Home Budget, Economy Governor Ralph Northam Unveils Budget Amendments for the 2018–2020 Biennium to the...

Governor Ralph Northam Unveils Budget Amendments for the 2018–2020 Biennium to the Joint Money Committees

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From Gov. Northam’s office:

RICHMOND—Governor Ralph Northam will today address the Joint Money Committees of the General Assembly to share proposed amendments to the 2018–2020 biennial budget.

Ahead of this address, Governor Northam previewed budget proposals to raise teacher salaries and invest in K-12 educationprotect Virginia’s water qualityadd school counselors to improve school safety, accelerate Virginia’s progress towards universal broadband access, and address the affordability of higher education and housing.

Governor Northam also outlined a plan to put Virginia on a path to committing 8 percent of its total budget in reserves by the end of the Northam administration.

AS PREPARED FOR DELIVERY:

Chairman Norment, Chairman Hanger, Chairman Jones, Chairman Ware, Speaker Cox, members of the General Assembly: Good morning.

And to my wife, First Lady Pam Northam; Lt. Gov. Justin Fairfax; Attorney General Mark Herring; and members of our Cabinet, thank you for being here today.

I want to thank Secretary of Finance Aubrey Layne and his team, as well as the staff at the Department of Planning and Budget and the Department of Taxation. Whether or not you like what we’re proposing today, they have all worked extremely hard to develop these budget amendments, and the Commonwealth and I are truly grateful.

We’re gathered this morning at an important moment for the Commonwealth. A growing economy and federal tax changes have come together to create a unique opportunity to strengthen our balance sheet, provide targeted tax relief to those who need it the most, and make historic investments that will position Virginia for future downturns and improve our ability to keep pace with a changing world.

This past year is one to celebrate. Because of all of our work, we crafted a biennial budget that will give 400,000 more Virginians the ability to get health care. That budget also invested more money in shoring up our reserve funds, preserving our triple-A bond rating that we have from all three rating agencies, and our reputation as a state that budgets and spends responsibly.

We also have had a great year of economic development announcements across the state, from Northern Virginia to Southwest Virginia.

I’ve been proud to stand with many of you in your communities to announce new businesses or expanding existing businesses, bringing jobs to places across Virginia. Every new job means another Virginian who can provide for themselves and their loved ones.

Since I took office, we’ve announced more than 41,000 new jobs, with more than $8 billion in new capital investment. I’ve made more than 80 visits to rural Virginia, to announce more than $1.25 billion in investments and 4,453 new jobs.

With the help of legislators, we created a proposal with Amazon that I’m proud to say was successful. Virginia will be home to a new corporate headquarters and 25,000 new jobs.  

This will help diversify our talent pool and reduce our reliance on federal spending in Northern Virginia.

I’m proud that our proposal to Amazon relied heavily on investments in our own people— expanding our computer science education offerings and committing to infrastructure improvements that will help everyone.

We have done these things together, in a bipartisan fashion. We are showing the world that while Washington is bottlenecked by bitter division and partisan point scoring, Virginia takes pride in governing for the good of the people we serve. We don’t question each other’s motives. We believe that each of us, regardless of the party we belong to, cares deeply about the future of the Commonwealth we love. We are all here as servants of the people of Virginia.

That said, we can all be proud of the state of Virginia’s economy. Our unemployment rate is 2.9 percent, the lowest in more than ten years. While some of our regions, like my home area of the Eastern Shore, have unemployment rates that are higher than the state, they have still shown improvement. None of us should rest until every Virginian who wants a job has opportunity to find one.

But we can say with certainty that in every part of Virginia, we’re heading in the right direction.

Our economy is stable and growing.

Over the past few months, our administration has worked with many of you, and with experts at the rating agencies and the Governor’s Advisory Commission on Revenue Estimates.

My administration has attended the money committee retreats to understand your staffs’ perspective. We all agree that our economy will continue to grow, adding revenue to our general fund coffers.  

This budget assumes the General Assembly will approve legislation to recoup revenues from Internet sales taxes.

This creates a unique opportunity for us to invest in our future—by putting additional money into our reserves, making down payments on important priorities that we can all agree on, and for expected bills.

We know we must pay for disallowances at Piedmont and Catawba hospitals, and close the books on our VITA contract with Northrup Grumman.

This approach is structurally balanced. One-time revenues are not paying for on-going spending requirements. That means we are funding only what Virginia can afford.

