By Dick Hall-Sizemore
The outlook for the state budget gets grimmer.
The most immediate concern is the budget for the current year. The state collects about a third of its fiscal year revenue in the last quarter (April-June). Income tax filings and payments are usually due May 1. (This year the payments can be delayed until June 1 without penalty.) The COVID-19 crisis probably will not affect that revenue stream; it is based on calendar year 2019 income. But, the prolonged crisis will affect sales tax receipts, current withholding tax receipts, and, possibly, non-withholding estimated payments. There will be some savings—state travel has been drastically curtailed and the filling of vacant positions can be put on hold, for example—but it is not known to what extent these actions will counteract the loss of revenue.
The Secretary of Finance, and staff in the relevant agencies under him, the Department of Planning and Budget (DPB) and the Department of Taxation, will need to make those projections to determine what amendments will be needed for the current year’s budget bill. Although the last quarter will have barely begun, they do not have a lot of time. By law, they Governor must submit any amendments proposed for pending legislation, including the budget bills, to the General Assembly by April 11 (about the time that the monthly revenue report is generally released).
The other bad news for the budget is that the $1.8 billion that the Commonwealth is projected to receive from the huge rescue package recently enacted by Congress can be used only for necessary expenditures incurred as a result of the COVID-19 emergency. It cannot be used to replace reductions in general tax revenue. According to today’s Richmond Times-Dispatch, the Northam administration is asking the state’s Congressional delegation for action to give states more flexibility in spending the money.
In addition to this general category of funding for states and localities, the federal legislation established additional pots of money for specified areas, such as higher education and public safety, which would benefit the state. Details on those programs are not available to Bacon’s Rebellion at this time.
Because the $1.8 billion will be available to cover certain expenditures, it will likely be sent out in the form of reimbursements. It will take some time to set up the bureaucratic mechanisms to handle such payments on the federal end and, on the state end, to collect the data on the eligible expenditures. In Virginia, that task will probably fall to the DPB. (Another reason I am glad I am retired.)
In the meantime, there is the matter of the biennial budget to worry about. There will be reserve funds to cover some of the revenue shortfall (if the Governor did not need all that reserve to cover a 2020 shortfall). However, if Secretary Layne is correct in his projection of a $1 billion revenue hit in each year of the biennium, there will need to be significant budget cuts. But that will need to wait until there is an official revenue re-forecast in the summer. It is going to be a busy and stressful fall for agencies and the central budget folks.There are currently no comments highlighted.