Five points of agreement and one brewing fight in Northam’s new budget

Outgoing Gov. Ralph Northam gets a final chance to define his legacy with a budget proposal he presented to lawmakers on Thursday. Pitching himself as Virginia’s most progressive and economically successful governor, Northam called for a slew of new investments built on the backs of state coffers flush with unprecedented cash.

“I am confident that this state is stronger and more forward-looking than it was when I took office nearly four years ago,” Northam told lawmakers.

Northam will hand off the document to Virginia’s divided legislature and a new Republican governor. Gov.-elect Glenn Youngkin, who attended the remarks, said after that the document was a good starting point even as he wants to make deeper tax cuts.

“He clearly listened to Virginians, and Virginians made a statement in November: that we want lower taxes, and then we want to invest in education, we want to invest in law enforcement,” Youngkin said to reporters.

Here’s five points where Youngkin and Northam – and Republicans and Democrats in the General Assembly – could find common ground:

1. Raising teacher pay and modernizing schools. - Northam’s plan calls for a 10% pay raise for teachers over two years. State employees would get an identical boost. His plan also calls for setting aside $500 million for school construction against the backdrop of urgent needs in many districts. Youngkin campaigned on raising teacher pay and Republicans in the House and Senate have said they support school modernization.
2. Raising pay for law enforcement. - Northam’s budget sets aside $233 million to raise pay for law enforcement and correctional officers. “Law enforcement is not an easy job. Officers put themselves at risk every day, and they deserve to be better compensated for it,” Northam said in his speech. On the campaign trail, Youngkin painted a more dire picture of low morale and pay among law enforcement, claiming they’d been “defunded” and “demoralized” despite previous bonuses of up to $5,000 approved by Democrats in the legislature, Lawmakers in both parties have voiced support for an increase.
3. Behavioral health services. - Virginia’s behavioral health system has struggled under pressure from strained capacity at state hospitals and ongoing staffing shortages. Northam’s budget plan sets aside $560 million to address the problems, including money for pay increases for staff at state hospitals and training centers. Roughly half of the proposed money would go toward community based services, including crisis service centers and expanding permanent supportive housing. Youngkin roundly criticized the state’s mental health hospitals, which briefly stopped accepting patients last year. “We’re in a crisis,” he said on Thursday while thanking Northam for including the funding.
4. Broadband - Northam says with his budget, the state will be “on its way” toward offering every community in Virginia broadband access by 2024, reiterating a commitment he made in a separate budget he signed this year. The proposal has broad support from many Republicans who represent rural communities that lack connections.
5. Increasing funding to HBCUs - Northam’s plan calls for a $297 million investment in capital improvements, student support and other needs at Virginia’s historically Black colleges and universities. If enacted, the money would represent an 87% increase over HBCU funding during former Gov. Terry McAuliffe’s time in office, he said in his speech. During the gubernatorial campaign, Youngkin said the HBCUs are “too often overlooked” and pledged that every budget he signed would include funding for all five HBCUs in Virginia.

A looming fight over taxes

While there’s the beginnings of common ground in the budget, Democratic and Republican lawmakers differ in how they’ll seek to implement the plans, how far they’ll go and who gets credit. There are also looming questions on whether previous bipartisan cooperation over transportation policy will continue under the Youngkin administration given his pledge to suspend a gas tax increase that is funding many projects.

But the biggest battle in the General Assembly session is likely to center on tax cuts. Northam presented cuts he pitched as more beneficial toward the people he said need it most: “Workers who have lower incomes; workers who have struggled in this pandemic; workers who need it, not just who want it,” Northam said in his speech.

The Democrats’ plan would eliminate the state’s share of the grocery tax (1% of the grocery tax is directed toward localities), expand refunds to lower-income families under the Earned Income Tax Credit and give households checks of $250 for individuals and $500 for married couples. The plan would cost the state $2.1 billion, including at least $419 million on an ongoing basis.

Youngkin’s plan is bigger and far costlier. He’s called for tax cuts for veterans, tax holidays for businesses, doubling the state’s standard deduction and eliminating the grocery tax entirely (including funds directed toward localities). Experts from the Commonwealth Institute for Fiscal Analysis  warn the plan could cost the state and local governments nearly $300 million each year, threatening government’s ability to fund education and other priorities.

Youngkin brushed off those concerns in remarks Thursday, arguing that the state’s projected surplus of over $13 billion from 2022 to 2024 will allow him flexibility to achieve both goals.

“There is plenty of money in the system in order to do both,” he said. “The money that we call a surplus is a surplus because we've been over-taxing Virginians, and we need to give more of it back.”