We’re taking this opportunity to make investments that we’ve discussed for years.

And we’re being responsible stewards of government, by putting money into reserves and budgeting for bills we can foresee, and some we can’t.

If this year has taught us anything, it’s that we have to prepare for the unexpected. I was glad to sign the biennial budget that put additional dollars in our reserve funds. But we can do more, and it’s responsible to do more now.

I am proposing that we set aside $1.1 billion in reserve funds, including last year’s surplus.

This will set us on a path to having eight percent of our budget expenses set aside in reserves when I propose my outgoing budget to you. This is a fiscally responsible action that will help protect the valuable triple-A bond rating that Virginia has long enjoyed.

We all know how complicated filing taxes can be. Virginia’s taxpayers should go through the most simple process possible.

Conforming our tax code to the federal tax code is a straightforward process, and we should do it this year, as we do every year.

After that, and only after that, should we begin a conversation about tax reform.

As you all know, the federal government enacted some major tax changes this year that will affect Virginia taxpayers. Virginians will pay about $4 billion less in federal taxes.

But our working families making $54,000 a year or less are not going to see a big benefit from these federal tax changes. Those are the Virginians who already see a disproportionate part of their paychecks go to taxes.

They deserve to keep more of their paychecks. One good job should be enough.

That’s why I proposed earlier this year that we make the Earned Income Tax Credit fully refundable. This work credit—which we already have—goes to our working, middle-class Virginians like our teachers and first responders.

Many of the jobs I mentioned earlier, the ones that you and I have stood side by side to announce, would fall under the threshold to qualify for this work credit. It will help Virginians in every community and every region.

We can all agree that tax relief should flow to those who need it the most—the middle class and working families across this Commonwealth. This is a policy that has been supported by Republicans and Democrats alike, because it works, and it puts money right back into the economy and rewards those who work hard for a living.

Virginia can join 24 other states that already make this refundable, and see it work here too.

My amendments would also lift a tax burden on many of our businesses, by ending the accelerated sales tax for businesses with up to $10 million in gross sales. This means about 1,800 additional businesses will be exempt.

Compensation

I want to turn now to the investments in this budget, beginning with our state workforce.

I’m proposing a one-time, one percent bonus for our state employees, effective next December.

I’m also proposing money to fund the state’s share of a one percent bonus for state-supported local employees.

These budget amendments also provide more support for our retired law enforcement officers, by increasing the health insurance credits for state police, deputy sheriffs, and other state law enforcement officers who retire with at least 15 years of service. They have put themselves in harm’s way, and their health insurance in retirement should be affordable.

Education

I believe there is power in every child.

I myself am a product of Virginia’s public schools. Both my wife Pam and I are educators. We know the tremendous impact a great teacher can have on a student – I’m sure we can all remember a teacher who gave us a passion for a new subject or provided us with a new perspective.

Virginia has a world-class education system. Our colleges and universities attract top talent.

But the world moves fast, and we need to make a sustained investment in education across the board if we want to be competitive in the 21st century economy.

A good education starts before a child ever enters school. We know that the care and nutrition a child receives in early childhood sets them on a path for success.

Earlier this year, we reinstated the Children’s Cabinet, and I’m proud that Pam is leading that effort to focus on early childhood initiatives and bring our advocacy groups under one roof.

In this budget, we’re proposing almost $10 million to continue the funding for the VPI Plus program, because its federal funding source is running out. This will sustain our available slots for early childhood education. 

At the K-12 level, we must invest in our teachers. I’m proposing to raise teacher salaries by an additional 2 percent as of July 1, 2019. That’s on top of the 3 percent raise adopted by the General Assembly in the budget that I signed earlier this year.

Doing this will provide our teachers with the single largest one-year raise in more than 15 years.

We’re losing great teaching talent to our neighbors in other states, because they pay them more. A good teacher can turn a child’s life around, and we should pay them enough so they don’t have to take a second job just to get by. Our teachers deserve this.

Our schools, too, deserve more than we give them. During my inaugural address in January, I spoke of crumbling schools.

We know that school divisions across the state would like to upgrade some of their older facilities. They have leaky roofs and ceilings, and antiquated classrooms. It’s hard for children to learn when the school itself is distracting.

