Virginia’s revenue picture continues to be very positive, but many of our advisors have indicated that our revenue gains could be ephemeral. First, inflation continues to be up and when things cost more, people spend more and employers give raises to keep up with inflation. Since Virginia’s General Fund is largely funded by sales and income taxes, our revenues are up compared to some past years.
The Governor proposed another $50 million for his “lab school” experiment, an approach that is actually another attempt to divert funds away from our public schools. He also proposed teacher retention bonuses. I believe these funds should be structured as raises that permanently increase teacher pay instead of one-time raises for one year only.
My caucus will try to focus more funding on secondary and post-secondary education, as they try to address the pandemic’s adverse impacts and expand educational opportunities for all students. Unfortunately, we have not adequately funded raises for teachers, police or other public employees to keep up with inflation or private sector salary rates. The state government currently has a record-high 17 percent staff vacancy rate, in part because of non-competitive salaries and the Governor’s directive prohibiting any of the state’s 106,000 employees from working from home without the personal approval of his chief of staff. Law enforcement staff across the Commonwealth continue to have 10-20 percent vacancy rates. We must pay our public employees better or we will continue to see attrition which erodes services that taxpayers expect.
Most disturbing is the Governor’s proposed expenditure of $50,000 to apparently cover costs associated with some type of new abortion ban. Longstanding Virginia law requires all new felonies or bills that expand existing felonious conduct to be contingent upon appropriating $50,000 for new prisoner costs and it appears the Governor included this in his budget in anticipation of new abortion restrictions. No legislation restricting women’s healthcare decision-making will pass the Virginia Senate. A ban is unacceptable.
The Governor proposed $1 billion in new tax cuts by putting corporate tax rate at 5 percent, a rate that is lower than the 5.75 percent rate paid by individuals. Unlike individuals, most businesses already benefit from deductions, depreciation and other policies that lower the actual amount they pay in taxes. In addition, our economic advisors have cautioned us against making significant changes to how we fund the state government because some predict a likely recession in the next year. I will fight unsound tax cuts for corporations.
The Governor did propose $230 million of major new spending on behavioral or mental health. The Senate Democratic Caucus proposed a similar measure last session, but it was sacrificed due to the Governor’s demand for $2 billion in tax cuts. I am sure we can find common ground on this important priority as the shortage of mental health services continues to be a crisis. He also proposed $100 million for Richmond’s massive raw sewage problem, a worthwhile proposal that I support. The city needs state help to end this pollution.
Last year’s sales tax cut also created a $700 million hole in our six-year plan for transportation projects that we need to fill.
State budgeting should also recognize potential impacts of the Federal Reserve’s actions. Home sales are declining – which fund grantors’ taxes - and the economy could begin to slow down as interest rates reduce borrowing and consumer spending. We must prepare and not set ourselves up for shortfalls by baking long-term tax cuts into our budget.
The legislature will convene on Jan. 11 in Richmond. In the coming weeks, I will report on proposals that I will carry this session. Please share your views and suggestions with me at email@example.com