We have completed the first three weeks of session. “Cross-over,” the date by which all bills must be passed by the originating chamber so they then can “cross over” to the other chamber for consideration, is approaching. The Clerk of the House reports that 1,400 pieces of legislation are already in play in the House of Delegates, not including all the amendments being negotiated nor any of the bills that will cross over from the Senate to the House in early February. With so much happening, it’s not possible to cover everything that the House worked on this week, but here are a few highlights (and lowlights) of interest. [Read more…]
Virginia’s Budget Shortfall: Is Anyone to Blame?
Governor McAuliffe announced last Friday that the state would not meet its revenue projections for fiscal year 2016, which just ended June 30, with the result that this year’s budget will be short a projected $266.3 million. Revised forecasts for the state’s two-year budget (which ends June 2018) places that shortfall at $1.2 billion. This has put much-needed pay raises for teachers and state employees this next year in peril, and will require further belt-tightening and possible curtailment of some state services. Why did this happen? Could it have been averted? [Read more…]
The Budget and Adjournment
House and Senate budget conferees came to an agreement late Tuesday, March 8, and published their proposed two-year budget on Wednesday in a “conference report.” The agreement contains many good things for which we have fought.
Highlights include:
- Major increases in K-12 education funding over the current biennium, including almost $200 million in lottery funding for school divisions, which will greatly help Charlottesville and Albemarle, a 2 percent salary incentive effective December 1, 2016, and additional money for eligible students to receive free or reduced lunch and breakfast at schools.
- Major new funding for higher education, including a 3 percent across-the-board raise for faculty. UVA will receive about $10 million for access and affordability, as well as $4 million for the Focused Ultrasound Program, a cutting edge research initiative, and monies for bioscience incentives.
- Full repayment to the Virginia Retirement System (VRS) of money the General Assembly borrowed several years ago – a move I voted against – and funding 100 percent of the VRS board-certified contribution rates. Both of these actions will enhance the fiscal viability of the system.
- An additional $76.2 million for mental health services.
- Fully funding the “Rainy Day Fund,” the special account we reserve for use if Virginia experiences a dramatic economic downturn.
- Additional monies for our community colleges to develop new programs to train the workforce of the next decade.
- Monies for the “Presidential Precinct,” an initiative developed by UVA, William and Mary, Monticello, Ash Lawn and Montpelier to bring scholars and elected officials from around the world to Virginia to be educated on how democracy works. This is an initiative that I and others in our area have supported, and worked with the Governor to get in his budget.
- Major initiatives for job creation through the “GoVirginia” concept. This will allow regions to cooperate in competing for economic development grants and projects necessary to build the New Virginia Economy. GoVirginia creates a great opportunity for our region given the degree to which the University, the city and the county cooperate on policy initiatives.
- Monies to fund a new General District Court judgeship in our Judicial Circuit.
In addition to these larger categories, some specific items I proposed are included in the Conference Report, such as:
- $900,000 extra funding for court-appointed counsel who take on complicated cases defending indigent clients.
- An increase in fees for court appointed mediators.
- Support for the Fostering Futures Program, which allows foster care and adoption assistance to be extended for youngsters who would otherwise “age-out” of the foster care program on their eighteenth birthday. Funded with $1.9 million from the general fund (Virginia tax dollars) and $3.9 million in non-general fund money (from the federal government or other sources), the program will benefit a large number of foster children who otherwise might experience tremendous difficulty transitioning to adult life.
- Additional money for the Centers for Independent Living. We have a wonderful center in Charlottesville called the Independence Resource Center, and this new money will help the IRC and other centers around the Commonwealth build their programs on behalf of disabled persons.