So we’re providing $80 million through our Literary Fund for school construction loans. That will cover all of the outstanding requests we currently have for the Literary Fund, and will help ensure that students have the best learning environment possible.

Our children go to school to get an education, but they bring with them everything else in their lives. If their home situation is difficult, if they’re having trouble with bullies – those factor into that child’s ability to learn. Schools have long been more than just a set of classrooms, but support staff like school counselors are often seen as nonessential when budgets are tight.

But counselors are absolutely essential. Giving students in distress a place to turn could change the life of a young student.

Suicide is now the second leading cause of death among school-aged youth, both nationally and in Virginia.

So I’m proposing $36 million to start increasing the number of counselors in our schools.

This will start us on the path to reduce the ratio of counselor to student from 1 to 425, to 1 to 250 in a few years.

We want our students to be safe in school, and for Virginia to continue to be a national leader on this front. I’m proposing money to expand training for our school resource and school security officers, for our threat assessment teams, and to enhance training and technical assistance on school safety.

Higher ed

I always say I want everyone in Virginia to have the opportunity for good health, a good education, and a good job.

You need the education to get the job, whether that education is a college degree or an industry-recognized workforce certificate.

And that education has to be affordable.

Virginia’s public higher education system is top-ranked and well-regarded. We have excellent schools. But to stay on top of those rankings, we have to maintain affordability.

Having best-in-the-nation colleges and universities won’t mean much if Virginia students can’t afford to attend them.

We can’t let another year go by without addressing this issue.

So I’m proposing a two-pronged approach. These budget amendments include $15 million for need-based tuition assistance for students at our public, four-year institutions.

We’re also including $5.2 million for the Tuition Assistance Grant Program.

These grants go to Virginia students at private institutions, and this money will allow us to increase the award to an annual amount of $3,400.

While we add this additional financial assistance, I’m proposing language requiring our four-year and two-year institutions to develop Tuition Predictability Plans, to help students understand what to expect.

I’m also proposing tuition assistance funding to help recruit and retain our National Guard members.

Workforce Development

As we work to make higher education more affordable, we’re also focused on aligning our programs that help folks get jobs.

We know that we were able to land Amazon because of the quality of our workforce. Companies are looking to locate where the best trained workers are. When I sell Virginia, it’s not hard because I know we have the best workforce in the nation. Let’s keep it that way.

I spoke earlier this month about a plan to work with the Virginia Community College System to transform our workforce pathways.

We want to measure success in jobs, not just degrees, and we can do that in part by putting the skills training at the front end of our programs.

I’m proposing $5.5 million for career advisors at our community colleges, to help guide students into the pathway that’s right for them.

These amendments include $4 million for our popular workforce credential grant program, which helps students pay for training in high-demand jobs.

We also need to do a better job of keeping track of the ways people enter our workforce systems, so I’m proposing $8 million in one-time funding to create a case management system across our agencies.

This will make our systems more efficient, so we can better connect people to a job and the dignity that comes with it.

Natural Resources

These budget proposals also include new, historic commitments to investing in our water quality.

I want to ensure that our water quality reserve fund is adequately supported, so if there is a future economic downturn, we don’t lose momentum on improving and protecting our waterways.

Our farmers are working to do their part, to reduce the ways their operations can affect the streams, creeks, and rivers nearby. I’m proposing to increase funding for the programs that help them and others do that, to $90 million in fiscal year 2020.

We’re also proposing to dedicate $50 million in fiscal year 2020 to the Stormwater Local Assistance Fund, to help urban and suburban areas reduce pollution coming off of roads and other impervious surfaces.

This will allow Virginia to accelerate our Chesapeake Bay cleanup efforts, and meet our targets for a restored Bay by the time I leave office.

I’m also proposing that we increase funding by $11 million for the Virginia Land Conservation Foundation to support the data-driven land conservation strategy we outlined in April.

And I’m seeking $2.5 million to begin to return staffing at the Department of Environmental Quality to previous levels. The DEQ has to be properly staffed to perform regulatory oversight.

A recent report from the White House illustrated how great a threat climate change poses, and how little time we really have to make changes to protect Virginia and its environment. From our ports to our coastlines to our economy, climate change is a crisis that will affect every Virginian. And we must meet that crisis with action.

We all breathe the same air and drink the same water. Keeping it clean for our children isn’t about Democrat versus Republican. It’s in the interest of every Virginian, and I look forward to working with the General Assembly on this front.

