State lawmakers are already starting work to prepare the next two-year budget, and as they begin, Governor Northam says the COVID-19 pandemic has not dampened Virginia’s overall economic outlook. Northam addressed House and Senate money committees Wednesday, saying the budget proposal his administration will prepare as he leaves office will continue to include conservative revenue estimates. WFIR’s Evan Jones has more:
08-18 Northam Budget Wrap-WEB
The Governor’s full remarks as prepared for delivery are below.
Good morning, Chairwoman Howell, Chairman Torian, Chairwoman Watts, Speaker Filler-Corn, Leader Saslaw, members of the General Assembly, ladies and gentlemen. Thank you for the privilege of speaking with you this morning.
I would like to thank Lieutenant Governor Justin Fairfax, Attorney General Mark Herring, First Lady Pam Northam, our Cabinet and staff, and all of our state employees for the work they do.
I think we all can especially appreciate that we are here together in person this morning.
Last year’s August revenue speech was held virtually, and so was the December budget address, and the January State of the Commonwealth.
It’s good to be together again.
We are here in person today because of one thing: vaccines.
The vaccines that scientists developed to fight covid-19 are incredibly effective, and for the bulk of this summer, Virginia—like other states—has seen dropping case counts, hospitalizations, and death tolls. It has been a relief to all of us.
We now have 74 percent of adult Virginians with at least one shot – one of the best performances in the country. And 66 percent of Virginia adults are fully vaccinated.
That’s good. But we need to keep working. Because covid is changing. The new Delta variant is much more contagious than previous versions—and it’s more dangerous for people who are not vaccinated. It’s causing our cases to go up again, and that’s not what we want to see.
But remember, cases are increasing mostly among unvaccinated people. Hospitalizations and deaths are almost all among unvaccinated people—nearly every single one.
That makes the solution more clear than ever: get vaccinated.
I hope all of you here today and watching are vaccinated, but if you’re not, please go out and get your shot today. And for you legislators, please urge your constituents to get the vaccine. It will save lives.
We’re going to talk a lot about good news today. But I want to start by recognizing that this has been a very difficult year and a half for everyone. It’s been especially challenging for people who have lost jobs or businesses to this pandemic—or, tragically, people they love.
And while we have a lot of positive news about our economy these days, we know that a lot of people are still struggling, and still hurting.
That’s why we have focused so much effort on investing in people. I want to thank all of you in the legislature for working with us, especially in the special session that just ended. Together, we’ve put money into programs and infrastructure that will help our neighbors and fellow Virginians, and that is what we’ll keep doing as we craft the next budget this fall.
Now, I am here today to update you on the Commonwealth’s revenues for the fiscal year that ended on June 30.
And it’s good news. Really good news.
We ended fiscal year 2021 with the largest surplus in the Commonwealth’s history—an historic $2.6 billion. Secretary of Finance Joe Flores will explain the details to you in a few minutes. Secretary Flores has been doing a tremendous job and I appreciate how you have all worked with him.
All of our major general fund revenue sources exceeded their forecasts.
Our payroll withholding and our sales taxes together account for 71 percent of revenues, and they’re the best indicator about current economic activity. Together, these two categories grew 6.4 percent this past fiscal year.
Revenue from personal income taxes—up 4.7 percent.
Revenue from sales taxes—up 12.4 percent.
Revenue from the recordation fees you pay when you buy a house – up almost 41 percent, a reflection of our strong housing market.
And revenue from ABC profits—up a remarkable 29.4 percent.
These tremendous results are among the best Virginia has ever delivered—and it’s thanks to the hard work of millions of workers across Virginia; entrepreneurs and employers in the private sector, and everyone in this room.
We need to be clear about how this has happened.
2020 was a profoundly difficult year. But Virginia is open for business – and business is good.
Thanks to the vaccine, we’ve been able to move beyond mitigation measures that were painful, even as they protected public health.
Thanks to recovery dollars from Washington, businesses have been able to keep going, and they’re hiring again. People have money in their pockets again, and the child tax credit is helping to lift families out of poverty.
Thanks to our strong national economy, the stock market is up. That’s good for families. It’s been profoundly good for the Virginia Retirement System that funds the retirement for police officers, teachers, and public workers all over Virginia.
Thanks to all of you, Virginians have made it through the past 18 months with tools to keep them safe—rent and mortgage relief, protection from eviction, and help paying for utility bills and child care.
And most of all, thanks to science, medicine, and good old-fashioned American ingenuity, we all now have access to vaccines that are safe and effective—and that’s helping drive this remarkable economic turnaround.
We accomplished all this during a pandemic that many expected to break our budget—and did exactly that to many other states.
Virginia has been different. Virginia has been a leader among the states—in policy making, in our COVID response, and in the performance of our roaring economy.
We have been able to help Virginians who most need support through this pandemic, while building our economy to be even stronger.