The largest missed opportunity continues to be the Republicans’ refusal to embrace Medicaid expansion under the ACA. It is ironic that despite their negative rhetoric, our budget does expand some Medicaid services, but in the most inefficient way possible. Under present law, every dollar we appropriate for Medicaid is matched by the federal government with another dollar. Consequently, when we implement new Medicaid spending for substance abuse treatment or to provide new waiver slots for intellectual or developmental disabilities in this budget, we are saying that we trust the federal government to fund its 50 percent of these programs. Yet we still hear the argument that Virginia cannot trust the federal government to continue funding “Medicaid expansion” if it happens under the ACA, where the federal government would pay 90 percent of the costs. This rejection of readily-available Medicaid money has become an article of faith for our Republican counterparts; without a change in the General Assembly’s political composition, Medicaid expansion is unlikely for the next several years.
On Thursday, the General Assembly approved a new Supreme Court Justice after an extremely flawed process. I did not support the appointment and you can see my speech explaining why in the video below.
As the session concludes, I thank you again for all of your input and support over the last sixty days. I am happy to be returning to Charlottesville to be with my family and continue my law practice. I remain available to serve constituents’ needs, and will shortly organize a series of town halls and smaller meetings to discuss the successes and failures of this General Assembly session.
Virginia Budget Prelude
State of Play:
A Preliminary Look at the Virginia Budget
With the 2015 election over, legislators and commentators are now turning their attention to the upcoming General Assembly session and Governor McAuliffe’s first two-year budget. Even though the Governor has been in office almost two years, this is his first budget: it is not widely understood that a governor does not have a chance to propose a budget that is totally his own until well into his second year in office. In Virginia, we have two-year budgets and this is Gov. McAuliffe’s chance to establish a legacy of budgetary priorities. His budget will be unveiled to the money committees in the House and Senate on Thursday, December 17, 2015. Between now and then, you’ll begin to read about possible initiatives in the proposed budget and will undoubtedly hear criticisms from the Governor’s detractors of his various proposals.
Budget Priorities, Assumptions & Projections
Before your eyes begin to glaze over as you read and hear about budgetary lingo like “re-benchmarking for the standards of quality,” “budget drivers,” “our budget is structurally sound,” and “claw backs,” please take a moment and think about the significance of the budget.
State budgets reflect the priorities and intentions about where we want to go as a Commonwealth. Every decision in the budget process, no matter how small, reflects a priority and can affect thousands of Virginians. We spend money on state police to keep us safe, on clean water to protect our health, and on education to ensure our children have opportunities to learn. We invest in job creation for future growth, and provide funds to the disabled, elderly, and infirmed so they can have a better life.
Budgets are also based on assumptions and projections. We are not precisely sure how much money we have to appropriate until tax dollars are actually collected. So we project figures. We usually expend close to our projected revenues, leaving us some cushion for the possibility that the economy will not be as robust as we think it will be. That is prudent budgeting, but it is also where politics and economic philosophy intrude. If your projections are too conservative, you might not fund a critical program; if too liberal, you could create a shortfall, requiring cuts in future years.
Traditionally, the House and Senate have used different assumptions in building their budgets, with the House generally more conservative in projecting revenues. The House Appropriations Committee and staff are generally less bullish on the economy, projecting the growth in revenues at 3.2% in fiscal 2017, and 3.3% in fiscal 2018. In contrast, the Senate Finance Committee and staff are projecting 3.6% and 3.8% in the same years, respectively. This difference will mean millions of dollars over the next two years.
The Governor will also make projections when he releases his budget, and it will be interesting to see what they are. If he builds Medicaid expansion into the budget, the revenue growth is likely to be much higher than either the House or the Senate money committees have assumed, and his budget is likely to be more robust. This will set up a direct conflict between the spending the Governor wants and the constraints that the Senate and House Republicans will put on the budget because of their refusal to accept federal monies to expand Medicaid.
Our budgetary challenges in recent years have occurred because of two factors. First, the Virginia economy has not recovered from the 2008 recession as well as it has historically done. Second, federal sequestration has decreased employment and brought less growth, especially in Northern Virginia. Virginia ranked 49th among the 50 states in growth for 2014 and we have been lagging behind places like Alabama and Maryland since 2010. Unemployment rates have declined somewhat, but wages have largely been flat since 2009. Part of this has to do with the effect of decreases in federal procurement, especially in Northern Virginia. There are some signs that Northern Virginia is slowly recovering, but we have a long way to go and we are not likely to return to the expansive growth rates of ten years ago without some structural changes in our economy.
