December 19, 2016 Newsletter

Governor McAuliffe unveiled his budget-plan at a meeting of the General Assembly's joint money committees on Friday. The governor's proposal addresses salary compression issues and career development funding for deputies and sheriff's office staff while providing a 1.5% bonus in 2017.

McAuliffe included the 1.5 percent bonus in a proposed compensation package totaling $130.6 million, but many feel it doesn’t address the serious pay inequities that the canceled 3 percent raise was aimed at narrowing.

The bonus, which would be paid next December, is based on projected one-time savings from a proposed tax amnesty program and changes to the state’s accelerated sales tax policy, which requires businesses of a certain size to submit most of their June tax payments by the end of that month. Usually, businesses pay the tax in the following month. Because the fiscal year ends in June, the early payment basically shifts money from the following fiscal year into the prior one.

McAuliffe also called for online businesses with warehouses or fulfillment centers in Virginia to pay state sales tax. He has routinely chastised Congress for failing to enact a nationwide Internet sales tax, and he said his proposal could generate $21 million a year in state and local revenue beginning in fiscal 2018.

The spending plan which covers the second year of the 2016-2018 biennial budget, mostly uses targeted cuts and revenue adjustments to close a funding gap that has shrunk as the state’s economy has strengthened in recent weeks.

The shortfall for fiscal 2016, which ended in June, and the projected shortfalls for 2017 and 2018 now total a combined $1.2 billion, down from $1.5 billion. The improvement is largely due to increases in payroll tax revenue as the state’s employment picture gets stronger.

Those and other revenue measures, including tapping the state’s rainy-day fund, carve the three-year budget shortfall to $785 million. The governor proposes closing that gap by enacting more than $800 million in spending cuts.

No cuts are proposed for K-12 education and various public safety agencies were already exempted from cuts. In addition, state colleges and universities will face smaller cuts than expected for 2018, 5 percent instead of 7.5 percent.

He announced earlier this week that his proposal would also call for $31.7 million in new spending to improve state mental-health services and treat substance-abuse issues.

McAuliffe also is requesting $1 million to upgrade Virginia’s voter registration and election management system and $570,000 to continue a program for those serving in the military to get access to secure absentee ballots online.

Unlike in the last three years, the plan he submitted to the General Assembly’s finance committees is not built around expanding Medicaid. Language in his budget would give the governor authority to use hundreds of millions in federal Medicaid expansion dollars if the Affordable Care Act still exists a year from now.

The District of Columbia and 31 states have adopted the federal Medicaid expansion under the Affordable Care Act, which provides health-insurance coverage to low-income adults. Because federal money covers the cost, McAuliffe said he could have included $231 million in savings in the budget if Virginia participated. Even though the federal government is paying its full cost now, the burden will gradually shift to states and become a drag on state finances.

Members of the General Assembly will get more detailed briefings on the budget before convening Jan. 11.

If you have any questions, comments or concerns that I or my Aide, Jenna, can help assist with in any way, please do not hesitate to call me (434) 821-5929 or email at Delmfariss@house.virginia.gov. You can also keep up with me on my Facebook page at www.facebook.com/DelegateMattFariss.

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