Now, before we turn to where we’re going, let’s take a moment to revisit how we got here—because the past 18 months have been unlike any other.
In early 2020, together we approved one of the most progressive budgets Virginia has ever seen. It included investments in important priorities, such as broadband access, early childhood education, clean air and water, and much, much more.
Then the pandemic hit. Not knowing what was to come, we froze that new spending and state hiring until we had a better picture of the pandemic’s impacts on our economy.
That was the wise, prudent, and fiscally responsible route to take.
We didn’t take the drastic measures some states were forced to take. Other states laid off workers, cut services, and even borrowed money to pay the bills—actions that will weaken their financial pictures for years to come. We can all be proud that Virginia did not reduce services or lay anyone off.
This time last year, we were rewriting the budget to account for an anticipated drop in revenues.
But things improved last fall. And by the end of 2020, we were able to restore many of the investments we had hoped to make.
We launched free community college through the G3 program for people who need the support to get high-demand skills—so they can get the jobs they want for the lives they want to build for themselves.
We restored investments in broadband, early childhood education, higher ed, and financial aid. This means more children will get the best start possible, while people in every community will be able to get the Internet access they need to work and learn.
We gave educators a much-deserved pay raise, invested more in school counselors, and held K-12 schools harmless for enrollment drops during the pandemic.
We know our schools and educators had a very difficult year—and students most of all—but we’re grateful for how they handled the challenges of the pandemic.
We updated Virginia’s voting systems, revised an outdated formula for funding local health departments, and set aside money for the vaccination effort we knew was coming. Now more than half the state is fully vaccinated, and our local health departments are getting the support they need.
We invested in new rail infrastructure, and put money into the organizations working to better tell the full and accurate history of Virginia. That means a more comprehensive and inclusive story about where we’ve been, and where we’re going.
And we set aside money in our reserves. I had set a goal to have more than 8 percent of our budget in reserves during my term—more than any other governor and General Assembly have ever delivered.
Well, we’re on track to have almost 15 percent in our reserves by the time my term ends.
In fact, our revenues may be strong enough to trigger a “super deposit,” and Secretary Flores will explain that in more detail shortly.
But we can all be proud that we have been able to act prudently and set aside money in our reserves.
This action will protect Virginia when the next economic downturn comes—and we know one will come eventually.
Our budget provides targeted support to help the people who need it the most, and lays the foundation for the economic recovery we have well underway.
We also used the federal funding we’ve received to support our local communities, our small businesses, and to save Virginians and landlords from the chaos of evictions.
Virginia was one of the first states to create a rent relief program, in June 2020. We directed $50 million in CARES Act dollars to it to start with, and this past February, we put another $524 million in federal funds into the program.
Virginia’s program stands out because we require tenants and landlords to work together to apply for funding. We understand that the pandemic has put people out of work, and through no fault of their own, they couldn’t pay the rent.
But we also understand that landlords had bills to pay too. That’s why we’ve had them work together.
Just last month, the United States Treasury Department published rent relief data that recognized Virginia as a top performer—and just last week, the White House praised Virginia’s work as being number two in the country for dollars out the door.
Also last week, we finalized legislation to spend $4.3 billion in federal American Rescue Plan funding.
I remain grateful to you for working with our administration to prioritize that funding so Virginia can be in a better position for the future.
We made a down payment on investments in behavioral health care, including strengthening our community-based services, and the valued staff who provide that care.
We’re giving schools the funding they need to improve their ventilation systems—a new priority in this pandemic era, but an issue that is likely to continue.
Together, we invested a record $700 million into bringing universal broadband access to every corner of the Commonwealth—that will be done in just a couple of years, far earlier than expected. This is a dramatic step forward for Virginia.
Previous legislatures have talked about broadband, but when we took office, we were spending only about $4 million a year on the effort. Coming from rural Virginia, I knew it needed to be a higher priority. We set the ambitious policy goal of getting every Virginian connected within ten years. And together, we kicked that number up to $50 million a year.
But we still have some Virginians without access, so I turned to my team and asked what it would take to hit the goal of universal access more quickly. They came back to me with a plan, and said it will take about $700 million to get the job done. So together with you all, we have now committed to one of the most aggressive investments in broadband of any state in the country-and we’ll do it in half the time we originally thought. We don’t want to leave any community behind.
We protected businesses from tax increases by making an historic investment of more than $800 million to refill our unemployment fund back to the right level. We had a clear policy goal—deposit enough money into that fund to ensure that our businesses, many of which have struggled in this pandemic, wouldn’t be hit with higher taxes to replenish the fund. Our economy continues to flourish, so between that and this investment, we are rebuilding that fund for the future.
While the Virginia Employment Commission is sixth in the nation for getting benefits to eligible people quickly, there have been times in the pandemic when VEC’s pace of resolving those difficult claims just hasn’t been acceptable.