Considerations To Be Made
The largest portion of state revenues is spent on education. The last two-year budget totaled $36.8 billion, almost half of which involved transfers to local governments. The largest section of those transfers to local governments is for public education, the number one priority of many of us in the General Assembly. This is where the Commonwealth’s spending comes to life – in the quality of our classrooms, the talents of our teachers, and the magic that occurs when students are being taught and learning at their full potential. And this is where much of the debate will occur in this budget cycle. We are under an obligation required by state law to “re-benchmark for the standards of quality” every two years. In everyday parlance, this means that we have to total up the costs of providing basic education services in the Commonwealth and then put enough money in our budget to fund it. In actuality, we do not totally fund all of the demands of public education; the state pays only a portion, and local governments need to find the rest. Consequently, every dollar not allocated by the Commonwealth for education creates more pressure on the localities and their taxpayers. In Charlottesville and Albemarle, we are very generous in spending local dollars on education; our community believes that educational investments are necessary to maintain our local school divisions. Other localities find this more difficult because their tax base is not as strong. Virginia’s per pupil spending state-wide is not much higher than it was in 2007, and many Democrats and some Republicans believe more investment is needed. Re-benchmarking is expected to cost the state an additional $450 million in the next two years, but I would expect the Governor’s budget will include more money for education than just for re-benchmarking.
With this background, here are some budget questions and issues we will debate in the upcoming next session:
- After we re-benchmark for the Standards of Quality, how much additional money will be allocated for other educational initiatives? We know the Governor is very supportive of pre-K education and observers predict that there will be more money in his budget for that. But historically, House Republicans have been skeptical about claims in support of pre-K and are likely to resist expanding the program. And what about higher education? Democrats have been focused on reducing the impact of tuition increases on rising student debt. In-state undergraduates pay 47% of the cost of education, up from 23% in 2001-02 and much more than the state targeted rate of 33%. Many on both sides of the aisle believe that we need to invest more in our research universities, such as U.Va., and provide greater incentives to commercialize research breakthroughs out of our universities to create new businesses and spur economic opportunity. We will likely see some new initiatives to spur university-business collaborations in bioscience, manufacturing, and cyber security, all designed to help build the new Virginia economy.
- What additional initiatives will we adopt to encourage the Governor’s New Virginia Economy Workforce Initiative? Agreement exists that we need more effective workforce development. We know two-thirds of all new jobs do not require college degrees, but a recent JLARC report indicated that our investment in workforce has not been as productive as it needs to be. Some change can occur without money, but other initiatives, especially in our community colleges, will require state investment to be effective.
- Will the legislature seriously attack the proliferation of tax preferences for industries – most notably coal – that no longer work for their intended purpose of creating jobs or economic opportunity? Eliminating credits for coal, for example, would create between $50 to $100 million in revenue, enough to fund a 2% statewide teacher raise.
- Will the legislature finally decide that it makes good economic sense to expand Medicaid and therefore provide healthcare coverage to over 300,000 Virginians while shoring up our budget, our rural hospitals, and creating jobs? Right now, we’re sending in excess of $4 million a day in our taxes to Washington, D.C., which could be brought back to Virginia if we expanded Medicaid. The Governor is likely to put a provision in this budget that will bring those dollars back to Virginia, but Republicans remain steadfast in their opposition. There is no doubt that state Medicaid spending is a huge driver of the additional demands on the budget. Virginia has adopted a number of reforms, which has had the effect of limiting the increases in Medicaid spending, but because so much of the additional costs are driven by increasing numbers of older people with special nursing home and other expensive needs, the program continues to expand. The good news is that the percentage increase in Medicaid spending is likely to decline.
