His speech Monday was supposedly about numbers and finance, but the subtext when Gov. Terry McAuliffe outlined his views on the next two-year state budget to legislators quickly turned political.
But after he set the stage by talking about businesses he recruited to locate or expand in Virginia and praising the General Assembly for working with him to establish a new cash reserve, Republican legislative leaders weren’t buying it.
“I heard a lot of ‘I brought this’ and ‘I did this’ … we got a lot of hugging,” said House Majority Leader Kirk Cox, R-Colonial Heights, after the governor’s presentation to General Assembly budget writers.
But Cox said the cash reserve was a General Assembly initiative, as was much of the collaboration on the budget that McAuliffe praised in his annual August update on state finances to the General Assembly’s budget-writing committees.
Cix said lawmakers would likely be skeptical of McAuliffe’s idea, which he floated after his presentation, of asking the General Assembly to remove the towering state-owned statue of Robert E. Lee on Richmond’s Monument Avenue.
McAuliffe’s final budget — his second opportunity to write a full two-year financial plan for the state — won’t actually be considered by the General Assembly until he is out of office.
Cox said governors typically use such lame-duck budgets to build a platform to seek other offices.
“Just look at history,” he said, adding that many expect McAuliffe to run for higher office.
The budget numbers McAuliffe detailed were tough, despite the rosy picture he sketched of the state economy.
While state general fund revenues for the fiscal year ended June 30 were about $134 million above budget, millions of that is already spoken for, mainly for the new cash reserve fund, McAuliffe said. He said the General Assembly ought to use the rest to boost that fund even more.
Two other big bills are coming that the legislature can’t dodge, he added.
“I want to be clear, it will cost hundreds of millions of dollars” to meet new Standards of Quality for K-12 schools from a once-every-two-years revision — called rebenchmarking — in the next budget.
A similarly large bill is coming due for Medicaid, the health insurance program that covers children and disabled adults in low-income households. Those increases have nothing to do with Medicaid expansion but reflect projected increases in medical costs for people already eligible for Medicaid.
State officials are still working on estimates for the actual increases, he said later.
McAuliffe said expanding Medicaid would bring $2 billion a year of federal money to Virginia, which would allow the state to save hundreds of millions in health care and mental health spending while covering roughly 400,000 additional people.
“This isn’t a political issue; this is about people’s lives,” he told the legislators.
But Senate Majority Leader Thomas K. “Tommy” Norment Jr., R-James City, said several states that have expanded Medicaid have landed in severe budget crises.
He said he doubted the General Assembly would vote to expand Medicaid despite McAuliffe’s forecast that it would — after he leaves office.
“That train has left the station,” Norment said.
Norment said he believed the General Assembly could balance the budget without Medicaid expansion, even with the big bills McAuliffe forecast.
“It’s a matter of prioritizing,” he said, adding that the legislature has dealt with much larger financial challenges in recent years.
House Appropriations Committee Chairman Chris Jones, R-Suffolk, said that did not necessarily mean spending cuts.
Revenue increases could mean the General Assembly can balance the budget without cuts, he said.
“It’s too early to say,” he said, adding that he’s waiting to see what revenue collection looked like in the first quarter of the current fiscal year.
The actual numbers that were the reason for Monday’s meeting showed that revenue collections through fiscal year 2017 ran well above the budget forecast, with general fund collections up 3.6 percent, or $134 million, compared with an expected 2.9 percent.
McAuliffe said the 5.2 percent increase in payroll withholding tax collections for the year was a sign of growth in high-paying jobs in the state, a priority of his.
The critical work of forecasting revenue for the current fiscal year, so the General Assembly can consider amendments to the current year budget as well as for the next two-year budget, won’t get underway until September.
But figures from July, the first month of the current fiscal year, show withholding tax collections are running 6.7 percent above the year-ago total.
Sales taxes, the second largest piece of state government revenue, are running 5.7 percent above last year, while the relatively small portion coming from corporate income taxes are up 196.6 percent from last year.
On the other hand, income taxes that aren’t paid through payroll withholding — basically income from investments, savings and individual’s business income — are down 25.6 percent from the year before. They account for the third-largest piece of state general fund revenue.
And income tax refunds are also running well above last year’s level, up 28.4 percent
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