(The Center Square) – Because of expected revenue shortfalls caused by the response to the COVID-19 pandemic, Virginia Gov. Ralph Northam has proposed 83 spending amendments to the General Assembly’s biennial budget that would cut nearly $2.3 billion worth of spending.
The proposed amendments would freeze or un-allocate about $874.6 million for fiscal year 2021 and $1.4 billion for fiscal year 2022, including replacing the funds for maintenance reserve capital projects with bond authorization and delaying funds that would increase the number of school counselors.
"The economic effects of COVID-19 will not be clear for some time," Northam said in his recommendation. "While it is too soon to obtain an accurate reforecast of revenues, we will need to do it once the economic fog has lifted, so that we can then identify a path to return to the progressive investments we have made together. Until that can happen, I do not want to eliminate specific appropriations without first knowing the overall level of spending reductions that is required."
The governor also proposed the Legislature create a COVID-19 relief fund to assist Virginians struggling during the pandemic. This funding would be for small businesses, unemployed Virginians, those struggling to pay their rent or mortgages, and the homeless. Northam would fund the program with a tax on electric skill gaming that he expects would generate $150 million annually.
Northam also proposed 49 language amendments that will give more flexibility to government bodies and institutes of higher education as they try to conduct business during the pandemic. There are 144 amendments to the budget in total.
The General Assembly reconvenes on April 22 to consider the amendments. Each chamber can approve the governor's amendments with a majority vote or override the amendments with a two-thirds vote.
At the beginning of the month, Northam had ordered a hiring freeze and directed heads of state agencies to cut spending.
Before the General Assembly sent the budget to the governor, Senate Republicans urged lawmakers to revisist spending initiatives based on new revenue projections that would take into account the economic effect of COVID-19. Democratic leadership objected.
According to a Pew analysis published earlier this month, restrictions on economic activity to curb the spread of the virus will cause a significant drop in expected revenues. This includes a drop in personal and business income tax revenue because businesses are shut down and people are out of work, and it includes a drop in sales tax revenue because there are fewer purchasing options and people are staying indoors.
Virginia has a stay-at-home order in effect until June 10. Northam acknowledged that some models suggest the pandemic could be ongoing into the summer. He said that models are based on information we have, but that this information changes frequently, so he has not yet decided whether he will extend the order.
The commonwealth also has shut down some nonessential businesses and has forced restaurants and bars to switch entirely to take out and delivery. Unemployment filings have skyrocketed in recent weeks.