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May 17, 2016

If Revenues Fall Short, It’s Not Just Teachers Who Could Feel the Pain

With Governor McAuliffe’s announcement last Friday that state revenue collections came in far lower than forecast for April, it’s clear that Virginia is on a crash course to a big problem unless the next two months bring substantial improvement.

Revenue growth that underperforms forecasts is bad on its own because it means the state lacks the resources to do things already planned. But this year it is particularly bad because more than $350 million in important public investment in things like education and public safety will be threatened if state revenues come in more than one percent under the forecast because of contingencies included in the upcoming budget.

If this happens, the largest potential cut would be $189.9 million for salary increases for public employees and faculty. One of the highest-profile cuts would be $134.4 million for the state’s share of a 2 percent salary increase for K-12 school staff. Also on the automatic chopping block would be $12.4 million to reward experience, skills, level, and seniority for sheriffs and jail employees, $6.3 million to do the same for state police, $4.1 million for the salary initiative for district court clerks, and $5.2 million for career development for elected constitutional officers.

The year isn’t done. Revenues could rally if the economy picks up steam. One reason April was a weak month is because it had one fewer collection day than April 2015. With one extra day, May could show dramatic growth and collections could get back on pace. Also, important payments from individual nonwithholding are expected in May.

But the revenues are behind by more than a day’s difference. Year-to-date sales tax revenues have lagged the forecast every month of the fiscal year. Revenues from withholding have been off pace since October and they haven’t matched strong employment growth in Virginia.

It’s looking less and less likely that Virginia will hit its revenue forecast this year. If this happens, public employees like Virginia’s committed teachers and dedicated police officers will likely pay the highest price.

Budget & Revenue

Aaron Williams

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