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February 19, 2016

Five Things to Watch for When Legislators Release Their Budgets

This Sunday, two key legislative committees – known as the “money committees” – will release their suggested changes to the governor’s proposed budget for the next two years. What happens next will influence whether Virginia’s schools have more adequate state funding; whether more Virginians have access to affordable health care; and whether the state will make progress on fixing its broken youth prison system.

With Virginia’s one-term limit for governors, this is the only two-year budget the governor’s administration has the opportunity to write and see through to implementation.

Here are the key issues we’ll be looking for.

1. We know legislators will reject closing the health care coverage gap, but will they at least make token improvements for those left without coverage?

Unfortunately, we already know that providing quality, affordable health care for as many as 400,000 uninsured Virginians won’t be supported by either the House or Senate. However, they may propose some funding increases for the organizations that provide care to the uninsured. They did this in 2014 with marginal increases in funding for the free clinics and community health centers and have hinted that they may do this again. Another potential vehicle is to take up hospitals on their offer to contribute to a provider assessment that would increase their reimbursement rates, bolster rural hospitals, and boost funding for graduate medical education.

2. Will the improved state support for K-12 education be retained, and will legislators change how it is distributed?

The House and Senate will likely maintain increased investments in preK-12 schools, similar to those proposed by the governor in his budget. The questions to pay attention to are: (1) how do the investments stack up in total dollars to the governor’s proposed budget, and (2) are these investments targeted to schools in high-poverty areas that have seen the most cuts in recent years.

Senators and delegates have joined the governor in voicing a need for increased support for Virginia’s preK-12 schools. However, house members have already publicly disagreed with some of his proposals to do so. In particular, they have raised concerns about the matching requirements for local governments attached to the funding for additional instructional positions. They may propose to cut this initiative and distribute the funds to schools under a different one. Also, don’t be surprised if the additional $50 million in the governor’s proposed budget for the at-risk add-on gets reduced in the proposals. These funds are currently targeted to schools with higher percentages of students living in poverty in order to assist schools with a variety of services including dropout prevention.

3. What approach will the money committees take on the state’s revenue forecast, and will they make it worse?

Revenue growth – like the overall economy – has been improving but not at the pace many had hoped. In recent years, the General Assembly has sometimes made funding certain things that would be nice to have contingent on meeting certain revenue goals. While this approach leaves some initiatives in limbo, it has the benefit of protecting core services in the event of softer than expected revenue growth. We will be looking to see whether and how legislators use this approach again this year.

Compounding the less-than-perfect revenue outlook is the addition of new tax giveaways that erode the resources available for the building blocks of our economy. For example, the House and Senate have already approved a new R&D tax credit that will cost the state $20 million a year in foregone revenue, $5 million more than proposed by the governor in his budget. What will the budgets reveal about legislators’ choices on new tax giveaways?

4. How will legislators change the governor’s proposed economic development spending?

The governor’s budget proposes pouring more money into economic development, including existing programs like the Governor’s Motion Picture Opportunity Fund, new programs like GO Virginia, and targeted research programs that focus on commercialization. Legislators have discussed cutting some of these, but perhaps adding new ones instead. It will be interesting to see how they put their own stamp on economic development programs, and to what extent they try to wrest control of the programs away from the administration.

5. Will legislators maintain the budget framework that allows improvements to the state’s juvenile justice system?

The governor’s budget provides needed flexibility for the Department of Juvenile Justice to use savings from closing youth prison to build out a continuum of community-based accountability and treatment programs. Currently the state has just two large, expensive, high security one-size-fits-all youth prisons, which have been shown to actually increase recidivism – the longer we hold youth in them, the more likely it is that the young person will be re-arrested after release. We expect legislators to maintain the current operating budget language that allows the development of more effective community-based options.

The governor’s budget also proposed allocating capital money to build two new youth prisons, allowing the closure of both of the state’s existing youth prisons. It appears legislators are pumping the brakes on that capital plan, instead only providing planning money for one facility in the second year of the budget.

The Commonwealth Institute

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