Va. Gov. McAuliffe Unveils Budget for FY 2019-20 to Joint Money Committees
Chairman Jones, Chairman Norment, Chairman Hanger, Chairman Ware, members of the
I'm joined today by my wife, First Lady
Also joining us are Governor-elect
This is the last budget that I will present to you.
To be honest, I feel some sadness that our time together is coming to an end, but I do take heart knowing that all of you are even sadder to see me go. Yet, I know you will be in very capable hands with the Governor-elect and Secretary Layne.
Unfortunately, it's not just my final budget.
This will be Finance Secretary
Ric, we're very sorry to see you go, but you've more than earned your retirement.
Dorothy and I wish you all the best in your next career as a semi-pro fisherman!
We wouldn't be here today if it weren't for the tireless work of
I can't count the number of hours we've spent poring over budgets these past four years.
It's a grueling process, but one that they've taken on happily, and with great pride for the positive impact it can have on
We've certainly had our financial ups and downs in recent years, but today I am proud to be here to tell
When I took office in
Most of the shortfall was caused by federal tax changes on capital gains and non-wage income, but it was also clear that
We needed to diversify - and fast. We needed to build a new
There is no question the biggest drag on our economy was created by disastrous federal spending decisions, notably the sequester cuts which continue today.
Those arbitrary cuts reduced military contracts in
Since that difficult budget, my team and I have worked hard to reduce
Through all of these highs and lows of economic gains and losses, I have remained committed to two important goals.
First, I pledged to work with you to pass balanced budgets that invest in priorities that are essential to economic growth and opportunity for all Virginians. I'm proud to say that we've kept that promise.
Together, we have:
Invested a record amount in our education system to build a more talented and skilled workforce;
Increased access to both physical and mental healthcare, especially for our most vulnerable citizens;
Put our transportation dollars to much better use for taxpayers; and,
Acted responsibly to protect
The bottom line is that by working together we have taken significant action to improve the lives of Virginians and regain solid financial footing.
The second commitment I made was to build a new, diversified
This new economy would focus on growing industries that are less reliant on federal decision-making, such as cybersecurity, bioscience, data analytics, communications, and unmanned systems.
Moreover, we would view the entire world as our marketplace.
With more than 95 percent of the world's customers located outside
I am proud that I have kept these promises. For four years, I have worked tirelessly to promote our existing businesses, attract new investment, and increase trade.
I have made thousands of economic development calls on prospective clients and undertaken more economic development trade missions to other nations than any other
And the numbers speak for themselves.
To date, my administration has announced more than 1,078 economic projects that will bring in more than
In addition, I recently announced the economic impact of our agriculture and forestry industries has reached
We've also overseen the creation of 207,000 new jobs.
I'd remind you as well that unemployment is down to 3.6 percent - from 5.4 when I took office - and marks the lowest rate we've seen nearly a decade.
Every single city and county in
However, there's still more work to do, but there is no question that by working together, we are leaving
We can continue to build on this progress by finding common ground on the issues that we all care deeply about and that directly impact our economic future.
That means: investing further in public education, workforce training, infrastructure, and healthcare.
It means using our limited resources wisely to secure the things we'll continue to need in the future, including a highly skilled workforce and a high quality of living.
In this balanced budget, I am giving you a roadmap to take our achievements to the next level.
And because we've gained ground economically, I am optimistic that we have the resources to do so.
When I last spoke with you in August, I announced a surplus in our general fund revenue collections and told you the
At that time, I also gave a very stern warning about the budget I initially had expected to unveil today.
However, I am happy to report that our outlook - and this budget - are far more positive than they were just a few months ago.
For fiscal year 2017, general fund collections exceeded the official forecast by more than
This was seven-tenths of a percent within the forecast - the smallest forecast error in 10 years.
After we factor in transfers to the general fund from other sources, we ended the fiscal year with an additional
That was driven by strong growth in payroll withholding and corporate income-tax collections.
Now, before you start planning that rooftop swimming pool on the new
As I explained in August, it will go toward the
The Appropriations Act also called for an additional deposit of
Roughly
The estimated revenues from the program fell short of expectations.