Rural Broadband

I often speak of how we need to ensure that everyone in Virginia has access to opportunity, no matter where they live.

Our children, our businesses, and our communities should have the same chance to thrive, from Lee County to Loudoun County. But our rural regions can’t keep pace without having access to modern broadband the way our urban areas do. To truly give every Virginian the chance to succeed, we must expand rural broadband access.

In July, I announced that our administration would develop a plan to get broadband to every Virginian within 10 years.

But that plan doesn’t help someone today. That’s why I am proposing $46 million in the coming budget year, on top of $4 million already in the budget, to help get broadband to those Virginians who don’t have it. And I plan to propose an additional $50 million each year in the next two biennial budgets.

With help from public-private partnerships, the $250 million investment I envision would get us a long way toward universal broadband, in a faster time frame.

This is probably the number one issue I hear about from residents, businesses, and legislators in rural Virginia. Let’s make a down payment on this investment today.

Infrastructure

It also remains critical that we can move goods and people around the Commonwealth. When our roads become congested, it impacts the quality of life for our citizens and the movement of commerce for our businesses.

So I’m proposing we invest $75 million in the Virginia Transportation Infrastructure Bank. This bank can help us fund projects across our Commonwealth.

This will provide seed money for big projects, like improvements to I-81, that need a down payment to get rolling.

I’m also proposing an additional investment of $20 million to develop pad-ready business sites. When I talk to companies that want to locate in Virginia, they’re looking for ready sites, with the services they need already installed, so they can get up and running as quickly as possible.

Businesses can’t wait for years while permits are lined up and sites are built. Virginia lags behind other states in creating these build-ready sites, and this proposal will help us compete for large manufacturing companies.

My proposals also include $10 million for Virginia Saves, a revolving fund for energy efficiency and renewable energy projects.

We’re proposing to create a new position at the Department of Mines, Minerals, and Energy to support the solar industry, and create an office focused on offshore wind.

Medicaid/Health

My budget amendments include additional dollars to pay for our current Medicaid programs, which did not experience the savings expected in the previous budget.  

That’s why I’ve asked Secretary of Health and Human Resources Dan Carey to be involved in the Medicaid forecast process earlier, and more intently. And I’ve directed the Department of Medical Assistance Services to bring stakeholders together to provide input and improve the forecasting process.

When I began my term and chose my team, I told Secretary of Finance Aubrey Layne I wanted him to function as a CFO for the state.

As such, he’ll be taking a greater role in oversight of financial matters at all of our agencies, to make sure we’re forecasting and spending as accurately as we can.

Rising costs of health care affect not only our public programs like Medicaid, they affect all of our private plans as well. We need to have a national conversation on health care and how we can get a handle on those rising costs.

Solutions like short-term health plans, or catastrophic health plans, don’t solve the problem of rising costs. As a doctor, I believe it’s critical that we start having an honest conversation about what we can do that will make a real difference in the cost of health care.

One thing we can do is to ensure that we’re investing in community-based behavioral health services.

My budget proposals include $9 million to expand our crisis response systems at our community services boards. This is a component of the reforms at our CSBs that began under Governor McAuliffe.

I’m also proposing $5 million for community transition support, and $2 million for permanent supportive housing. We know our state hospitals are at high capacity, which can be a health and safety concern.

We want people to be able to leave our institutions and get the care they need in their home communities, but to do that, we have to have the services available. This is a step toward that.

These amendments include additional funding to help our first responders buy more Naloxone, a lifesaving opioid overdose reversal drug.

Local health departments, working with local community services boards, have been able to supply naloxone for communities at no cost, but this requires continued resources.

Every overdose death is a preventable death, and naloxone is a key element in that prevention.

Veterans

I want Virginia to be the most veteran-friendly state in this great country of ours. We should be proud that Virginia was the first state in the nation to effectively eliminate veterans’ homelessness. That is a credit to everyone here.

As a veteran myself, I feel it’s our responsibility to do all we can to ensure our veterans have the support they need and can access the benefits they’ve earned.

I have proposed funding for behavioral health support positions for veterans, and new positions to help process benefits. I’ve also added positions to help our veterans transition into the civilian workforce.

Let’s ensure that every Virginia veteran has access to the services and benefits they have earned.

Housing

We know that affordable, accessible housing helps bring new employers to the Commonwealth to create new jobs.

