Virginia’s COVID Federal Grants Now At $5.8 Billion

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By Steve Haner

Having received and mostly spent $3.1 billion in federal COVID-19 “relief” funding already, Virginia’s state and local governments now will have another $2.7 billion in the fourth and latest (but likely not last) federal spending bill tied to the ongoing pandemic and unemployment crisis.

The word relief is in apostrophes because Virginia’s state budget, as previously reported, is surprisingly strong in this time of economic stress, strong enough to pour dollars back into the state’s reserve funds Other states are in much worse shape. But just as with the individual COVID payments, need is not a factor. The idea is to stimulate personal – and government – spending across the board. 

Much of this new $2.7 billion will pay for things Governor Ralph Northam had earmarked state tax dollars to cover, which means those state tax dollars may be freed for some other purpose. The full scope of the recent flow of federal dollars has been seen in recent legislative meetings, but so far Northam’s specific plans to use them are not known.

For example, $568 million is earmarked for housing and rental assistance just in Virginia, swamping the state’s efforts in that regard since last summer. In the health arena $608 million will cover vaccinations, testing and mental health challenges from the crisis, and nearly $1 billion will bolster public education, protecting it from the revenue losses caused by declining enrollments. All could result in free cash flow for the General Assembly starting Wednesday to spend elsewhere or save.

The coming inrush of federal dollars was mentioned in passing in recent meetings of the House and Senate money committee, but today’s meeting of the Joint Subcommittee on Local Government Fiscal Stress focused on the topic.  Quite a bit of detail is provided in a slide presentation used for the meeting, including an appendix that details the spending decisions made by individual localities (slides 28-32).

In aggregate, 30% of the previous local allocations so far have gone to local public health and public safety payrolls, 16% to distance learning, 13% to small business assistance and the rest to scattered uses. Bath County spent 96% of its allocation on small business assistance, while quite a few spent nothing that way. Richmond City spent 18% on rental assistance, but few spent even 10% of their allocated funds on that.

The legislators were shown information on how the state, cities and counties have recovered from the previous recession, starting in 2009. The state’s tax revenue rebounded in two years, the counties in three, and the cities in four (slide 11). The staff missed the headline number, however: In the years since 2009, state revenue is up 52%, county revenue up 35%, and city tax revenue rose only 24%. The disparity is pronounced.

Part of the explanation is on slide 10. Counties received more than two-thirds of their local tax revenue from real estate and personal property taxes, cities just 54%.  Those are based on value and grow faster over time, and counties have more room and appetite for new real estate development.

A panel of local government administrators, including Fairfax Board of Supervisors Chairman Jeffrey McKay, discussed the revenue bright spots (sales taxes, real estate transactions) and danger signs (shrinking commercial leases, tourism-related taxes) seen in their own localities during this crisis. All stressed the importance to them of the Governor’s proposal to provide “hold harmless” funding for their schools, preventing the revenue loss that would normally result from the enrollment losses.

Meghan Coates, Henrico’s Director of Finance, indicated that may need to continue into future years as all the departed students may not return.

The county leaders thanked legislators for the 2020 legislation adding additional “revenue options” for them to consider. Fairfax’s McKay pointed to the prepared meals tax, something Fairfax voters have rejected. It can now be imposed without a referendum. Given the current state of the restaurant industry, McKay said, now is not the time to impose that but “we know long term that’s still the right decision.”

But the data presented today indicate it is the cities, not the counties, that are failing to see revenue grow, even though they have so many more ways to tax their citizens. Right now, only one percent of county revenue comes from meals taxes, and when that equals the six percent cities now receive (it won’t take long), the counties will be that much further ahead.

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16 responses to “Virginia’s COVID Federal Grants Now At $5.8 Billion

  1. If Virginia is going to enjoy all this extra free cash flow from “relief” funding, it might be nice if the General Assembly decided to give a smidgeon back to taxpayers. Ha! What deluded fantasy. Hey, a guy can dream, can’t he?

    On a different point: If state revenue is up 52% and local revenues are up only half as much, I expect we might see a lot of pressure for the state to share some of its bounty with local governments. What do you think the odds of that are? Will legislators be willing to divert less to their pet causes rather than help out local governments?

    • “… it might be nice if the General Assembly decided to give a smidgeon back to taxpayers. ”

      That’s what the French did. Reversed the flow through the tax catheter.

      But, but, if Dominion wins, we all win, James.

    • Well, isn’t that explicitly what Trump and the GOP refused to do in the stimulus – i.e. “help” local government, right?

      Why did Virginia fare so well and other states not? I know, I know, the GOPpers will say Northam/dems screwed Viginians over by not giving back the windfall from conformity but how did other states not also benefit similarily?