During budget deliberations, unfortunately, the
However, only
As a result, the current amount required to be deposited to the reserve is
Let's not forget why we created this cash reserve in the first place.
Earlier this year, S&P Global Ratings affirmed our
They did that for two reasons.
First, they believed that
Second, and in light of the first issue, S&P is concerned about our budgeted withdrawals from the
To address these concerns, we must build reserves to protect us against the risks associated with the federal government and national economic uncertainty.
And even though we are taking a conservative approach that will help insulate us from potential future shocks, we are still delivering a structurally balanced spending plan that invests new money in key priorities.
As you know, my team began the process of reforecasting general fund revenues shortly after the close of fiscal year 2017, which involved a review by our two advisory boards.
The forecast calls for our nation's GDP to continue to grow at an average of 2.3 percent over the next three fiscal-year period, with no recession.
Both employment and personal income are forecast to continue to grow at moderate rates through fiscal year 2020.
In addition, inflation is expected to remain at, or below, 2.5 percent after posting a 1.9 percent increase in FY 2017.
The impact of federal tax reform is still largely unknown, and will remain so until a final bill is enacted, if at all.
At the state level, personal income is forecast to grow by 3.3 percent in FY 2018, up from 2.4 percent the year before, and job growth is expected to increase at a similar rate this year, too.
That means more Virginians will secure good-paying jobs and will in turn help us make the investments we need to provide quality education, affordable healthcare, and workforce training for 21st century jobs.
All of these projections give us a reason to be very optimistic, but due to ongoing national economic uncertainty, we are still using a conservative revenue forecast.
For example, we have continued to place a collar on the projections of non-withholding income tax receipts.
This acts as a hedge against the natural volatility of these non-withholding receipts. In fact, our revenue surplus in fiscal year 2017 would have been a revenue shortfall had this collar not been in place.
In total, the final general fund forecast for the next biennium is just over
This is based on total general fund resources growing at 3.8 percent for FY 2019, and 3.9 percent for FY 2020.
Given this forecast, today I am proposing a total of
Another
Over that three-year period, my recommendations will grow the cash reserve to
This will be welcome news for our rating agencies.
With the new resources provided by our revised forecast, many of my spending recommendations will fund vital public services like the Standards of Quality for public education and the existing Medicaid program. These are two of my top priorities in this budget.
Our public schools are among the best in the nation and they serve as the foundation for our future workforce and economic vitality.
My team and I have worked hard to transform how we educate our children and prepare them for the new
We've secured historic funding for public education, redesigned the high school experience, and helped expand access and affordability for higher education.
But we do still face some headwinds.
One of the toughest obstacles to providing that quality education is our ability to attract and retain our teachers, particularly at our most at-risk schools.
I announced last week that my budget funds several initiatives to address this growing crisis.
These proposals include funding to automate the teacher license application system and to support principal recruitment and retention in our hardest-hit school divisions.
In addition to addressing that urgent problem, my budget fully funds re-benchmarking of the Standards of Quality, which equates to
We're also providing an additional
I've also included
In total, this budget provides more than half a billion (
I'm proud of the work we've done to expand opportunity in the classroom, but we also know that our kids can't be hungry to learn if they're just plain hungry.
On that point, I want to recognize the First Lady for her work to connect our students with nutritious meals.
Thanks to her leadership, and the many partners she's brought in to help, we served more than 10 million more school breakfasts this year than in my first year in office, bringing an additional
But we're not stopping there.
That's why I've included
It's time that we extend that funding for our middle and high schools as well so we can end childhood hunger in
I've also included more than
Higher education is also critical to maintaining and strengthening
We've leaned in to provide new opportunities for Virginians to access a four-year education, but also for those who want to earn high-demand workforce credentials in less time, and for less money.
To help keep higher education affordable and accessible for all students, I am proposing an additional
To support institutions with the least resources and those with the greatest growth, I've provided an additional
Through this funding, schools will be under less pressure to raise future tuition and fees, protecting the pocketbooks of our students and their families.
