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January 14, 2022

Important Steps Forward in Virginia’s Budget

State budget proposals offer a significant opportunity to make important investments in our communities and to make sure that everyone — no matter what they look like or how much is in their wallet — has the resources to thrive. Virginia’s robust economic recovery in 2021 means the state has more resources than expected to help families and communities and invest in the future. The outgoing budget proposal by Gov. Northam uses much of this money for one-time purposes such as to beef up Virginia’s reserve funds, to pay cash for capital projects rather than borrowing, and to provide one-time rebates on income taxes. The budget proposal also includes some key investments that will expand opportunity for Virginia families, particularly Black and Latinx families who have faced barriers to advancement, as well as addressing immediate needs.

Below is a summary of key initiatives in the areas of:

K-12 Education

  • Teacher and staff pay – Steps in the right direction for Virginia schools: Average teacher pay in Virginia was more than 10% below the national average in 2020 despite Virginia being a top-10 state for median household income and a relatively high-cost state. Teacher pay has also been shown as an important tool for attracting and retaining teachers. A recent national survey found 1 in 4 teachers were considering leaving their job by the end of the school year, with Black teachers being particularly likely to be considering leaving. This matters for Virginia’s families and future because effective teachers are the most important school-based factor for student educational performance.
    • The budget proposal provides $245.5 million in the budget year that begins July 1, 2022 (fiscal year, or FY, 2023) and $505.5 million in FY 2024 to increase salaries for state-supported teachers and other school staff, equal to the state share of 5% raises each year.
  • At-Risk Add-on – Significant boost for students from low-income families: School divisions that are located in rural areas, have a majority of students of color, or are in communities with a high share of poverty often have less resources to invest in schools, leading to less resources for students. Research shows that increased investments in schools have profound impacts on student outcomes, from graduation rates to academic improvements.
    • The proposed budget funds an additional $268.5 million for the At-Risk Add-on, a state program that provides additional funding to divisions based on the share of their students living in poverty.
  • English Learner teachers – Important step toward educational opportunity: Insufficient staffing and resources has clear consequences for students who are learning English (EL students), most of whom are Latinx, as seen in SOL pass rates and on-time graduation rates. Currently, the state funds 20 EL instructional positions for every 1,000 students.
    • The governor’s proposed budget would increase the ratio to 22 positions for every 1,000 students (one teacher for every 45.5 students) with an investment of $20.2 million. While the proposal is an improvement, it falls short of what the Board of Education recommends. In addition to increasing EL staff positions, the Board’s recommendations tie staffing ratios to student language proficiency, so students who need the most support get the most support. Fully funding the recommendations would provide a ratio of 1 instructor for every 25 students at the lowest level of English proficiency.

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Health Care

  • Behavioral health – Key investments to complete STEP-VA and move forward: Due to years of underinvestment, Virginia’s behavioral health safety net has struggled to meet community mental health needs exacerbated by the COVID-19 pandemic. Deficiencies in Virginia’s mental health safety net have an outsized impact on Black individuals in Virginia, with Black patients making up nearly 28% of all people serviced by Virginia’s mental health system.
    • The budget proposal includes $50.5 million to complete the long-term System Transformation Excellence and Performance (STEP-VA) initiative to improve access to quality behavioral health services. An additional $100 million is allocated in the budget year that begins July 1, 2023, to implement recommendations of a study on Virginia’s behavioral health system set to be completed in 2023.
  • Reimbursement rates – Improves patient options by increasing reimbursement rates: Promoting a robust provider network is vital to make sure that families who access health care through Medicaid or FAMIS can make timely appointments with local health care providers. Although most people enrolled in Medicaid/FAMIS in Virginia identify as white, nearly 762,000 Black and Latinx individuals participate in Virginia’s Medicaid and FAMIS programs.
    • In order to incentivize more providers to participate in Virginia’s Medicaid program, Gov. Northam has proposed increasing reimbursement rates for the following services: developmental disability ($294.2 million), primary care ($20 million), dental ($7.4 million), obstetrics and gynecology ($6.5 million), and children’s vision ($6.2 million).
  • Co-pays in FAMIS and Medicaid – Eliminates barriers to health care for children and adults: Upon the expiration of the federal health emergency, children in Virginia’s FAMIS program and adults in the Medicaid Fee-for-Service program would once again be required to pay out-of-pocket for copays to access some services. This practice may discourage individuals from seeking care due to cost concerns. Roughly 328,000 Black or Latinx children in Virginia are enrolled in FAMIS health coverage.
    • Funding is included in the proposed budget to eliminate co-payments for these populations.

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  • Housing Trust Fund – Increases investment in affordable housing: A recent state study found that 300,000 renters in Virginia are cost-burdened, meaning they pay a higher share of their income toward housing costs than is generally considered affordable (30% of income), and that Black, brown, and senior households are more likely to be cost-burdened. Black and Latinx homeowners are also more likely than their white peers to be cost-burdened. Black and Latinx families are most at risk of eviction and foreclosure. The Virginia Housing Trust Fund provides competitive, low-interest loans for the production and preservation of affordable rental and homebuyer housing and grants for reducing homelessness.
    • The proposed budget provides increased funding to create or preserve affordable housing units in Virginia through the Virginia Housing Trust Fund. This includes an additional $70 million in the budget year that begins July 1, 2022 (fiscal year, or FY, 2023) and $120 million in FY 2024, for a total of $125 million in FY 2023 and $175 million in FY 2024).
  • Housing Innovations in Energy Efficiency – Allocates Regional Greenhouse Gas Initiative (RGGI) money for energy efficiency programs for low-income renters and homeowners: Because families with low incomes and families of color often cannot afford to rent or buy energy-efficient homes (or pay to upgrade their existing homes to be more energy-efficient), many face high energy bills on top of already struggling to make ends meet. Data from before the pandemic showed that 2 out of every 3 low-income households faced a high energy burden, and Black, Hispanic, Native American, and older adult households face particularly high energy costs compared to their incomes.
    • The budget proposal includes $190 million of special funds from RGGI for energy efficiency programs for low-income Virginians, including upgrades to new and existing residential buildings.
  • Eviction protections and rent relief – Continues eviction diversion pilot, allows COVID-19 protections to expire: The limited COVID-19 protections against eviction for non-payment of rent expire on June 30, 2022.
    • The proposed budget does not include any additional money for eviction diversion, any new or extended protections against eviction, or additional state dollars for rent relief.

