Northam says Virginia’s budget isn’t in terrible shape, but legislators should stay cautious

Virginia’s pandemic-era budget outlook isn’t terrible, but Gov. Ralph Northam’s administration urged legislators to remain cautious Tuesday as the state deals with a $2.7 billion shortfall projected for the two-year budget cycle that began this summer.

“We feared worse,” Northam told lawmakers in a virtual budget briefing before the start of the special session. “But this still requires serious and thoughtful budgeting and planning.”

Northam says he still intends to implement the “progressive budget” the Democratic-led General Assembly approved before the COVID-19 crisis struck. 

But with continued uncertainty over when and how the crisis will end, he said, new spending in areas like education and transportation will have to wait, possibly until lawmakers return to Richmond for their regular session in January. 

“We need to follow the oath that doctors lead with: First, do no harm,” Northam said.

Despite the economic slowdown this spring, state revenues actually grew a little more than 2 percent in the fiscal year that ended June 30, according to state budget officials. But they didn’t grow as much as predicted, finishing about $230 million below the forecast.

Resilient revenue sources enabled the state to avoid widespread layoffs or cuts to government services, the governor said in a speech that lasted a little less than 30 minutes.

“This would have hurt Virginia’s ability to serve people, and it would have slowed down our recovery,” Northam said.

Though big-ticket priorities like tuition-free community college will remain on hold, the governor proposed some new spending in response to the pandemic and nationwide calls for police reform following the killing of George Floyd. His proposals include:

• $88 million to promote affordable housing and prevent evictions
• $85 million to expand broadband internet service to remote areas
• $15 million for technology upgrades and student support at historically black colleges and universities
• $2.6 million for criminal justice reform measures such as civilian review boards, standardized training and a more robust decertification process for officers found guilty of misconduct
• $2 million for pre-paid postage on absentee ballot return envelopes to make it easier to vote by mail
• $1.1 million for the removal of the state-owned Robert E. Lee statue in Richmond

Asked how the state plans to deal with a possible $750 million shortfall in the unemployment trust fund used to cut checks to out-of-work Virginians, Finance Secretary Aubrey Layne said the deficit could be covered by higher unemployment taxes on employers.

“Which I think could be a terrible policy decision, particularly coming out of a pandemic,” Layne said. “But hopefully the federal government will take action and alleviate some of that burden on the state and the employers.”