To help keep equipment at the institutions of higher education up-to-date,
I'm also increasing funding for the New Economy Workforce Credential tuition assistance program by
During FY 2017, the program served 5,050 students, with over 90 percent completing the academic portion of the program.
And it has nearly tripled the number of people who earned credentials at
Those are the graduates who are going to fill the high-skilled jobs that we're creating in 21st century industries.
By supporting that successful new program, we are putting more Virginians to work in good jobs with little to no student debt.
It's a small investment from the Commonwealth, with a big pay-off for
Finally, higher-ed will also receive
This is the largest amount of maintenance reserve funding ever provided to our higher education system.
Once our students graduate - whether it's with a four-year degree or a 10-week credential - we want them to find a good job right here in the Commonwealth.
That's why we are continuing to invest in initiatives that will boost our efforts to grow and diversify our economy.
I am proposing
Through this initiative, workforce experts at the
This new incentive will be available exclusively to projects that include a new location, or a substantial expansion of an existing location, and will create high-wage jobs.
By doing so, we will extend the reach of these dollars to provide opportunities in communities that need it.
My budget also provides
In addition, my budget will help the
This planning is necessary to gain access to federal funds to dredge these channels.
With deeper channels, the
As you know, the Port was unwisely put up for sale during in 2012 after experiencing five straight years of losses.
Following a
The Port is just one of the success stories we've seen during our transformation of the Commonwealth's transportation system.
I hope we can someday soon tell that same story about
Along with VRE, it supports 130,000 jobs and 85,000 families in
But we all know that system is just plain broken. And it represents a significant threat to our economy if we don't fix it, and quickly.
Instead of agreeing to a regional general sales tax, which would disproportionately burden Virginians, I have instead included dedicated, ongoing funding to provide
This shouldn't be a tough call, given that the
And of course, our funding is contingent on DC and
Without that funding, Metro's General Manager has said he will need to cut service as of
Its problems didn't happen overnight, and any solutions will take time to work, too, but we cannot delay action any longer.
That's why I support the temporary reform board recommended by former Transportation Secretary
With a more streamlined governance structure, it will be able to make the tough decisions needed to get this vital system back on track.
In addition to
These systems help reduce the need for road construction, cut the number of vehicles on the roads, and provide more options to commuters and visitors.
The state funding we've been using to support the capital needs of our transit systems will no longer be available come fiscal year 2020.
Given this reality, my budget includes the authorization to issue
We need robust, sustainable public-transit systems to support the growth and diversification of our economy.
They also help us reduce our carbon footprint and car culture, which drive other costly investments we must continually make - which is everything from road maintenance to climate change mitigation.
As we shift toward a 21st century model for economic growth and transportation, we remain laser-focused on developing a renewables industry that can support our rising energy demands.
Solar energy, in particular, is an essential part of our efforts to diversify our energy mix.
To that end, my budget includes
These initiatives build on important investments in the solar industry across
When I came into office, it's fair to say that
This isn't just good for the environment - it sends a message to job-creators, too.
These kinds of investments in clean energy have helped us attract big-name companies like
These actions clear the way for us to attract new businesses and create high-paying jobs.
But as I've heard from job-creators around the globe, they want to go where they'll have access to a healthy workforce, too.
If we're going to continue to bring in these companies, we will need to strengthen our healthcare system and expand access to it.
Sadly, there are still nearly 400,000 Virginians who lack access to basic healthcare because they fall in the coverage gap.
Each year during my term, I've gone out to the RAM clinic in
That once-a-year clinic provides life-saving care, but in America, our citizens should be able to access healthcare wherever and whenever they need it - without facing the prospect of financial ruin.
I've fought to expand coverage to these Virginians every year for four straight years.
As you know, that effort has repeatedly failed in the
We've filled that gap the best we could through my Governor's Access Program and other measures to meet these needs. But we can - and should - be doing more.
That's why my budget will expand Medicaid for the
Since the Affordable Care Act became the law of the land,
Through Medicaid expansion, we will be able to offer coverage to the nearly 400,000 Virginians who not only desperately need it, but they are entitled to it and we've already paid for it.
The cost of providing these additional services will be funded through an assessment on private acute care hospitals.
