Virginia’s unemployment is among the lowest in the country and state officials say the economy remains solid. But while the fiscal news remains mostly good, Governor Northam says he isn’t ready to go on a spending spree in the upcoming 2020-2022 state budget.
“I’ve always taken a cautiously optimistic approach, and that’s where we are now,” Northam said after a meeting with business leaders earlier this week.
Economists have been warning about a coming recession for years now, citing President Donald Trump’s trade war with China and a record-breaking economic expansion that has lasted over a decade.
But Virginia is so far collecting about 8% more revenue than it expected since the start of the fiscal year in July.
Secretary of Finance Aubrey Layne says it’s not clear whether that trend will hold, and so the state isn’t baking that money into its modelling for the next budget.
“It all revolves around tax policy and taxpayer behavior, which is terribly unpredictable,” Layne said after the annual meeting of the Governor’s Advisory Council on Revenue Estimates (GACRE) on Monday. Layne also noted that the state modelling for future years doesn’t show the same influx in revenue.
Northam has prioritized maintaining the state’s AAA bond rating, which lowers the state’s cost of borrowing. And since rating agencies prize states that keep money in the bank, Layne said any extra windfall from this year would likely head to reserves.
“I think prudence would be the best course of action,” Layne said.
The governor said workforce training and early childhood education will be two top priorities in his budget. But clearing funding for them might involve cuts elsewhere.
“If you’re going to look at new programs you have to look at ways to fund them, and certainly one way to do that is to eliminate ones that aren’t as effective as they used to be,” Northam said.
He’ll lay out his budget proposal in more detail on December 17. Unlike past years, Northam will be primarily selling his plan to fellow Democrats, who now control the General Assembly.
