Bud­get fix re­mains a work in progress

Assem­bly has yet to forge a path on how to ad­dress state short­fall

Richmond Times-Dispatch Weekend - - FRONT PAGE - BY MICHAEL MARTZ

Al­most four weeks into a spe­cial ses­sion called ini­tially to deal with a $2.7 bil­lion pro­jected hole in the state bud­get, the Vir­ginia Gen­eral Assem­bly is still look­ing for a road map to an agree­ment on how to fill the gap.

The House of Del­e­gates and Se­nate haven’t agreed on a process for adopt­ing their bud­gets and rec­on­cil­ing their dif­fer­ences, much less on where to find money to pay for some of the more than $2 bil­lion in spend­ing pri­or­i­ties that Gov. Ralph Northam pro­poses to cut be­cause of a public health emer­gency he de­clared on the same day the assem­bly adopted the $135 bil­lion bud­get in March.

“I haven’t heard any­one say, ‘Here is the plan,’ ” said

Sec­re­tary of Fi­nance Aubrey Layne, who will ap­pear be­fore the Se­nate Fi­nance & Ap­pro­pri­a­tions Com­mit­tee on Tues­day to brief law­mak­ers on rev­enues to pay for spend­ing in the $46 bil­lion gen­eral fund bud­get. The gen­eral fund, sup­ported by state taxes, chiefly goes to­ward core ser­vices such as ed­u­ca­tion, health care and public safety.

The lack of clear di­rec­tion has frus­trated some law­mak­ers, es­pe­cially Repub­li­cans who are in the mi­nor­ity in both cham­bers of the assem­bly for the first time in more than 20 years.

“We’re just search­ing for what the process is,” said for­mer House Speaker Kirk Cox, R-Colo­nial Heights, a mem­ber of the House Ap­pro­pri­a­tions Com­mit­tee who is ex­plor­ing a run for the Repub­li­can nom­i­na­tion for gov­er­nor next year. “That is very frus­trat­ing.”

Even some Democrats are un­sure about what the next step will be as the assem­bly be­gins to move be­yond leg­is­la­tion on po­lice and so­cial jus­tice re­forms that have dom­i­nated the first 24 days of the spe­cial ses­sion.

“Com­mu­ni­ca­tion has not been good be­tween the two bod­ies,” said Sen. Creigh Deeds, D-Bath, a new mem­ber of the Se­nate Fi­nance and Ap­pro­pri­a­tions Com­mit­tee.

As chair­man of a joint sub­com­mit­tee on men­tal health, Deeds is look­ing for ways to sal­vage some of the $135 mil­lion in pro­posed new spend­ing on behavioral health care that the assem­bly froze in the bud­get in April and Northam now pro­poses to cut. “I don’t know what’s hap­pen­ing with the bud­get,” he said.

Pro­ce­dural fight

The spe­cial ses­sion be­gan with a fight over a pro­ce­dural res­o­lu­tion that the House adopted and the Se­nate re­jected be­cause the bod­ies couldn’t agree on the op­er­at­ing rules, in­clud­ing those for act­ing on the bud­get and new rev­enue fore­cast that Northam pro­posed on Aug. 18.

“There will be a col­lab­o­ra­tive de­ci­sion made be­tween the Se­nate and the House, but that has yet to be de­ter­mined,” House Ap­pro­pri­a­tions Chair­man Luke To­rian, D-Prince Wil­liam, said Fri­day.

To­rian’s com­mit­tee has been fo­cused on re­view­ing the cost of leg­is­la­tion pro­posed in re­sponse to the death of Ge­orge Floyd in po­lice cus­tody in Min­neapo­lis in May, as well as other in­ci­dents of al­leged po­lice bru­tal­ity against African Amer­i­cans. Floyd’s death ig­nited public protests in Rich­mond and across the coun­try to call for laws to make law en­force­ment more ac­count­able, par­tic­u­larly for use of deadly force.

The House com­mit­tee also is re­view­ing amend­ments that panel mem­bers and other del­e­gates have pro­posed to the gov­er­nor’s bud­get. Se­nate Fi­nance and Ap­pro­pri­a­tions is not con­sid­er­ing mem­ber amend­ments be­cause com­mit­tee lead­ers say that has not been the prac­tice in pre­vi­ous spe­cial ses­sions.

