Category Archives: Budgets

Vital COVID Issue: Paid Student Athletes?

by Steve Haner

I warned everybody to watch for extraneous issues buried in the new budget bill pending at the special session which starts tomorrow. Who knew that regulating the potential income of student athletes was a vital COVID emergency issue that couldn’t wait for the regular General Assembly meetings in January?

What follows should have been a stand-alone bill, but that would have opened the door to plenty of other issues. Clearly this is a response to the recent court decisions opening this door, and the new NCAA rules on the subject.

Herewith the provision, as it appears in Governor Ralph Northam’s introduced bill: 

18.a. That no institution or an agent thereof; athletic association; athletic conference; or other organization with authority over intercollegiate athletics shall:

1. Provide a prospective or current student-athlete with compensation for the use of his or her name, image, or likeness;

2. Prohibit or prevent a student-athlete from earning compensation for the use of his or her name, image, or likeness, except as set forth in this subsection; Continue reading

What Fun! Spending $4.3 Billion in “Free” Money!

Manna from heaven

by James A. Bacon

Before departing for the private sector, former Secretary of Finance Aubrey Layne outlined his thinking for the disposition of $4.3 billion in federal COVID-helicopter money: The funds are a one-time windfall. Spend them on one-time projects. Do not use the money to fund programmatic expansions that will make an ongoing claim on future tax dollars.

In recent days, the Governor’s Office has been issuing press releases on how Governor Ralph Northam proposes to allocate the manna from heaven, technically known as the American Rescue Plan. To a significant degree, the Governor is hewing to what might be called the Layne Doctrine. Here are the ten announcements he has made so far, listed in the order in which he made them: Continue reading

If No Better Ideas Emerge, Go With These

By Steve Haner

First published Tuesday by the Thomas Jefferson Institute for Public Policy.

In 1972, a Virginia taxpayer needed a taxable income of $12,000 before the state’s maximum income tax rate kicked in. Adjusted for inflation, that threshold should be $78,000 today.

There has been one adjustment since, to $17,000 in income before the maximum rate is now applied. Adjusting that for inflation since 1987, when last amended, that should now be $40,000. In Virginia today, even a lower middle-income couple can be paying the same maximum tax rate as the richest Virginians on parts of their income.  Continue reading

What? No Amendments Permitted to a $4.3 Billion Budget Bill?

Delegate Luke Torian, D-Woodbridge

by James C. Sherlock

Del. Luke Torian, D-Woodbridge, the Chair of the Appropriations Committee in the House of Delegates, has announced that there will be no member amendments allowed for the budget that the governor sends down during the upcoming special session.

Three things about that:

  1.  Torian is the king of budget amendments. Look at all of the amendments that he permitted/authored on education and healthcare policy in the past two sessions on what were supposed to be a budget bill. He was also the one that orchestrated the tabling in his committee of the Health Enterprise Zone bill that passed overwhelmingly in the policy committee among other examples;
  2. It is not clear that his ruling is either Constitutional or practical; and
  3. The budget bill will spend $4.3 billion.

Article VI of the Constitution of Virginia grants legislative power to the General Assembly. Torian’s ruling subordinates the General Assembly to the Governor for this session.

It also seems to make no sense. Continue reading

What to Do with Virginia’s Pile O’ Money

by James A. Bacon

Virginia is expected to close out the year with a $2 billion budget surplus. An estimated $900 million is required under the state constitution to go into a rainy day reserve fund. That leaves roughly $1.1 billion for the next General Assembly and Governor of Virginia to play with.

According to Brandon Jarvis’ Virginia Scope newsletter, the two candidates for governor, Glenn Youngkin and Terry McAuliffe, have very different ideas of what to do with the surplus cash.

“Virginia families deserve a tax refund from this surplus,” said Youngkin spokesperson Macaulay Porter. “Investing in our kids and our schools, public safety, and infrastructure is the right thing to do.”

