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Virginia budget deal includes 5% raise for teachers and state employees

RICHMOND — Teachers, state employees and state-supported local employees would receive raises of 5% in the next fiscal year, with additional money for state police salaries, under a budget agreement House and Senate leaders reached late Wednesday night.

The deal includes more than $66 million to raise Medicaid reimbursement rates for home health care providers to keep them ahead of increases in the minimum wage on May 1 and Jan. 1. It also includes $3.4 million for sick leave for personal care attendants under legislation the Senate approved on Thursday, and a $15 daily stipend for nursing homes based on each Medicaid recipient served.

The details of the agreement were to be posted online by late afternoon Thursday, allowing legislators at least 48 hours to review them, as required under House rules. That would allow the General Assembly to complete work on the budget and legislation by Saturday night, but the General Assembly will formally adjourn its special session on Monday so that legislation will take effect on July 1, the same day as the revised budget.

Under the Virginia Constitution, legislation adopted in special session takes effect four months after the month in which the assembly adjourns. That would be June 1 if the legislature were to adjourn on Saturday.

This provision comes into play because Republicans refused to extend the regular session that convened on Jan. 13 beyond 30 days. Gov. Ralph Northam called a special session to give the assembly up to the customary 46 days to complete its work.

The Senate prevailed in its plan for a one-time tax benefit of up to $100,000 for individual proprietors and companies that received tax-exempt, forgivable loans in federal emergency relief packages last year.

The deal will cost the state about $100 million in income tax revenue over two fiscal years by allowing companies to deduct expenses from their 2020 state tax obligations, even if those costs had been paid by federal loans. The loans converted to grants for businesses that kept employees on payroll during the pandemic, but the money is not counted as taxable income.

“I think we did the right thing by them,” said Sen. George Barker, D-Fairfax, who led a special finance subcommittee that produced the compromise on conforming Virginia tax code to changes in federal law under two emergency relief packages last year.

One of those bills, which Congress adopted on Dec. 27, allowed businesses that received PPP loans to deduct their expenses without counting the money as income. Northam considered the provision a “double tax benefit” that could have cost Virginia up to $500 million in the current budget.

Secretary of Finance Aubrey Layne said the governor supports the tax compromise, which would cap the income tax deductions below the $107,000 average for PPP loans in Virginia. It also would apply the same tax treatment to loans made by the Rebuild VA program that Northam created with federal emergency aid to help small businesses.

Additional revenues

Budget negotiators were helped by $730.2 million in additional state revenues that Northam identified for them last week, primarily from faster growth than expected in sales tax collections.

Former House Speaker Kirk Cox, R-Colonial Heights, who is seeking the Republican gubernatorial nomination, had pitched a plan to give all of the additional money to taxpayers through rebate checks, but Cox was dropped from the conference committee after voting against the House budget earlier this month.

The additional money allowed the budget conference committee to go big on salary increases. They had been removed from the budget last year after Northam declared a public health emergency because of the pandemic. The additional funds also enabled negotiators to boost the state’s financial reserves to hedge against the loss of federal emergency funding for Medicaid and other services in the next budget.

Under the agreement, the state will deposit an additional $250 million in the cash reserve fund on top of the $650 million that the governor had proposed in his budget before Christmas, giving Virginia more than $2 billion in combined reserves by mid-2022.

“Putting additional in our reserves has always been a priority of mine,” House Appropriations Chairman Luke Torian, D-Prince William, said Thursday.

State workers

Raising salaries for teachers and state employees also has been a priority for both chambers, as well as Northam, who urged negotiators last week to adopt the higher increases the House proposed.

In the end, negotiators went to the top limit and beyond, with 5% raises for teachers but also for state employees and state-supported local employees, such as sheriff’s deputies. The House had proposed a 3.5% increase for state employees, compared with 3% for the Senate.

“It’s the biggest increase for all state employees in recent memory,” said Col. Wayne Huggins, executive director of the Virginia State Police Association.

The Senate prevailed in getting additional money for state police, who are struggling to compete with other state and local law enforcement agencies to recruit and retain troopers. The agreement includes an additional 3% increase for state troopers and $100 per year of service to help veteran officers whose pay has lagged behind that of newly hired officers.

Huggins, a former superintendent of the Virginia State Police, had pushed for a comprehensive salary package to deal with salary inequities, funded either through general tax dollars or a proposed 4% surcharge on vehicle registrations. The agreement instead provides both broad and targeted pay increases.

“We had hoped the problem would be solved, but we’re appreciative of anything we can get at this point,” he said.

Education

The budget agreement also increases state support for public education, from kindergarten through 12th grade and public colleges and universities. It includes more than $80 million to moderate tuition increases by higher education institutions. It also funnels state and federal aid to K-12 school divisions that have lost enrollment during the pandemic and are trying to make up lost ground in instruction.

The negotiators provided almost $50 million for school divisions to hire additional nurses, social workers and behavioral health professionals, as required under pending legislation proposed by Sen. Jennifer McClellan, D-Richmond, who is seeking the Democratic nomination for governor.

Senate Finance Chairwoman Janet Howell, D-Fairfax, said the money in the budget for the state’s share of teacher raises could be used for other K-12 needs, depending on whether local school divisions have the money for their share of salary increases.

“They will have flexibility to use it in other ways,” Howell said Thursday. “Some of them are saying they can’t afford it.”

Source: www.dailyprogress.com

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