      I’d say that Northam and company have been prudent and perhaps had some luck but the proof is in the pudding.. Virginia is in good shape with his leadership.

      • “Virginia is in good shape with his leadership.”

        Oooh, talk about prodding the hornet’s nest. Prepare for a stinging rebuke of blackface and coonman remarks. But, honets have only one stinger, eh?

        But then, this is their leadership

        • Yep… saw that… and now there are cases of the virus with members of Congress.

          Really hard to understand some folks behaviors these days.

        • Even when I try to return to the mundane, you useless trolls use it to to pollute the site. I have better things to do.

          • Oooh, a hit! A sting! I do fear I breathe my last.

            Okay, props where props are due. Thank you for the numbers if not the cynical opinion of the check-writing plans.

    • Jim, the table seems to measure revenue growth from direct taxes, so it demonstrates which sources are most productive, which gov’t entities are on firmer ground. Once the state collects its boodle, much of it then moves to localities, so they benefit from that. But as you know they’d love to eliminate the middle man!

      And wouldn’t using the money to pay rent for people behind, or provide these vaccine shots for free, count as a benefit to individuals?

      • I also sat through some of the Senate Finance briefing yesterday, which included an interesting talk about the current economy and prospect from a Fed economist (I assume she’s an economist.) One senator, Norment, raised a question about the national debt and the long term implications of the COVID deficit spike. Great question, she said, she gets it all the time, but she didn’t have much of an answer. Most economists think the response to the recession and pandemic has been “appropriate” and so far capital markets seem to be taking it in stride. But that can change suddenly….over night, even…..

        I now return you to your regular programming of hate, discontent, racial strife and ignoring the logs in your own eyes….

        • The Trump tax cuts are funded directly from deficit/debt and perhaps perversely and ironically – Virginia has managed to grab some of it out of hands of taxpayers who received it?

          Some economists are changing their mind about deficit/debt since
          it has not (yet?) resulted in any of the supposed bad things that would happen – like crowding out private sector investment and having to pay higher and higher and higher interest rates.

          There is still a preference for (some) government bonds which are still considered far less risky than other investments despite what some folks say about irresponsible govt spending and selling your fiscal soul to the Chinese.

          Attitudes about what we are leaving to future generations seems to be changing……

        • I cannot speak for others but, as for me, give me snark or give me abject fear. Being snarky is a defense mechanism.

          But additionally, please don’t confuse my envy for hate. I envy your cold, steely eyed demeanor in the face of a pandemic that lets you look past the bodies and count the beans. Maybe it’s because I don’t know enough about government spending to be more concerned about choosing between the lesser gods of pestilence and famine. Of course, it’s more fun now given that on Wednesday the third showed up. It’s a lot to take in.

  2. If the state has extra money sloshing around, and if the General Assembly has no interest in returning any of it to the taxpayers, I would suggest that a good use of the money would be to offset the effects of the virus and the lockdown. Funneling money to tenants threatened with eviction might be a good place to start. Advancing loans to restaurants and other small businesses forced to close might be a good idea. Hiring more employees to process unemployment claims might be useful. I hope those ideas are under consideration.

    One-time sources of funds (federal aid) should be used for one-time expenditures, not used to pad ongoing programs.

    • I thought/think that Northam and Layne may do some version of what Jim advocates.

      One thing for me is when I look at the relief money numbers, I have no idea what they really mean.

      For instance, for the rent relief. What percent of the total rent market revenues is that? Is it a huge percent or a tiny percent?

      Ditto with some of the other money.

      While the relief numbers seem huge, I suspect in relation to the actual amount already in those economic activities , might be tiny.

      As with any stimulus – the idea is to get helicopter money into the economy with _Some_ logical allocation to different areas.. I have no idea what the allocation logic is though.

      • Questions you’d think legislators would ask, but they just snooze in their chairs with the Zoom cameras off….$568 million for rent assistance is a pretty good number.

  3. Steve is right about all this federal COVID money freeing up state general fund revenue. Northam seemed to build his budget proposals under the assumption that there would not be a second federal stimulus package. (Remember, that was in doubt up until late December.) The real danger will be how the GA uses this “additional” state money. If it is used for ongoing costs, that will create a “structural imbalance” in the budget for future years when that federal money goes away. I have heard a suggestion from GA staff that Northam’s budget already is structurally imbalanced because it relies on the enhanced federal share of Medicaid in the second year.

    Here are some suggestions for one-time uses of the money:
    Rental assistance
    Rainy day fund
    Fund for local school capital needs
    State capital projects instead of bonds (although with interest rates so low, this might not be the best use)
    Bolstering VRS (reduces need for GF in future)
    Bonuses for state employees
    Equipment for state agencies such as DOC, State Police, and Mental Health
    Additional property for wildlife preserves and natural heritage sites

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