Gov. Ralph Northam. Screenshot.

Facing a flush general fund and a billion-dollar surplus, outgoing Gov. Ralph Northam in his final budget proposes a total of $500 million in grants for school construction and renovations. Cash infusions from the state are desperately needed especially in many underserved communities in Southwest and Southside Virginia, where localities with a low tax base struggle to keep up even with the most basic maintenance. 

“Our revenues allow us to make investments we’ve needed for a long time, and one problem that has festered in Virginia for decades is the issue of crumbling schools – schools with leaky roofs and ceilings, and antiquated classrooms. It’s hard for children to learn when the school itself is distracting,” Northam told lawmakers at a joint meeting of the Senate and House Finance and Appropriations Committees Thursday, which was also attended by Gov.-elect Glenn Youngkin and Lt. Gov.-elect Winsome Sears. 

Many school divisions have old schools, and not enough money to build new ones, the governor said. “But school construction has traditionally been a local responsibility, not a state one. While I understand the reasons for that, I believe that when we have the means to help, we should,” he said. 

State Sen. Todd Pillion and Del. Israel O’Quinn, two Republicans from Washington County, applauded Northam’s proposal. “We are glad to finally be moving forward on this issue and appreciate Governor Northam for providing a basis in the introduced budget from which we will work with our colleagues in the Senate and House, as well as Governor-elect Youngkin,” they said in a joint statement. They also noted that school construction and modernization has been an issue that they have been working on over multiple legislative sessions, including during the 2020 session, when they sponsored legislation creating the School Construction Fund and Program. “While that legislation passed the Senate unanimously, it was killed later by House Democrats in the Appropriations Committee,” they said.

Northam on Thursday also proposed increasing support for educationally at-risk students by more than $268 million and expanding access to the Virginia Preschool Initiatives for three-year-olds, increasing the Child Care Development Fund by more than $73 million each year, and expanding the early reading initiative more than $77 million over two years. “Every child, no matter who they are or where they live, should get a world-class education in Virginia,” Northam said.

The two-year budget for fiscal 2022-24 totals $158 billion. A strong economic recovery and federal aid during the pandemic allowed the administration to set aside $1.7 billion to the commonwealth’s revenue reserves, including a $564 million voluntary deposit, bringing the total reserves amount to more than $3.8 billion, or 16.8% of state revenues, and more than double the 8% that the administration set as a goal four years ago.

“When you’re doing well, the first thing any financial advisor will tell you to do is put money in the bank,” Northam said, adding that Virginia’s economy is strong and on a steady track. “State revenues are at record levels, and we are at a unique moment, when we have the funding to catch up on long-delayed investments, while also putting money back into the pockets of the hardest working Virginians.”

Northam said that the strengthened balance sheet is the result of  a “consistently prudent, cautious approach to budgeting” taken by the administration in the last four years. “We’ve made targeted long-term investments to help Virginia grow, and we’ve made choices that ensure more opportunities for more Virginians,” he said.

Senate Minority Leader Thomas K. Norment said that by introducing “several of Governor-elect Youngkin’s key priorities,” Northam has acknowledged “the decisive outcome of the November elections and the impending change” in Virginia’s government. “Over the last several weeks, Governor Northam previewed almost all of the priorities he highlighted in his remarks today.  It is impossible not to notice that from tax relief to broadband expansion, many of the budgetary priorities he touted were first championed by Senate Republicans,” Norment said.

But Northam spokeswoman Alena Yarmosky told reporters on Wednesday that the budget demonstrates that Northam will leave office as “the most progressive and economically successful governor in state history.” The budget is a direct result of “record economic growth and smart fiscal leadership,” Yarmosky said, and it builds on the administration’s priorities throughout Northam’s previous budgets – education, equity, and investments in working Virginians.

Secretary of Finance K. Joseph Flores said Wednesday that Virginia isn’t the only state where the general funds currently are flush. “When you look across the country, a number of states are reporting a general fund surplus,” he said. When the administration began preparing its budget forecast, “we didn’t know where we were headed,” because of a dramatic rise in COVID-19 cases over the summer of 2020 that wouldn’t plateau until January. “We had no vaccine at the time, businesses were struggling to operate, and we didn’t know that the feds were going to provide additional relief for us. So we were very cautious how we projected,” Flores said.

Without a pandemic playbook, financial planners worked on the same model they used during the 2009 recession. “But that’s not what happened here. Who knew that our housing market would explode? Typically in a recession it goes the other way,” Flores said, adding that it was “the successful and unprecedented development of the vaccine and the rollout, but also those two additional stimulus packages that put cash in people’s pockets,” made a big difference. “The Feds have certainly stepped up. That has helped facilitate the recovery,” Flores said. 

Northan’s budget also invests nearly $1 billion into the Virginia Retirement System to honor retirement commitments to public employees, and commits $42.5 million each year for payments state expects to make to Amazon that are contingent on them meeting their promises on investments and job creation.

Additional key investments proposed by the administration include:

  • a 10% pay increase over two years to push Virginia’s teacher salaries to the national average; $223 million in increased funding for State Troopers, correctional officers, deputy sheriffs and regional jail officers that would increase starting salaries and address pay compression to a range of law enforcement officers and sworn personnel; a 10% raise for all state employees over the next two years on top of the 5% raise that took effect this past June. 
  • the elimination of the widely considered regressive 1.5% state sales tax on groceries; a one-time tax rebate of $250 for individual filers and $500 for married couples; making up to 15% of the federal income tax credit refundable for eligible families, giving a tax break to low- and middle-income Virginians; ending accelerated sales tax payments for retailers.
  • $297 million for Historically Black Colleges and Universities for capital improvements, student support, and other needs at our HBCUs, including $20 million for Norfolk State University and Virginia State University, $20 million to help support scholarships at Virginia Union and Hampton University, and $277 million in funding for operating costs and building construction. 
  • $245 million for multi-use trails and State Parks, including $233 million to help cover the expansion and improvements to existing trails, like the Spearhead Trails trail system in Coeburn; $410 million in land and water conservation efforts,  including $12 million to help tribal nations conserve and expand their tribal lands, and $10 million to preserve historic sites related to Black and Indigenous Virginians. 
  • $150 million to develop mid-sized and megasites to attract large manufacturing projects and others who need large sites prepared and ready to go to make communities as competitive as possible; adding an additional $70 million in the first year, and $120 million in the second year to the Virginia Housing Trust Fund that helps create and preserve affordable housing and reduce homelessness in the commonwealth.
  • $38 million in additional investments to the G3 program that provides tuition-free community college for low- and middle-income students who pursue jobs in high-demand fields; $11 million for UVA Wise to help expand programs, particularly those focused around economic development; an increase of the Tuition Assistance Grants (TAG) to private school students to $5,000 per student over the next two years. 
  • $424 million of Virginia’s remaining American Rescue Plan Act dollars for the state’s continued response to COVID-19. 

Markus Schmidt

Markus Schmidt is a reporter for Cardinal News. Reach him at markus@cardinalnews.org.