Surovell: Comments on Virginia’s 2019 budget

The 2019 General Assembly session adjourned on February 24 after a few hiccups.  Two weeks ago, I discussed the legislation that I passed.  In this column, I will explain various budget actions we took.

First, unlike the Federal Government, our budget is balanced as required by the Constitution of Virginia. Next, the General Assembly needed to address modifications to our tax code to bring it up to speed with changes made by Congress with the Tax Cut and Jobs Act of 2018.  This is usually labelled “conformity.”

“Straight conformity” would cause an additional $600 million of state revenue largely due to the interplay between the new increased federal standard deduction and the $10,000 cap on state and local taxes and mortgage interest (“SALT”).

We addressed this in two phases.  First, for the 2018 tax year, every taxpayer receives $110 refund if tax returns are filed before June 30.

For tax years 2020 through 2026, the state standard deduction is raised by $1,500 for individuals and $3,000 for joint filers.  This is worth about $86 per year for individuals or $172 per couple.  The budget also removes the $10,000 cap on SALT for state income taxes.  However, due to our low 5.75% state income tax rate, that is only worth roughly about $575 if you pay $20,000 of combined income taxes and mortgage interest or $1100 if you pay over $30,000 per year.

These combined actions took about $450 million out of our annual revenues on an annual basis or $2.7 billion over six years and limited our ability to fund multiple priorities.

Notwithstanding, we were able to fund a few things.  First, we increased secondary funds to secondary education by $50 million.  This included pushing the teacher pay increase from 3% to 5%, $12 million in new school counselors statewide, and $24.9 million in new dollars for At-Risk students.

Virginia’s state-supported universities received a $57.5 million increase in funds conditioned on a tuition freeze for 2019 and $168 million to build the new Virginia Tech Innovation Campus at Potomac Yards in connection with the Amazon project.  We also added $5 million in support for our community colleges, $16.6 million to increase computer science degrees, and $4 million towards Virginia’s New Economy Workforce Credential Grant Program (AKA “FastForward”).

We increased Virginia’s contribution to the Housing Trust Fund by $3 million per year to a total of $14 million per year.

The money committees also included my proposal to hire staff at prisons and study the Commonwealth’s ability to provide earlier reparative therapy to sex offenders in state prisons instead of waiting until they have completed their jail sentence.  Historically, providing these services in post-jail secure inpatient facility have cost nearly twice as much as prison.  Starting earlier and shortening civil commitment will save taxpayers millions.

We finally started the process of investing in rural broadband with a $15 million investment along with $1 million in Enterprise Zone grants to encourage solar.

Virginia’s cash reserves will stand at $1.45 billion at the end of the biennium which is a strong hedge against a downturn in the economy.

While the budget makes some progress, I also felt like it was a missed opportunity to make progress on long standing funding priorities because there are many priorities the General Assembly could have funded if we had not cut taxes.  First, our secondary education funding continues to lag behind our re-Great Recession historic commitment.  Virginia’s teachers remain some of the lowest paid in the nation.  Virginia’s higher education system remains a crown jewel, but our college tuitions are some of the highest in the nation.  We not only need to freeze tuition but roll it back.

Virginia also has thousands of families waiting for childcare subsidies so parents (mainly mothers) can go back to work. We still have 12,000 families waiting for Medicaid services for mentally and developmentally disabled children.

Virginia’s public employees remain significantly behind private sector wages which hurts retention and proficiency.  The construction backlog and staffing needs at Virginia’s State Parks is over $100 million while demand for parks skyrockets.

Please email me at [email protected] if you have any feedback!