RICHMOND — Gov. Ralph Northam is giving a nearly $300 million boost to the General Assembly money committees as they prepare to release their versions of the state budget on Sunday afternoon.
Buoyed by higher revenues in January, Northam informed the leaders of the House Appropriations and Senate Finance & Appropriations Committees on Friday that he has found an additional $292.5 million in this fiscal year for the general fund budget, which pays for core state government services such as education and public safety.
The Virginia Constitution requires the state to deposit $112.3 million of the extra revenues in the Revenue Stabilization Fund, but the governor left the remaining $180.2 million to the General Assembly to spend in the current fiscal year budget or the two-year budget that will take effect July 1.
Northam also made some suggestions to Senate Finance Chairwoman Janet Howell, D-Fairfax, and House Appropriations Chairman Luke Torian, D-Prince William.
“As you and your colleagues advance your budget deliberations, I urge you to focus on two key priorities: maintaining Virginia’s fiscal integrity and investing in our future,” he said in a two-page letter also copied to the staff directors of both committees. “We must ensure our economy continues to grow and create new jobs.”
Northam specifically cited priorities in the $135 billion two-year budget he introduced in December — all rooted in public education.
“That’s why I proposed landmark funding to increase access to early childhood education, support K-12 students and teachers, and help low-income community college students get the job training skills they need,” he said. “These are generational investments in areas that have long been neglected. Fully funding these programs will be critical to our long-term success.”
Del. Mark Sickles, D-Fairfax, vice chair of the House Appropriations Committee, said: “We think all of those areas are important and that we need to address, and we have a lot of other issues too.” He pointed to raises for state employees and teachers, and preparing for a likely increase in the minimum wage.
“The governor’s budget didn’t accommodate a minimum wage increase,” Sickles added. “There are a lot of priorities in the budget and now we have resources to address some of them.”
The governor also emphasized the need to further build state financial reserves “so Virginia is prepared no matter what comes our way,” and to produce a structurally balanced budget that sustains any spending increases with revenue in both years.
Northam had hinted at the potential money earlier this week when he announced that general fund revenue collections had grown 8.7% in January compared with the same month a year ago. Revenues grew 8.4% for the first seven months of the fiscal year, far ahead of the annual forecast of 1.9% growth, which the governor had raised from a 1.2% growth rate after consulting with economists, business leaders and legislators last fall.
State finance officials still expect a big drop in final income tax payments on May 1 by Virginians who don’t have their taxes withheld from paychecks, but those revenues remained strong in January after fourth-quarter estimated taxes came due. Through January, the state estimates about $700 million in additional revenues.
The $292.5 million added to the current fiscal year budget is “money in the bank,” Secretary of Finance Aubrey Layne said.
More than half of the new money — $154 million — comes from nonwithholding income taxes paid by self-employed businesses, professionals and investors who sell stock. The governor is allocating an additional $67 million in corporate income taxes, $55.5 million in sales and use taxes, and $31 million in taxes on recording wills, deeds and other court filings. Declining insurance taxes reduced the total by $15 million.
For Northam, the additional money is another opportunity to strengthen his working relationship with the leaders of the new General Assembly, controlled by Democrats in both chambers for the first time in more than 20 years.
“We are trending ahead of our revenue forecast for the current fiscal year,” he wrote Torian and Howell. “Our growing economy is the result of our mutual and continued stewardship of taxpayer dollars, and it allows us to fund public education, health care, law enforcement, and other critical services Virginians expect.”
Northam already included a $200 million gift for the new legislative majority in his proposed budget in December. The budget includes $100 million each year in unappropriated funds for the assembly to spend on “contingencies” in consultation with his administration.
“The governor has been good about giving them plenty of options,” Layne said.