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Higher Education

  • HBCUs – Addresses longstanding funding inequities: Virginia’s Historically Black Colleges and Universities (HBCUs) play an important role in helping low-income, first-generation students find new opportunities. Yet HBCUs are historically underfunded in Virginia.
    • The proposed budget takes another step in addressing the long-term underfunding of HBCUs through additional operating and capital support ($260.9 million). This includes $20 million in increased financial aid and scholarships for each of Virginia’s public HBCUs (Norfolk State University and Virginia State University), support for new initiatives, and significant support for overdue capital investments at those universities. The proposal also includes a new $20 million HBCU Opportunity Fund for students attending Virginia’s private HBCUs (Virginia Union University and Hampton University). For that Fund, students must be eligible for Pell grants, meet university admissions requirements, and live within a 25 mile radius of the institution they attend.
  • Tuition – Addresses high costs at public colleges: For students who are Black, Latinx, and/or from families with low incomes, financial aid plays a crucial role in the ability to attend college. Rising college costs make it hard to afford college overall, but this is especially the case for Black and Latinx students. In 2018, the average net cost of attendance at a public four-year university in Virginia accounted for 36% of median household income for Black families and 27% for Latinx families, while it only accounted for about 23% of median household income for non-Hispanic white families and 17% for Asian American families.
    • The proposed budget includes increased support for need-based financial aid ($166.8 million) and affordable access ($154.0 million).

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Immigrant Inclusion and Language Access

  • Language access – Takes steps toward improving language access: According to 2019 census data, roughly 212,000 people living in Virginia reported that they either do not speak English or speak English ‘not well’, and 9 out of 10 Virginia residents with limited English proficiency (LEP) are people of color. Spanish speakers make up a large portion (61%) of the LEP population, but LEP individuals in Virginia speak a large variety of languages. After Spanish, the most commonly spoken languages by LEP individuals are Korean, Vietnamese, Chinese (includes Mandarin and Cantonese), Hindi, Arabic, Farsi, and Amharic.
    • The proposed budget provides funding for state agencies to improve language access for public services ($10.8 million) and support for American Sign Language interpretation and other equity improvements in the Governor’s Office ($1.1 million).
  • Navigator program – Creates pilot program to increase information for immigrants: Most immigrant Virginians are people of color, and improved assistance navigating existing resources will help immigrant families of color thrive.
    • The governor’s proposal funds a pilot program in the Office of New Americans that competitively award grants to immigrant- and refugee-serving organizations to provide intensive case management ($8 million).
  • English learners in K-12 schools: See K-12 section

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Tax Policy

  • Grocery tax – Eliminates state share of sales tax on groceries and menstrual products: Households with low and moderate incomes pay a larger share of their income toward sales taxes because a larger portion of their income is spent on consumer goods, particularly necessities like food and hygiene products. Sales taxes on groceries can exacerbate racial inequities in the tax code, because of the intersection of race and class, such as how long-standing racial discrimination in education, hiring, and wages contribute to lower incomes for households of color, especially Black and Latinx households. At the same time, sales taxes are an important funding source for state and local budgets, and Virginia’s state sales tax on groceries is dedicated to K-12 education and transportation.
    • The governor’s budget proposes to eliminate the 1.5% state sales tax that applies to groceries and personal hygiene products, while leaving in place the 1% local sales tax option that exists for localities. The governor’s proposal includes a hold harmless provision to backfill these funds to protect school budgets. However, transportation funds would not be backfilled.
  • EITC – Makes the state Earned Income Tax Credit (EITC) partially refundable: Virginia provides a state EITC up to 20% of a family’s federal EITC. Unlike the federal EITC and nearly all state EITCs, Virginia has a nonrefundable state EITC that caps the amounts of the credit available to families. Refundability would help to increase incomes for working families across the state, particularly Black and Latinx families, and reduce long-standing wage gaps that persist for Black and Latinx working people.
    • The governor’s budget would address this issue by making the state EITC partially refundable, up to 15% of the federal EITC. This would help make the state tax code more racially equitable.
  • Rebates – Provides one-time tax rebates of $250 per individual ($500 per married couple)
    • The governor has proposed to issue one-time rebate payments of up to $250 per individual or up to $500 per married couple. However, these payments would be nonrefundable, which means they would exclude many families and individuals with lower incomes. Similar, though smaller, rebate checks were issued in 2019 and excluded over 1 million tax filers in the state—about 3 in 10. In addition, although millionaires in the state would receive full rebate checks under the proposal, many other tax filers will receive much smaller amounts than the maximum $250 or $500 amounts. Because these payments are nonrefundable, they would not meaningfully advance racial equity for families in the commonwealth.

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Beyond the baseline…

Virginia needs long-term investments to adequately fund our schools, make health care both accessible and affordable, break down barriers for people of color, and lift up families with low incomes. Legislators should go beyond the baseline established in Gov. Northam’s proposed budget and take further steps to use available and new resources to increase opportunity and build a better future for every Virginia family.

Budget & Revenue, Economic Opportunity, Education, Health Care, Immigration

The Commonwealth Institute

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