In return, hospitals will see reduced costs for indigent and uncompensated care, since more of their patients will now be covered.
It makes sense that they will be expected to help cover a portion of the state's cost to serve a population that will now be the source of significant revenue for these hospitals.
This expansion of Medicaid will allow
From a budgetary perspective, across the executive branch there is a modest general fund cost of about
In addition, this will unlock over
It's long past time to take this commonsense, fiscally responsible step.
Without bringing these dollars back to
Unfortunately, while our Medicaid expansion proposals have languished, we've continued to see growing costs in physical and mental health care.
This budget fully funds mandated services, including the revised Medicaid forecast, foster care and adoption programs, and Children's Services Act caseloads.
In total, the increased cost for these services is
Consistent with the 2012 agreement with the
We've budgeted
The children's insurance programs, known as
Last week, that forced me to notify 68,495
Just imagine - two weeks before the Christmas holidays -- thousands of low-income Virginians getting a notice in the mail that their children's healthcare is at risk.
To me, this is absolutely unconscionable. It's nothing short of malpractice on the part of
However, given the immense pressure
That includes
The budget also provides
We also recognize that there is significant work yet to be done to address crises related to mental health and opioids, despite great advancements that we've made in the past four years.
As such, my budget builds on our recent achievements by expanding same-day access to all 40 of our Community Services Boards.
As I heard from the leadership at the
If they are told to come back another day, unfortunately we know that there might not be another day.
We also provide funding for two assisted-living facilities and for supportive housing for people currently in our mental health hospitals who can function in less restrictive settings.
We fund the operating costs for the new expansion of
And we provide
Beyond direct treatment, this budget also provides
These resources will allow courts to identify individuals with mental illness who can be safely supervised and treated in the community.
The budget also provides
Too often, people with mental health issues wind up in jail, the emergency room, or homeless. These Virginians shouldn't face that dangerous and costly cycle when we have the knowledge and tools to help them.
As we all know, the opioid epidemic has reached crisis proportions in virtually every region of the country and this commonwealth.
Additional resources are absolutely necessary if we hope to turn the tide on this issue.
My budget increases our resources to combat this problem in several ways.
It provides:
Nearly
Funding to expand drug courts.
All told, this budget increases our resources to combat the opioid epidemic by
Our hearts break for the 1,100 Virginians who died of an opioid-related overdose last year and their families.
We must take these smart additional steps to save lives today and get folks clean, healthy, and back to work.
In addition to Medicaid and behavioral health care, the Commonwealth also operates our veterans care centers and health departments, and we provide funds for private and nonprofit organizations to offer rehabilitative and safety-net services.
My budget includes
These funds will ensure adequate training and pay for personal care attendants, help to implement electronic health records, and support the construction of two new veterans care centers that I broke ground on this fall.
This isn't just the right thing to do for our veterans, but it's a necessity if we're going to remain the best state in the nation for our veterans, military service members, and their families.
While I am very proud of all of the many priorities we've taken care of in my final budget, this document is only as good as the 110,000 state workers that carry out its vision.
That's why I am so proud to give them one parting gift this holiday season, in recognition of their work and dedication to our Commonwealth.
My budget funds a two-percent raise in compensation and offsets health premiums for our hard-working state workforce. This will be the third pay raise for state employees during my term, and reflects my commitment to building a strong and sustainable workforce.
This pay raise also means that our teachers, law enforcement, state agency workers, and more will not have to choose between serving their communities and sufficiently providing for their families.
And we've been able to make this investment while still fully funding the retirement fund and other post-employment benefit programs.
This raise, and the many other new investments we make, are only possible because we've worked together to put our state finances back on solid footing.
When I took office, I inherited a
Today, I am proud to leave you with a structurally sound budget that prepares us for inevitable future storms, meets every single one of our commitments, and builds on the work we have done together to create a diversified economy with a well-educated and healthy workforce.
With your partnership, we have built the new
It has been a tremendous privilege to serve as your Governor.
I wish you all the best of luck in the upcoming legislative session and a happy holiday season.
May God bless you and our great Commonwealth.
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