Vague… very vague. But at least the statement signals a willingness to return something to taxpayers and to slow the relentless growth in state spending. By contrast, McAuliffe is campaigning on a promise to spend $2 billion per year more on education — much of it to boost teacher salaries. Continue reading

State Revenue Up a Full Third in Northam Years

Departing Secretary of Finance Aubrey Layne

by Steve Haner

With one month to go in its fiscal year, Virginia has almost met its General Fund revenue target in the first eleven months, as the revenue bonanza described here before continues. Partly it is due to the strong economic recovery post-COVID, but it is also due to numerous increased tax rates or policy changes under Governor Ralph Northam.

With 11 months of the basic taxes now accounted for, the state has collected just a hair under $22 billion towards the $22.3 billion it estimated in the budget adopted last year and amended this winter. Compared to the same point four years ago, total GF revenue has grown a full one-third. With the deepest recession of the past century in between the comparison points. Continue reading

Virginia Local Ability-to-Pay Calculation and State Contributions to Public Schools — Some Surprises

by James C. Sherlock

Some things are very important that the average citizen knows little to nothing about.

For example, a complex state computation, the Composite Index of Local Ability to Pay, determines how much state money per student goes to your school district to maintain an overall state ratio of 55% state and 45% local.

The lower your district composite index of ability to pay, the more money per student your district gets.

You will find some big surprises in the list of school division indexes, or at least I did.

My home division of Virginia Beach did not make the top 20 highest indexes, while the City of Richmond did. Fredericksburg is a top-20 division. Stafford County is in the lower middle group. Bath County has the third highest index out of 133. Continue reading

Protect Taxpaying Virginians From Coming Inflation

Time for a refresher course on the Weimar Republic?

by Steve Haner

First published this morning by the Thomas Jefferson Institute for Public Policy. 

One of big financial winners with the May 1 Virginia minimum wage increase is the state itself, because the entire raise is subject to a 5% state income tax. With its low standard deduction and personal exemption amounts, Virginia squeezes income tax out of even its lowest wage workers. Continue reading

State Tax Harvest Under Northam Expands Again

by Steve Haner

With the release today of the April 2021 Virginia state revenue report, a correction in an earlier post becomes necessary. Overall general fund state tax collections are not up 26% so far compared to four years ago, they are up almost 30 percent. Corporate income tax collections are not up 68%, but 86% over the same period four years ago.

Your correspondent regrets the error and admits jumping the gun after the March report knowing things would become more dramatic soon. Since the essence of good communication is repetition, expect another update in a month. And as has been the case for a while now, expect Governor Ralph Northam to seek to distract the voters from what is really going on. Continue reading

Corporate Tax Already Exploding in Virginia

by Steve Haner

First published this morning in The Roanoke Times.

With Virginia’s fiscal year now three-quarters complete, and basically one year since the depths of the COVID-19 recession, state tax revenues are soaring. Despite reports that the boom results from the economic rebound, it remains clear that changes in tax policy under Governor Ralph Northam are the major driver.

Usually, the state financial reports compare results year over year. Instead, compare the recent data to four years ago. Four years ago it was Governor Terry McAuliffe coming to the end of his term as President Donald Trump began work on what would be his legacy tax bill, the Tax Cuts and Jobs Act of 2017.

In the four years since the March 2017 report, the state’s overall general fund collections to date are up 26%, almost three times the basic inflation rate for the same period (under 9%.) That is an extra $3.35 billion compared to four years ago at the same point. That is just the General Fund, ignoring all the other ways the state taxes us, such as last year’s gasoline tax increases.

About half of the added General Fund revenue came from individual income tax withholding, up 17% or more than $1.5 billion. It is the largest revenue category, so you would expect that to lead the pack. But it leads only in dollars, not in percentage growth.