But it also improves educational outcomes for our children, and improves health outcomes for all Virginians—especially those with chronic physical and mental health conditions.

I’m proposing in these budget amendments that we add $19 million to the Housing Trust Fund, which provides loans for home purchases and helps reduce homelessness. I’m also proposing the creation of a new position at the Department of Housing and Community Development to work on the issue of eviction.

And my budget would also provide additional support for legal aid attorneys to provide legal assistance to Virginians facing the prospect of eviction.

Other items

In addition to these investments, there are other budget items that may not be large dollar amounts, but we hope will have a big impact.

First, I’ve included funding to support Virginia’s Complete Count Committee, to make sure that we count all of our state’s residents in the vital upcoming census.

The census, done every ten years, determines federal funding for a vast array of programs, and it affects our congressional representation and our state legislative district lines. It’s critical that we get an accurate count.

Second, in light of the close call we had with Hurricane Florence in September, I’m proposing to add $4.25 million to the Department of Social Services to prepare for a potential storm evacuation in the future.

I’m also proposing funds to enhance the search and rescue functions at the Department of Emergency Management.

After this fall’s storms, we conducted a review with the help of experts from Louisiana, to identify ways we can better prepare for storms in a more cost-effective way. I look forward to sharing the results of that review soon.

Third, I’m proposing a change at the Department of Motor Vehicles.

No longer will Virginia suspend driver’s licenses for unpaid court costs and fees. Often, people don’t pay court costs because they can’t afford it. Suspending their license for these unpaid fees makes it that much harder on them.

When we proposed this before, one issue was how we would cover the revenue lost from license reinstatement fees, which go to the trauma fund. This budget addresses that.

There has been bipartisan support for addressing license suspension, and I look forward to building on the good work we have done together on criminal justice reform in moving this issue forward.

Fourth, I have included money for the Department of Elections, to enhance training for local elections officials and improve our oversight over maintenance of the voter lists.

I’ve also included money for a voter referendum for the Equal Rights Amendment. Virginia is long overdue to ratify that Amendment.

And I’m proposing $6 million to pay for the presidential primaries in 2020.

Conclusion

I know that we’re heading into an election year. I know people on both sides of the aisle will be thinking about the campaigns they’ll be running as soon as the General Assembly adjourns.

But I also know that there’s a lot we can accomplish in this short, 45-day session.

We can make the right adjustments to this budget to improve it, to invest in Virginia’s future, and preserve our longstanding reputation as a fiscally responsible state.

Many of these investments are things we all want, and have discussed for years.

We all want a safer I-81. There’s nothing partisan about wanting to drive on safe roads and arrive at your destination without hours in traffic.

We all want our rural areas to have the broadband infrastructure they need to fully participate in 21st century life. There’s nothing partisan when a business passes on your community because the Internet isn’t fast enough, or when your child can’t complete a school project because your house is still on dial-up.

We all want our farmers to have the support they need to do the right thing in reducing the runoff that ends up in our waterways and the Bay. There’s nothing partisan about wanting to fish in our rivers or in the Bay and being able to safely eat what we catch.

And we all want our schools to be safe environments. There’s nothing partisan about wanting our children to go to a school that doesn’t leak.

This year we can make sensible investments. We have a unique opportunity to help Virginians keep more of their paycheck, while investing in teachers, public schools, roads, clean air and a stronger economy that lifts everyone up.

Virginians are counting on us in the next session to help them. Their lives and their needs don’t stop because we have an election next November. They need us to work together.

When we work together, Virginia can’t be stopped. When we look for bipartisan solutions, Virginians benefit.  When we look to the way ahead, the future of the Commonwealth is bright, but only if we work toward our shared success.

Years from now, we won’t be judged by the outcome of an election, but by whether our children succeed, our economy thrives, and whether we live in a Commonwealth where everyone has a chance at opportunity.

Washington may be mired in a partisanship that has become so corrosive that winning a news cycle is more important than helping a fellow citizen. But that doesn’t have to be the fate of Virginia’s government. Here, we have always worked for the common good. Here, we moved ourselves above party and found things in common with one another. That’s what makes the way we do our work, the Virginia Way.

Every session, we have the opportunity to do the work that the people elected us to do. Let us again do this year’s work the way Virginians have always expected us to do it. I look forward to doing that work with each of you in the upcoming session.

Thank you, and happy holidays.