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October 14, 2020

Virginia Needs an Updated Budget to Address Economic and Health Challenges

A lot has changed since April when legislators approved a state budget amid significant uncertainty. After six months, we have seen how Virginia’s economy has reacted to the pandemic and how families have continued to struggle. We also know there are federal and state resources available to help address these needs. This special session the governor, House, and Senate have put forward revisions to the budget to use some of these resources to help people gain access to health care, to stay in their homes, and help schools with reopening. However, Gov. Northam has threatened to not sign the state budget after disagreeing with revisions made by the House and Senate. Virginia can not afford to wait until spring 2021 for available state money to be provided for urgent needs related to the health and economic crisis, but that’s exactly what will happen if a budget is not approved during this special session.

Decisions made in April 2020 to “unallot,” or freeze, funding for almost all new initiatives mean people in Virginia are living without health care access, schools don’t have the resources they need, public colleges don’t have money to address rising student need and pandemic-related costs, and new affordable housing initiatives are indefinitely delayed. The budget items that were “unallotted” during the April reconvened session are initiatives that express the priorities of the new legislative majorities and many take important steps to remove barriers facing low-income families and communities of color.

The governor’s proposed revised budget that was introduced in August does not restore funding for most of these initiatives, but it takes some important steps forward. The House and Senate take further important steps, using a portion of the state’s available resources to restore funding that will help families and communities get through the coming months. Without a new budget, the funding for these new initiatives will be unavailable to help families until at least spring, undoing much of the important progress toward a more equitable Virginia that was made during the 2020 legislative session. (During “short” regular legislative sessions, which 2021 is scheduled to be, the amended budget is typically passed by the legislature in February, yet typically isn’t signed by the governor until after the reconvened session in April, and the revisions do not go into effect until after the governor signs the budget.)

Image shows a woman with a face mask comparing products in a Targets shopping aisle.

There is money available to invest in the needs of families and communities and the opportunity now to do so. The governor’s administration, House, and Senate budget proposals that are currently being considered include important changes that would use a small share of the available money to improve the lives of Virginia families.

  • Housing – The loss of jobs and income for many families due to the COVID-19 pandemic has sharply increased the number of families at risk of losing their homes nationally, with one study estimating that houselessness could rise 40-45% by the end of the year. Black and Latinx families are most at risk of eviction due to both past and present discrimination leading to lower incomes and lower wealth, as well as direct discrimination on the part of landlords. All three budget proposals include restored and additional funding for the Housing Trust Fund and current-year money for an eviction prevention and diversion pilot program, which would help to address Virginia’s looming eviction crisis. This money is needed now – evictions are happening despite the limited federal moratorium – and if policymakers do not pass a budget, the funding will not be available until at least March, and likely not until April.
  • Healthcare – The House and Senate proposals restore funding to extend postpartum coverage from 60 days to a full year effective Jan. 2021. This is an important step in safeguarding continuous health coverage for new mothers and will make sure the families’ health care needs can be met during a critical time. Similarly, House and Senate proposals include funding to remove a barrier to health coverage for immigrant communities (“40-quarter rule”) but differ on when it would become effective. The House version would end the rule at the start of 2021, while the Senate version would not remove the rule until July 2021. Immigrant communities in Virginia have been hard hit by COVID-19 due to longstanding health care, housing, and workplace inequities. Removing this barrier to health coverage should take place as soon as possible so that some immigrant families are not forced to wait any longer to become eligible for Medicaid coverage.
  • Education – Virginia schools have undergone a transformational shift as they reopened, whether in-person, virtually, or as a hybrid model. This has included getting technology to students, adapting lessons, and reworking transportation and class schedules to protect student and staff safety. Meanwhile, schools are experiencing large enrollment declines, which will be a major hit to school budgets, and could reduce state funding by $150 million if current estimates are accurate. This would occur in the middle of the school year that schools have already budgeted for. The House proposal delays the enrollment declines from impacting state payments to school divisions until after March. This means the General Assembly will have the opportunity in the January 2021 legislative session to take further steps and prevent these funding losses altogether. Separately, declines in sales tax forecasts are projected to cost schools a further $189 million. The House and Senate both dedicate revenues from a tax on Virginia’s “gray machines” (also called games of skill) to cover those revenue declines in the current school year. If there is no budget, then both the declining enrollment and sales tax revenues will further limit resources for Virginia schools.
  • Higher education – Public colleges and universities are struggling to transition to hybrid and virtual learning while experiencing a temporary reduction in tuition and fee revenue. All three proposals restore funding for the current year to help Virginia’s historically Black public universities increase financial assistance for their students. These colleges – Virginia State University and Norfolk State University – serve the highest number of low-income students of any of Virginia’s four-year public colleges, and have smaller endowments than many historically white public universities in Virginia due to historical barriers to wealth-accumulation for Black families.
  • Policing reform legislation – A revised budget would also allow policymakers to fund any costs associated with new legislation reforming police and criminal justice training and procedures. Regular laws passed during a special session typically take effect on the first day of the fourth month following adjournment, which means that if the special session adjourns in October, the new reform legislation would take effect on February 1, 2021. However, if required funding is not available because there is not a revised budget bill, implementation would be delayed.
  • Closing a tax loophole – All three budget proposals would update Virginia’s tobacco tax to include newer “heated tobacco products” now on the market as well as certain out-of-state distributors that are not currently required to collect Virginia’s Tobacco Products Tax.

Without a revised budget, the February 1 date for closing the tobacco tax loophole will not happen, there will be no funding until at least spring for legislation that passed during this special session, and the “unallotted” new initiatives will not be restored until March or April – three-quarters of the way through the budget year – harming families and communities, and denying state policymakers the opportunity to take a more holistic approach and set the stage for an equitable recovery. The budget is a fundamental policy document that indicates who and what we prioritize as a state; the legislature should pass and the governor should sign a budget that uses available resources to invest in families and communities, rather than delaying yet again.

Budget & Revenue, Decriminalizing Poverty, Education, Health Care, Immigration

Freddy Mejia

Chris Duncombe

Chad Stewart

Phil Hernandez

Chris Wodicka

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