State budget bill details released

SPECIAL SESSION

RICHMOND — A new state budget bill is ready for General Assembly action Wednesday, with good news for public schools, behavioral health services, health insurance premiums and pay raises for teachers and state employees.

House Bill 6001 and Senate Bill 6001 will come before the assembly in a special session on Wednesday, as legislators push to end a six-month political stalemate by adopting revisions to the two-year state budget they approved more than 14 months ago.

Assembly budget committees released the 800-page bill on Saturday morning, encompassing the current budget, a stop-gap spending bill adopted in February and an agreement on taxes and spending that budget negotiators reached more than a week ago. Assembly leaders hope that Gov. Glenn Youngkin signs the bill within seven days of legislative action, allowing it to take effect immediately instead of requiring an additional month for proposed amendments.

"This would give the governor that option if he doesn't want amendments," House Appropriations Chairman Barry Knight, R-Virginia Beach, said late Friday. "He can sign it and send it back to us."

Spokesman Rob Damschen said Saturday: "Governor Youngkin is reviewing the budget proposal released today. Virginians deserve a budget that provides tax relief for families to lower cost of living, invests in our law enforcement and supports education for all Virginians."

Youngkin wanted $1 billion in corporate and individual income tax cuts, but the Democratic-controlled Senate balked, leading to a standoff that left Virginia without a fully revised budget for the second time in 50 years.

Tax cuts

Under the compromise House and Senate negotiators reached, the proposed budget would return more than $900 million to taxpayers through rebates of $200 for individuals and $400 for couples filing jointly.

It also would cut taxes by about $100 million by raising the standard deduction for taxpayers who don't itemize their deductions, remove the age limit for an exemption of military retirement income and raise the deduction for business interest expenses. It also includes $44 million to cover the higher ongoing cost of $4 billion in tax cuts that the assembly approved last year in a compromise with Youngkin.

It would revive the "sales tax holiday" for school supplies, hurricane preparedness, clothing and shoes, and energy-efficient products. The holiday, normally held before Labor Day, lapsed this year after the assembly inadvertently failed to introduce legislation to continue it. It will be held on the third weekend of October.

The new budget relies on $2.5 billion in new revenues, after subtracting money for the tax rebate, about $1 billion in essential spending that the assembly adopted in the so-called "skinny budget" on Feb. 25 and about $1 billion that the state expects to return to taxpayers under new "pass-through entity tax" created last year to allow some taxpayers to avoid a federal cap on deductions for state and local taxes. Business owners paid the new tax last spring, boosting state revenues for the fiscal year that ended June 30, but the state will have to refund the money when those taxpayers file extended returns this fall.

Public schools

Public schools are the biggest winners in the proposed budget, with about $653 million in new spending on K-12 education. That includes $152 million to pay more of the state's share for school support positions, which have been under a cap imposed in 2009 to save money during the Great Recession. It would increase the funding ratio from 21 support positions per 1,000 students to 24 per 1,000 positions, still short of fully removing the cap.

It also includes $418 million for one-time payments to school divisions. Use of the money is flexible, but the budget wants it used to address learning loss during the COVID-19 pandemic and implementation of the Virginia Literacy Act, with a minimum payment of $150,000 for the smallest divisions.

"Every single penny helps, particularly for small and rural school divisions," said Washington County Superintendent Keith Perrigan, founder and president of the Coalition of Small and Rural Schools of Virginia and president-elect of the Virginia Association of School Superintendents.

Pay raises

The budget also includes a 2% pay raise for teachers and state employees, including state-supported positions, adjunct faculty and teaching assistants at public colleges and universities. The raise comes on top of the 5% raise lawmakers approved in each year of the current two-year budget that ends June 30, 2024.

Sheriffs' offices would receive an additional $8.3 million to ease pay disparities and boost salaries in localities with small populations. The budget also includes extra compensation for commonwealth's attorneys' offices, circuit court clerks, district court clerks and deputies, and public defenders, while restoring positions that had been eliminated in commissioners of revenue and treasurers offices.

Health insurance

One small but important provision of the proposed budget would make clear that Virginia is seeking to reduce health insurance premiums by 15% by continuing a reinsurance program adopted last year to reduce the risk pool for all people buying insurance in the individual market by creating a separate fund for those with the most expensive health care treatment.

The reinsurance program essentially is a backstop that covers the cost of health insurers' biggest claims. That reinsurance had enabled the insurers to cut their premium rates to reflect the benefit of the backstop.

A State Corporation Commission analysis had warned that premiums would increase by up to 28% without the reinsurance program, administered by the Bureau of Insurance at the SCC.

The federal and state governments share the cost of the program, but the federal share rises significantly in proportion to the expected reduction in insurance premium subsidies paid for policies purchased on the federal and state marketplaces.

"I'm really glad that we have sent the proper signal to the State Corporation Commission to continue this very important program," said Del. Mark Sickles, D-Fairfax, who introduced legislation to create the program last year along with Senate Finance Co-Chair George Barker, D-Fairfax.

Sickles estimates that the reinsurance program will prevent premiums from rising significantly for 350,000 to 370,000 Virginians who do not have access to health coverage by their employers.

"It's really good news for small businesses and gig economy workers," he said.

Additional highlights

Other features of the proposed budget include:

• $186.8 million in state and federal funds for behavioral health services, including more money for crisis receiving centers and stabilization units, permanent supportive housing to keep people out of institutions, mobile crisis teams and higher pay for employees of Virginia's 39 community services boards and one behavioral health authority;

• $72.7 million in state and federal Medicaid funds to increase reimbursement rates for people providing personal care, behavioral health services and early intervention services;

• $7.6 million to add 500 slots for community services under the Medicaid developmental disability waiver, boosting the total new slots to 1,100 in the fiscal year that began July 1;

• $30 million to prevent community violence under the Operation Ceasefire, Safe Communities and the Firearm Violence Prevention and Intervention funds;

• $189.8 million for higher education to increase access and affordability, and to support workforce initiatives and research;

• $200 million to boost the availability of business-ready sites for economic development, including $75 million for the new Business Ready Sites Acquisition Fund to allow the state to purchase potential sites for big business prospects; and

• deposits of $644 million in the state water quality improvement fund and $289.6 million to the revenue reserve fund.