Corporate income taxes grew 68 % over four years ago. The revenue category that includes the state’s tax on real estate transactions recorded at courthouses was up 72%. State policy didn’t spark the real estate price boom behind soaring recordation taxes. But intentional state policy has increased the corporate income tax harvest by two-thirds, to $315 million more than four years ago.  Continue reading

Will Virginia COVID “Rescue” Be Big and Bold or Come in Dribs and Drabs?

by James A. Bacon

About two weeks ago, Secretary of Finance Aubrey Layne floated a trial balloon on Bacon’s Rebellion, suggesting that Virginia do something “transformational” with the $6.8 billion the federal government is showering upon Virginia in the latest COVID-relief package, the American Rescue Plan.

Transformational? Like what? Like patching up Virginia’s under-funded unemployment insurance program, extending affordable broadband into every corner of the state, or fixing antiquated school buildings, Layne suggested.

Now others are beginning to entertain similar thoughts. Reports Michael Martz with the Richmond Times-Dispatch:

“This is an extraordinary opportunity to meet long-term obligations and challenges,” said Michelle Gowdy, executive director of the Virginia Municipal League, in a letter to General Assembly leaders on Tuesday that asks them to work with local governments and Gov. Ralph Northam to collaborate on using billions of dollars coming to them under the American Rescue Plan Act.

Continue reading

Do Something “Transformational” with $6.8 Billion in COVID Relief

by James A. Bacon

The $1.9 trillion COVID-relief bill just passed by Congress will shower billions of dollars upon Virginia citizens, businesses and government. State Secretary of Finance Aubrey Layne expects Virginia state government to receive about $3.8 billion and local governments to get about $3 billion, for a total of $6.8 billion.

The crazy thing, says Layne, is that Virginia made it through the COVID-19 pandemic in decent fiscal shape, so it doesn’t need the federal funds to maintain core functions of government as some other states do. Rather, he worries, legislators will be tempted to fritter away this once-in-a-lifetime bounty on pet projects or, worse, on new programs. This COVID-relief money is a one-time source of funding, he says, and it would be unwise to make financial commitments the state will have to continue honoring in subsequent years.

Congress has limited what the states can do with the money. Virginia can’t share this manna from heaven to citizens by reducing taxes. Nor can the state use it to reduce unfunded pension liabilities. As the guardian of the state fisc, Layne would like plow the revenue into one-time capital investment projects. This is Virginia’s opportunity to do something “transformational,” he says. Continue reading

We Pay For All the COVID Funerals, Too?

by Steve Haner

Per the Centers for Disease Control’s tracking, more than 4 million death certificates have been recorded in the U.S. during the COVID-19 pandemic. Only 520,000 of them (those recorded so far) listed COVID as primary or contributing cause of death.  The survivors of those individuals are eligible for 100% compensation for funeral expenses under the new round of federal COVID spending.  Continue reading

Podcast: How the General Assembly Has Changed

By Peter Galuszka

I haven’t contributed much to BR lately since I am slammed with non-Virginia work. I did manage to help out on a Podcast about how the General Assembly has changed the state over the last two years as Democrats have gained power.

This Podcast is produced by WTJU, the University of Virginia radio station. I do a weekly talk show on state politics and economics and, on occasion, work on Podcasts.

Joining me is Sally Hudson, a delegate from the Charlottesville area. She is Assistant Professor of Public Policy, Education and Economics. Sally studied at the Massachusetts Institute of Technology and Stanford and is one of the youngest members of the General Assembly.

I hope you enjoy it.

Analysis of State Use of Federal COVID Funds

Design credit: Atlantic Cape Community College

By Dick Hall-Sizemore

(Note:  All of the data presented in this post is based on the author’s analysis of raw expenditure data from the state’s accounting system (CARDINAL) for FY 2020 and FY 2021 through 2/22/2021.)

As of February 22, state agencies had spent or disbursed $11.9 billion in federal COVID funds.

Two major categories of expenditures accounted for about 86 percent of that total.  The Virginia Employment Commission had paid out $8.8 billion in unemployment claims.  Secondly, in accordance with federal law, the state had transferred $1.4 billion to local governments.  The remaining $1.7 billion was spent directly by state agencies or disbursed by them as grants to local or regional government agencies or to private entities. Continue reading