Gov. Ralph Northam wants lawmakers to put $2 billion in new spending on pause while the economic impact from the coronavirus pandemic plays out in Virginia, his top fiscal adviser said Sunday, April 12.
Among the other changes the General Assembly will consider when it returns to Richmond Wednesday, April 22: delaying an increase in the state’s minimum wage. It’s still too soon to know how much revenue the state has lost and will continue to lose because thousands of Virginians are out of jobs and spending is down, Northam’s finance secretary, Aubrey Layne, said on a call with reporters the afternoon of Sunday, April 12. The budget that was passed a month ago, before the pandemic, also doesn’t include all of the COVID-19 expenses the state has incurred, let alone still to come. “The only thing I know for certain right now is that the economy and the outlook for us — for both the U.S. and the Virginia economy — are undergoing a contraction without precedent in our history,” he said.
Northam is asking the General Assembly to approve freezes of $874.6 million in the fiscal year that starts July 1 and $1.4 billion in the next fiscal year. They would last until the state has a better idea of how much less money is coming in. Northam would then ask lawmakers to come back to Richmond sometime in late summer or early fall to reshape the budget. The freeze also gives time for the Northam administration to know exactly how it’s allowed to spend the $1.8 billion Virginia is expected to get from the federal stimulus package. Localities are expected to get another $1.5 billion.
Halting new spending means there won’t be money for a state commission to investigate the Virginia Beach mass shooting, at least for now. It also means no raises for teachers or state employees, as well as no new spending on infrastructure such as roads. Northam’s chief of staff, Clark Mercer, told state agency heads earlier this month to halt any discretionary spending and freeze hiring.
To make up for some of the lost revenue expected, Northam is proposing to tax so-called games of skill — slot-like machines found in restaurants, bars and convenience stores — and put the revenue into a COVID-19 relief fund for small businesses as well as for housing and nursing home assistance. Lawmakers voted to ban the machines effective July 1, saying they were harmful to Virginia Lottery sales — which generate revenue for schools — and would increase the risk of problem gambling. But Northam wants to temporarily tax them at 35%, which Mercer said could generate around $100 million. They’d then be banned after a year. In addition to bringing the state money, Mercer said allowing the games for a year would ease the burden on restaurants that have had to severely limit business or close entirely.
One of the biggest changes Northam proposed is delaying the first increase in minimum wage from $7.25 an hour to $9.50 an hour. The bill was supposed to go into effect January 1, and Northam suggested pushing that start date to May 1, 2021. If that change is approved, the minimum wage would still increase incrementally as lawmakers originally proposed after May 2021, ending with $12 an hour in 2023.
Del. Todd Gilbert, the GOP House leader, said in a statement the businesses required to implement the minimum wage increase would be “digging out of this financial hole well past May 1, 2021.” “The actions taken by the governor fail to provide long-term certainty for Virginia’s businesses and their employees,” he added. Northam also suggested delaying when public government employees — including teachers — can begin collective bargaining until May 2021, rather than July 1.
The General Assembly is slated to take up Northam’s amendments April 22 in Richmond.
