Gov. Ralph Northam hopes to reset the clock on Virginia’s budget impasse by reintroducing a proposal that was liked by neither the House of Delegates nor state Senate.
But by offering former Gov. Terry McAuliffe’s plan, including using Affordable Care Act funds to expand Medicaid with no conditions, Northam avoided picking sides between a sharply divided House and Senate. The House and Senate adjourned earlier this month without agreeing on a budget.
He also intended to send a strong signal that he prefers Medicaid expansion with no conditions. The House proposed a version of Medicaid expansion with a work requirement. The Senate rejected any expansion.
“In light of the General Assembly’s difficulty in finding common ground before the regular session adjourned, I’m proposing a budget that returns to what we would call clean Medicaid expansion, without work requirements,” Northam said.
But Northam said he saw the budget as a starting point, not an ending point.
Northam offered one change to McAuliffe’s budget: an amendment that would direct any unexpected increases in state revenue toward a new cash reserve. That won immediate praise from House of Delegates Republicans.
“The budget introduced today does not rely on a revenue reforecast and commits a major share of surplus revenues to a reserve fund that is critical to protecting our Triple-A bond rating,” said a joint statement from House Republican leadership.
Senate Majority Leader Thomas K. “Tommy” Norment Jr., R-James City, took a tougher line.
“That he continues to make Obamacare’s Medicaid expansion integral to that budget, and his refusal to base his plan on a more current revenue forecast, means the current standoff cannot be resolved quickly,” Norment said, adding that the uncertain impact of the Trump administration’s federal tax cut on state tax collections means it is essential to have a new forecast of revenues before enacting a budget.
By reintroducing McAuliffe’s budget, Northam hopes to streamline the General Assembly’s work when it convenes for a special session on the budget April 11.
Both are likely to start off amending the budget exactly as they did McAuliffe’s, and reintroducing the former governor’s budget eases the chore of inserting those changes into a 500-plus page document.
That will clear the way for the hard work of the House and the Senate trying to reach agreement, without risking irritating one by favoring an approach of the other.
The House’s version would have covered roughly 300,000 low-income Virginians through the Medicaid system, paying for the bulk of that cost with $3.1 billion of Affordable Care Act funds over the next two years.
Doing so would save some $370 million now spent on mental health and medical care for the indigent and for prisoners, the House budget said.
The Senate budget excluded Medicaid expansion, which meant it had to fund the medical and mental health costs the House wanted to shift to Medicaid from state tax revenue.
That also meant cutting spending the House included, such as the $173 million difference between the House proposal for a 2 percent raise for teachers and state employees in fiscal year 2020. The Senate budget did not include raises.
The House and Senate budgets also took different approaches to funding a new cash reserve. The House called for a payment of $91 million, the Senate for $336 million.
State budget officials have said the new federal tax law could end up boosting Virginia tax revenues, because it discourages itemizing deductions.
Secretary of Finance Aubrey Layne said the proposal to direct any unexpected increase in revenue to the cash reserve was not intended as a bargaining chip to nudge the House and Senate toward middle ground on the cash reserve.
He said that Northam would “obviously” like to push back on some items that included the budgets passed by the Senate and the House, but he wants to maintain a commitment to health care expansion.
“He’s willing to negotiate on some others,” Layne said. “We wanted to be credible in saying, (Medicaid expansion) is his number-one goal, let’s start from here and so that’s why he introduced the original budget.”
On top of the split between House and Senate on Medicaid, “there’s still several hundred million dollars of unreconciled items between various categories,” he said.
“So until they reconcile the Medicaid debate, they’re not going to be able to reconcile those others,” Layne said. “We don’t know what’s going to happen, if in fact, let’s say the House budget is the one they end up migrating towards. Then that means a lot of spending is restored. So in terms of negotiating with them, we don’t really know what to negotiate at this point in time.”
Senate Republicans have called for reforecasting how much revenue will flow into the state. Layne said that economists have likened a reforecast to “playing with a very volatile situation.”
There is already a state law that diverts a certain percentage of surplus money to a rainy day fund, then to water quality and other areas. Northam proposed that anything beyond that amount be shifted to a separate reserve fund so that they’re in the good graces of credit agencies.
Credit agencies have not indicated that they will downgrade Viginia’s triple-A rating, but they have said that other Triple-A states have more reserve cash, Northam said.
The House and Senate’s proposed plans for beefing up the reserve fund were not as much as Northam has proposed.
Layne said that money committee members have wanted structural balance, which he argues is addressed in Northam’s amendment.
Ress can be reached by telephone at 757-247-4535