“We are work­ing to put to­gether the House bud­get,” To­rian said.

Cox cred­ited To­rian for com­mu­ni­cat­ing with Repub­li­cans about the com­mit­tee’s work. “Luke has been good to us,” he said.

But the for­mer speaker faulted the House Demo­cratic lead­er­ship for its han­dling of a spe­cial ses­sion that has been both in­ter­mit­tent and vir­tual — con­ducted en­tirely on­line — since the open­ing day pro­ceed­ings at the Siegel Cen­ter in Rich­mond. The Se­nate, in con­trast, has met pri­mar­ily in per­son at the Sci­ence Mu­seum of Vir­ginia in Rich­mond.

“I think the process has been very flawed,” said Cox, who called the lead­er­ship “un­com­mu­nica­tive” in let­ting mem­bers know their day-to-day sched­ule and du­ties.

House Speaker Eileen Filler-Corn, D-Fair­fax, did not re­spond di­rectly to her pre­de­ces­sor’s crit­i­cisms, but said, “At the start of the spe­cial ses­sion, the House Demo­cratic Cau­cus laid out a thought­ful, bold plan to sup­port Vir­gini­ans dur­ing the COVID-19 pan­demic and pass lon­gover­due im­prove­ments to polic­ing and our crim­i­nal jus­tice sys­tem — we are de­liv­er­ing on those crit­i­cal im­per­a­tives.”

“We look for­ward to fin­ish­ing this spe­cial ses­sion as strong as we have started it, as we work with our col­leagues in the Se­nate to con­tinue to de­liver for fam­i­lies, stu­dents, work­ers, and com­mu­ni­ties across Vir­ginia,” FillerCorn said.

Re­main­ing tasks

The re­main­ing work of the ses­sion, in ad­di­tion to rec­on­cil­ing dif­fer­ences on leg­is­la­tion, is the bud­get.

“As the House con­tin­ues to work through the ap­pro­pri­a­tions process, the speaker is com­mit­ted to pass­ing a bud­get that sup­ports stu­dents, work­ers, fam­i­lies, and busi­nesses while main­tain­ing Vir­ginia’s AAA bond rat­ing dur­ing this un­prece­dented eco­nomic pe­riod,” her spokesman Jake Ruben­stein said.

Se­nate Mi­nor­ity Leader Tommy Nor­ment, RJames City, who en­gi­neered the de­feat of the pro­ce­dural res­o­lu­tion on the first day of the spe­cial ses­sion, said in a text mes­sage on Fri­day, “So­cial-jus­tice re­form has over­taken the re­vised bud­get as the num­ber one pri­or­ity by some.”

“Hav­ing said that, many of the bills be­ing ad­vanced have sig­nif­i­cant fis­cal im­pacts,” said Nor­ment, a for­mer co-chair­man of Se­nate Fi­nance. “That fis­cal re­al­ity trans­lates into pri­or­i­ties [that] must be de­ter­mined and bal­anced.”

Se­nate Fi­nance Chair Janet How­ell, D-Fair­fax,

“is re­spon­si­bly work­ing with our staff to de­velop a list of op­tions for con­sid­er­a­tion” of the fi­nance com­mit­tee and ul­ti­mately the en­tire Se­nate, he said. “Ul­ti­mately the re­vised bud­get will be de­cided in con­fer­ence with our House coun­ter­parts.”

How­ell said last week that the com­mit­tee would not con­sider any ad­di­tional Se­nate bills and will be­gin “work­ing more in­tensely on the bud­get.”

New spend­ing

Both cham­bers are strug­gling with ways to find money to re­store new spend­ing — for public ed­u­ca­tion, men­tal health and other pri­or­i­ties — with­out dip­ping fur­ther into fi­nan­cial re­serves and risk­ing the loss of Vir­ginia’s AAA bond rat­ing. The high bond rat­ing low­ers the cost to the state of bor­row­ing money for a wide range of cap­i­tal projects and raises Vir­ginia’s rep­u­ta­tion as an at­trac­tive place for busi­ness in­vest­ment.