- Will the budget include pay increases for faculty, teachers, and other state employees? A 2% faculty COLA increase would cost $33 million to the state in the next two years. A 2% teacher increase amounts to $83.2 million per year.
In the next several months, you’ll read more about so-called “wedge” issues – guns, Syrian refugees, abortion – and I hope you engage in these conversations. But the major action always involves the budget, and I will continue to keep you informed as we go through the process.
We have a long way to go before we get to a biennial budget and I will continue to try to provide insights about the Governor’s proposals and the legislative responses to them.
General Assembly Update (Feb. 20, 2015)
The 2015 General Assembly session is scheduled to adjourn on February 28, 2015. The revised budget is just about done and will likely include some raises for teachers and state employees. It is also likely to include some additional monies for higher education. These are important advances, though I would like to see additional funding for education.
The budget does not go far enough in a number of other ways, and still does not provide for the expansion of Medicaid, which could bring back hundreds of millions of our taxpayer dollars to help Virginians secure health insurance, create jobs, and strengthen our hospital systems.
A number of the major initiatives that I have worked on look likely to pass in some form. The bill to expand the DNA database, which was proposed in response to the Hannah Graham murder, has now passed the Senate in a form slightly modified from the one that was passed by the House. This means that there will be a conference committee composed of Senate and House members to reconcile the two bills for final passage. The same is true with the campus sexual assault reporting bill. I hope to be involved in the final discussions on these bills and expect them to be passed and signed by the Governor.
In the energy arena, one of the major debates focused on the bill proposed by Dominion Virginia Power to freeze electric utility rates for the next five years. This is drawing considerable controversy in the press, and much of the focus has been on the initial form of the bill, which was extremely detrimental to consumers and those of us who support greater investment in renewable energy. The bill that passed, however, is substantially different than the one that was proposed. In fact, the amended bill was not opposed by the Sierra Club, nor the League of Conservation Voters. It includes a requirement that Dominion undertake a weatherization program for low-income persons, and unprecedented initiatives to expand solar and other renewables. The bill provides some comfort to consumers as it will freeze the “base rates” of the utility for the next five years. Your utility bill may or may not change, however, as your bill also reflects the cost of fuel. If natural gas continues to decline, that decrease in price will be passed on to the consumer in the form of lower bills. If there is a spike in natural gas or other fuel sources, your bill will likely rise. But the base rate, which is determined by the cost of other operations of the utility, such as maintaining its infrastructure and repairs and replacements generated by weather events and natural disasters, will be borne solely by the utility. In the event that Dominion “over earns” after the five year period, they will have to provide a credit to consumers, or an actual reduction in base rates.
My efforts to reform the coal tax credits have not yet succeeded. Republicans in the House and Senate have not yet been convinced of the economic arguments opposing the massive taxpayer subsidies provided to the coal and utility companies. This has amounted to approximately $600 million over the last twenty years for an industry that has lost three quarters of its workforce during this period and is now mining substantially less coal. Unfortunately, some people are so “locked in” to the so called “war on coal” argument, and are willing to allow their constituents to further subsidize an industry that is failing. The better approach is to take the money and invest it in emerging industries in southwest Virginia that will create better jobs in the long run. We will continue to fight for reform.
Several of my other bills will soon pass both bodies and go to the Governor. Included in these is my bill to give property owners more flexibility in how they deal with the city’s zoning ordinance for sidewalk construction (HB 2051), a bill to eliminate paperwork for small businesses as they file their personal property tax documents with their localities (HB 2098), and a bill requiring universities to provide more information about their sponsored research programs and the degree to which these initiatives are creating more commercial activity in the Commonwealth (HB 1959).
And, for your viewing pleasure, you may be interested in a floor speech I gave this week on “millennials” and how Democrats are responding to their concerns in Richmond. You can see it here.
I am looking forward to returning to Charlottesville to spend more time with my family, resume my law practice, and serve my constituents from my local office. It is a pleasure serving you in Richmond.
Sincerely,
David Toscano
