they spend. The package includes about $34 million in new aid for schools with high concentrations of at-risk students and moves to restore a reliable share of Virginia Lottery proceeds for K-12 classrooms.
“Our hope is it will be a continuing policy,” said House Majority Leader M. Kirkland Cox, R-Colonial Heights.
The budget doesn’t include $3 billion in federal funds to expand health coverage of the uninsured, but it provides $16 million in state matching funds to adjust Medicaid reimbursements to hospitals for inflation — half of what the Senate had sought and about one-third of what hospitals say they need. Nursing homes would get $6 million in inflation adjustments, as well as money to update their rates.
The agreement would increase Medicaid eligibility for people with serious mental illness, expand the number of community teams to help people with behavioral issues, add $3.5 million for children and adolescent mental health treatment, and establish funding for pilot programs to help treat people with mental illness in local and regional jails.
The budget also includes about $11 million that McAuliffe proposed to create a Medicaid benefit for people with substance use disorders to help combat an epidemic of heroin and prescription opioid overdoses. “I think that’s going to be a great initiative,” said Hanger, chairman of the Finance subcommittee on health and human resources.
The deal also pays for an additional 355 Medicaid waiver slots for people with intellectual and developmental disabilities, on top of the more than 850 slots required under a settlement with the Department of Justice to move people out of institutional care.
And, for the first time, the assembly has agreed to extend foster care benefits for young people up to 21 years old, as long as they are working.
Del. John M. O’Bannon III, R-Henrico, credited foster care advocates for developing a plan that legislators could support. “If the advocates keep at it and make it better, you can eventually get something done,” he said.
The budget also makes major commitments to state transportation initiatives — from road funding to operating support for Washington Dulles International Airport.
It establishes a statewide policy for imposing tolls on existing highways, requiring General Assembly approval, with some exceptions, such as plans for relieving congestion on Interstate 66 in Northern Virginia, the state’s top-ranked transportation priority.
A small group of Senate Republicans had blocked the policy in legislation that Jones had carried, but he embedded it in the budget instead.
The budget would make major investments in initiatives McAuliffe pushed for major spending on economic development and research of commercially viable technologies. It includes about $35 million to fund the Virginia Growth and Opportunity Act, or GO Virginia, a new regional framework for economic development, while establishing additional oversight of economic development spending through the Joint Legislative Audit and Review Commission.
The agreement also provides about $30 million for research initiatives aimed at developing technologies for emerging industries — about $10 million less than McAuliffe had sought. But it also provides $6 million for the Massey Cancer Center at Virginia Commonwealth University and $4 million for ultrasound technology to treat cancer and other diseases at the University of Virginia.
And it includes $12.5 million to develop community college programs for providing students workforce credentials in trades crucial to industry. “That’s a significant new initiative,” Hanger said.
Hanger said state parks aren’t likely to get much of the $140 million that McAuliffe had proposed in bonds, including money to establish a new state park at Biscuit Run in Albemarle County, but he remains hopeful that the pending package will include money to begin developing a proposed park at Widewater in Stafford County.
The budget agreement restored $120,000 that the House had removed to establish a new state park at Natural Bridge — as long as the governor agrees not to further accept property for parks without legislative approval.
“There was still some hesitancy about expanding the parks at all,” Hanger said.