Northam’s loaded legacy budget co-opts Youngkin, dispenses holiday sugar plums

What better way to get the Yule season rolling than playing Santa Claus, as Virginia’s lame-duck governor, Ralph Northam, is doing?

His jolly old excellency has been popping up everywhere, promising hundreds of millions of dollars’ worth of sugar plums that he’s embedded into his proposed $158 billion biennial state budget that’s improbably flush with cash. After publicly raising the curtain on the whole shebang Thursday, he gets to leave it for the General Assembly and the new governor to sweat out starting next month.

Northam called it his “Thank You” tour, and he’s not being stingy with the state’s gaudy record budget surplus. You don’t have to be if the heavy lifting of vetting and passing the budget will be done in the winter weeks and months after the Democratic governor has turned the keys to the Executive Mansion over to his Republican successor, Glenn Youngkin, and returned to life as Citizen Northam.

Now before the “Bah! Humbug!” chorus starts, give Northam some credit. What he’s doing is not new. It’s common for governors to take a holiday-season victory lap in the closing weeks of the single, non-successive term Virginia uniquely affords them.

Some go better than others.

Gov. Jim Gilmore, for instance, had little left to shower on an appreciative electorate 20 years ago after a recession depleted Virginia revenues and retrenchment was the order of the day. In fiscal year 2001, the last of Gilmore’s term, general fund tax collections declined 3.9 percent from the previous year – one of only four times revenues declined from one fiscal year to the next since 2000.

By contrast, his successor, Mark Warner, was able to do his St. Nick tour because he left office with the nation in an exuberant economic turnaround and revenues – fattened by a recent tax increase he supported and signed into law – were plentiful. Fiscal year 2005 ended with general tax collections exceeding the previous year by $1.7 billion, or 14.8 percent – still the largest proportional year-over-year growth in the 21st century.

Nobody has drawn a luckier hand than Northam. Somehow, in the middle of a pandemic and its resulting global economic wreckage, Virginia found itself in Fat City, giving him a sleigh overflowing with goodies to dispense at his leisure.

State government ended its last fiscal year on June 30 with an unprecedented surplus of $2.6 billion, some of it a windfall of federal pandemic recovery funds. Revenues that feed the state’s operational general fund, which pays for such basics as public education, health care and law enforcement, increased during fiscal 2021 by $3.1 billion, or 14.4 percent, over the previous fiscal year. That’s the largest dollar amount increase on record and the second-largest increase this century after fiscal 2005.

Put another way, the five richest quarterly general revenue collections totals in Virginia history all came under Northam’s watch: $8.6 billion from April through June of this year; $7.3 billion collected over the same three months of 2019; $6.8 billion in that period of 2020; $6.3 billion in that period of 2018; and $5.9 billion in the quarter that ended this September.

In all, Northam’s new budget anticipates general fund appropriations from July of next year through June of 2024 that will exceed comparable spending amounts in the current budget by $7.7 billion.

It’s easy to get lost in the number soup. But they add critical context to this staggering fact: that the budget Northam is proposing is more than twice the size of the final $72 billion biennial budget Warner proposed before leaving office in 2006.

The sheer growth of the budget and this year’s bountiful revenues enable Northam to promise eye-popping increases and investments that would have been unthinkable just a decade ago.

The state budget is the antithesis of sexy. Usually, bills fraught with conflict about hot-button social issues – this year, look for fights over “election integrity,” what public schools can and can’t teach about race, new abortion restrictions – grab the headlines. As someone who’s spent many nights into the wee hours stalking the dozen or so influential lawmakers who negotiate the final budget largely behind closed doors, it’s exhausting and as interesting as watching chrome rust.

But every year, the budget is the most consequential bill the General Assembly passes. Its provisions touch nearly every facet of life: what you pay in taxes, what government services or support you receive, the final prices you pay for goods, the quality and safety of the roads you ride and the water you drink. Provisions in the budget have the power to supersede other statutory law.

So it matters. A lot.

Often, what the governor drops in the legislative hopper in mid-December bears little resemblance to what emerges in March or April. Northam knows from experience that much of what he’s proposed will wind up on the cutting room floor. Governors’ budgets run a legislative gauntlet during which competing interests weigh in, urging a snip there, an addition here, an obscure but critical wording change that can cost or save a person or business millions. It gets torn apart like a straw hat in a bear fight and then reassembled for a last-minute vote by the House and Senate, sometimes as a fevered last order or business before adjournment sine die.

That is especially true when an adversary party will not only assume control of the Executive Branch of state government, but will take over one of the two chambers of the General Assembly.

But Northam was able to use this year’s bountiful financial resources to not only achieve ends important to him such as a significant investment in Chesapeake Bay cleanup, he was able to artfully co-opt his GOP successor. Including Youngkin’s major campaign promises in his budget bill may have been a concession to reality, but it ensures that at least some of it survives.

For instance, Northam’s budget makes good on Youngkin’s pledge to remove the state tax on groceries. Northam proposes ending the 1.5 percent state share of the tax; localities collect the other 1 percent.

Northam allocates $223 million to give raises to state police and prison officers and sheriffs’ deputies, as Youngkin had promised.

He beat Youngkin to the punch on his commitment to provide major funding increases for Virginia’s Historically Black Colleges and Universities.

For his part, Youngkin looked on with a smile. At Northam’s invitation, he attended Thursday’s meeting of the legislative budget- and tax-writing committees where the outgoing governor outlined his budget. His transition team called the grocery tax cut “a step in the right direction but does not entirely fulfill Virginians’ mandate.”

Youngkin listened as Northam recounted his administration’s good fiscal fortunes and crowed over its economic development benchmarks, all of it recognized in CNBC’s prized designation of Virginia this year as the Best State for Business.

Perhaps, Northam said, the sound financial footing he bequeaths to Youngkin would allow Youngkin to keep the good times rolling, to lure more factories to the commonwealth, to repeat as CNBC’s favored state.

Then he turned toward Youngkin, seated a few steps to his left and added dryly, “No pressure.”