We directed the VEC to dramatically expand their ability to process complicated claims, by adding 300 new adjudication specialists and make technology upgrades. As a result, VEC has now resolved 98 percent of complex claims. We know we have more to do. The ARPA investment will boost our chronically under-funded unemployment system, by improving its technology, increasing call center capacity, and ensuring highly-qualified staff to help people, allowing VEC to continue to improve.
We also invested even more in our small businesses through the Rebuild Virginia Program. We launched Rebuild Virginia a year ago to give grants to small businesses and non-profits that were affected by the pandemic.
The response has been overwhelming—that fund has spent all its money three times, and still has a number of applications in the pipeline.
So we used federal ARPA money to provide another $250 million. That will fund the needs for many more small businesses. All told, we’ll have put almost $400 million into that fund to help our small businesses all across Virginia.
We can all be proud of using federal support for these targeted investments to help Virginians. Some would have had us spend every ARPA dollar we received. But given the unpredictability of this pandemic—the rapid spread of the Delta variant is an example—it is most prudent to set some aside.
I want to thank Senator Janet Howell and Delegate Luke Torian for their strong commitment to this fiscally responsible decision. As we look to how to use the ARPA dollars we have set aside, rest assured, the 2022 General Assembly will have the final say.
Now, let’s talk a little bit about our economic recovery.
Last fall, there was considerable uncertainty about where we were headed on the pandemic and its impact on our economic outlook.
A vaccine was still months away, there was uncertainty about any future federal stimulus relief, and we were in the waning days of a tumultuous election season.
As I said, this time last year, we met with economic advisors, and we all expected the pandemic would reduce revenues.
But by December, those same economists were seeing that Virginia was on an upswing. We expected $1.2 billion in additional revenue. That was great news.
What’s even better news, however, is that we more than doubled that.
The topline is this: we forecast our total revenue collections to grow 2.7 percent. We based this on the conservative recommendations of experienced economists, and Virginia business leaders. This was the right and prudent course.
Instead, revenues soared 14 percent—and we can all celebrate that.
That tells us all that what we’ve been doing is working—making targeted investments for the future, while helping people get through the pandemic.
Revenues are exceeding official forecasts, even during a pandemic.
Our finances are solid, and we have taken we have taken actions to keep our triple-A bond rating secure. We are one of only 13 states that hold this rating, and it’s because we laid out a long-term financial plan, and we have stuck to it, in good times and bad. We must continue this work.
There is no doubt this past year and a half have been difficult in a variety of ways. That includes the worries we have all shared about our state’s revenues, and how the people and businesses behind those numbers were faring during the pandemic.
That is one reason why it was so heartening to have something good—really good—to celebrate last month.
Once again, Virginia was named the best state in which to do business by CNBC—the only state to get that rating back to back.
This is something we should all be proud of, because it speaks to the work we have done together to make Virginia a better place, both for businesses and for workers.
I could not be prouder of what this says about the inclusive, commonsense policies that we have put in place, and how they encourage business investment.
It is a testament to Virginia’s workers, our education system, our commitment to diversity, and our strong business climate.
When we treat people right, it’s not just the right thing to do, it is good for business. And we know that if we stick with this philosophy, Virginia will grow even stronger.
Since I took office in 2018, we have secured $47.5 billion in statewide capital investment and created more than 90,000 new jobs.
We’ve done that while advancing policies that treat people equally and with dignity, recognize and celebrate diversity, tell our full and true history, and promote democracy.
And as a result of all this, our economy is roaring. We see that in these revenue numbers.
We know that we are taking the right steps to keep this momentum going.
At the same time, we don’t know what the future holds. If you’d asked me about the pandemic in June, I would have said we could have a fall that looked almost normal. But now we know that won’t be the case, thanks to the Delta variant.
So as we head into the fall, we will continue to be cautious and prudent in our budgeting. We want to be ready for any more surprises COVID may throw our way.
My administration will be working with you to craft a new two-year budget to leave in your hands. It will be one that continues prioritizing investments for the long-term, and supporting people as they recover from the pandemic.
We have already committed to making strong investments in overcoming salary compression for our state police and many other public safety officials. And we’ve committed to continuing investments in our behavioral health system and in the staff who are on the ground, taking care of people.
Our goal as we build this budget together is to leave you all with the kind of roadmap that can continue the strong economic success that we are seeing. We will keep making the investments that Virginia needs. We will keep putting resources into supporting Virginians who need it. We have built a strong Virginia that works for more Virginians than ever before.
We can all be proud of Virginia’s position today. We have a strong economy, thanks to cooperative leadership, and we are well-positioned to continue seeing robust revenues and hiring going forward, if we keep steering the ship along the same course.
We have laid out a path for economic prosperity, and it’s working.
Virginia is the best state in the best nation in the world. I am grateful to all of you for the work we have done together to benefit Virginians. And I am grateful to every Virginian who has played a part in making our Commonwealth the best place to live and work.
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