Faced with an eco­nomic melt­down be­cause of the coro­n­avirus pan­demic, Northam did not de­posit $600 mil­lion into the state’s cash re­serve, as pre­vi­ously planned in the re­vised bud­get for the fis­cal year that ended June 30. He also has pro­posed to de­fer the de­posit of

$300 mil­lion into the re­serve in the sec­ond year of the new bud­get, although he in­tends to make an ad­di­tional de­posit to the con­sti­tu­tion­ally man­dated rainy day fund.

Lib­eral ad­vo­cacy groups and pro­gres­sive law­mak­ers have called for the state to with­draw more money from the Vir­ginia’s com­bined $1.1 bil­lion in re­serves to re­store lost sales tax rev­enue and other pre­vi­ously ap­proved spend­ing for public ed­u­ca­tion.

“There’s a win­dow to use them and the win­dow is go­ing to close,” said Michael Cas­sidy, pres­i­dent and CEO of the Com­mon­wealth In­sti­tute for Fis­cal Anal­y­sis, which wants the state to with­draw about $375 mil­lion from the re­serve funds over two years.

AAA bond rat­ing

How­ever, the gov­er­nor and assem­bly bud­get lead­ers have been un­will­ing to touch the ex­ist­ing re­serves be­cause of con­cern about the re­ac­tion of na­tional bond rat­ing agen­cies and the un­cer­tain fu­ture of the econ­omy that de­pends on end­ing the COVID-19 health cri­sis. The worst-case sce­nario con­sid­ered dur­ing the re­fore­cast­ing process pro­jected a po­ten­tial rev­enue short­fall of $5 bil­lion over two years.

“There is lit­tle cer­tainty in these new rev­enue fore­casts,” said Jim Regim­bal and Neal Menkes, fis­cal con­sul­tants for the Vir­ginia Mu­nic­i­pal League, in a joint pre­sen­ta­tion on Thurs­day.

Vet­eran po­lit­i­cal an­a­lyst Bob Holsworth said he would be sur­prised if the assem­bly dipped fur­ther into the state’s re­serves be­cause of con­cerns about pro­tect­ing the AAA bond rat­ing. While some pro­gres­sive leg­is­la­tors “don’t see the bond rat­ing as sa­cred, as Democrats tra­di­tion­ally have in Vir­ginia,” he said the tim­ing would not be good with all 100 House seats up for elec­tion next year, along with the gov­er­nor, lieu­tenant gov­er­nor and at­tor­ney gen­eral.

“I can’t imag­ine the Democrats try­ing to do that the year be­fore an elec­tion,” Holsworth said. “Ul­ti­mately, the chal­lenge is if the bond rat­ing is down­graded, it gives the Repub­li­cans a ready-made is­sue.”

Se­nate Ma­jor­ity Leader Dick Saslaw, D-Fair­fax, a se­nior mem­ber of the fi­nance com­mit­tee, said Fri­day that he also does not know the process for reach­ing agree­ment on a bud­get. But he said he is heart­ened by the lat­est rev­enue re­port on Thurs­day that showed Vir­ginia’s tax col­lec­tions about $375 mil­lion ahead of fore­cast dur­ing the first two months of the fis­cal year.

“The num­bers are bet­ter,” said Saslaw, who hopes to get “a dif­fer­ent pic­ture” when Layne, the fi­nance sec­re­tary, ap­pears be­fore the com­mit­tee on Tues­day.

Ad­min­is­tra­tion of­fi­cials still take a cau­tious view about any big spend­ing com­mit­ments that would re­quire re­cur­ring state rev­enue to pay for them, at least un­til another rev­enue fore­cast and another assem­bly ses­sion that will be­gin in Jan­uary.

“I’m go­ing to try to tamp down their ex­pec­ta­tions,” Layne said.

Sec­re­tary of Fi­nance Aubrey Layne will ap­pear be­fore a Se­nate panel Tues­day.

BOB BROWN/TIMES-DIS­PATCH

“There will be a col­lab­o­ra­tive de­ci­sion made be­tween the Se­nate and the House, but that has yet to be de­ter­mined,” says Del. Luke To­rian, D-Prince Wil­liam, seen speak­ing with Sen. Janet How­ell, D-Fair­fax, in March.

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