Budget Compromise Reached

Budget negotiators released a compromise proposal on Wednesday, October 14, and both chambers are expected to agree to the budget conference report on Friday, October 16.  The conference report recognizes approximately $280 million in savings and revenue adjustments and includes approximately $240 million in net new spending above the budget as introduced in August, much of which was used to restore spending items that had been included in the budget as passed by the General Assembly in March, but unallotted in April and proposed to be eliminated in the Governor’s August budget.  The conference report also directs the use of federal Coronavirus Relief Funds for priority items such as unemployment assistance, support for K-12, child care, and election administration.  After passage by the legislature, the Governor will have an opportunity to recommend amendments and veto specific line items.

The conference report includes several items which were requests made by VACo of the conferees, including important actions to protect school divisions against mid-fiscal year reductions in revenues, stabilize the child care system, and enhance access to broadband.  An overview of key provisions in the conference report is provided below.

K-12 Education

• Redirects $8.9 million in federal Governor’s Emergency Education Relief fund dollars provided through the CARES Act that had previously been designated for longer-term internet access initiatives to support technology needs and internet access for virtual learning resulting from school closures. (Item 141 #1c)
• Authorizes school divisions to use textbook payments in FY 2021 to address costs related to school reopening or virtual learning and waives local match requirements for these funds. (Item 145 #1c)
• Provides that semi-monthly payments to school divisions would not be reduced in January as a result of potential reductions in September average daily membership counts. This language prevents school divisions from experiencing reductions in state payments in the middle of the fiscal year and allows the issue to be revisited after average daily membership is calculated in March.  VACo strongly supported this provision.  (Item 145 #2c)
• Provides $95.2 million in FY 2021 from taxes on “gray machines” (“games of skill” temporarily allowed to continue operations, subject to a monthly tax on each machine) to hold school divisions harmless from losses that would otherwise be incurred as a result of the sales tax reforecast. VACo supported holding school divisions harmless from these potential mid-fiscal year reductions.  (Item 145 #3c, Item 479.10 #1c)
• Includes distribution of $220.1 million in federal Coronavirus Relief Funds to school divisions to assist with costs associated with the pandemic. (Item 479.10 #2c)
• Restores $35.2 million GF in FY 2022 for the At-Risk Add-On (these funds were included in the budget as passed in March, but unallotted in April and proposed to be eliminated in the August introduced budget). (Item 482.20 #32c)

Compensation

• Provides $10.9 million GF in FY 2021 for a one-time $500 bonus payment to state sworn law-enforcement personnel and sworn state-supported local constitutional officers and their staffs and regional jail superintendents and their staffs, to be paid December 1, 2020. (This language does not appear to include local police departments; a separate appropriation, discussed below, is provided to local police departments to assist with recruitment and retention.)  (Item 477 #3c)
• Contingent on FY 2021 revenues meeting the forecast, provides $98 million for one-time bonus payments. State employees would receive a one-time bonus payment of $1500 on September 1, 2021; includes funding for a one-time bonus of 1.5 percent on September 1, 2021, for constitutional officers and state-supported local employees.  Language provides that if there is no downward revision to the revenue projection for FY 2022 and such revenue estimate includes sufficient revenue to provide the bonus payments and a salary increase for SOQ-recognized instructional and support positions, the Governor is directed to include such a salary increase in his introduced budget for consideration by the 2021 General Assembly.  (Item 477 #4c)

Judiciary/Public Safety

• Restores $30.2 million GF in FY 2022 for STEP-VA services, including $6.8 million for mobile crisis services and $4.7 million for crisis dispatch to assist in implementation of the Marcus Alert system, which is set out in legislation under consideration by the legislature and seeks to ensure that an appropriate behavioral health response is provided when an individual is experiencing a behavioral health crisis.  Provides approximately $184,000 GF over the biennium in staffing costs for the Department of Behavioral Health and Developmental Services to implement the Marcus Alert legislation, and $184,000 in staffing costs at the Department of Criminal Justice Services over the biennium.  Provides $3 million GF in FY 2022 to fund community care teams pursuant to the legislation establishing the Marcus Alert system.  (Item 482.20 #17c, Item 320 #2c, Item 404 #1c, Item 322 #2c)
• Directs the Secretary of Public Safety and Homeland Security to establish an E-911 Border Response Workgroup to assess deficiencies related to the timely routing of E-911 calls to the appropriate Public Safety Answering Point across state or county borders.  (Item 391 #1c)
• Provides $6.4 million GF in FY 2021 for grants to law enforcement agencies for one-time costs associated with purchasing, operating, and maintaining body-worn camera systems.  Provides funding for a coordinator to manage the program.  Language stipulates that a local match would be required for grants.  (Item 406 #1c)
• Provides $7.5 million GF in FY 2021 to be distributed to local police departments on December 1, 2020, to be used to attract and retain qualified sworn personnel and support costs associated with criminal justice reform.  (Item 408 #1c)
• Restores funding for an executive director and an investigator for the Board of Local and Regional Jails (formerly the Board of Corrections), which had been unallotted in April.  (Item 482.20 #33c)
• Restores $5.7 million GF in FY 2021 and $7.6 million GF in FY 2022 for district court clerk positions that were unallotted in April.  (Item 482.20 #24c)
• Restores approximately $950,000 GF in FY 2020 and $5.7 million GF in FY 2022 for additional public defender positions ($3.8 million in FY 2021 and $5.7 million in FY 2022 had been unallotted in April).  (Item 482.20 #25c)
• Restores $1.2 million GF in FY 2021 and $2.3 million GF in FY 2022 for pretrial and probation services.  This funding provides for programs to be established in localities currently lacking such programs, and had been included in the budget as passed in the 2020 regular session, but was unallotted in April.  (Item 482.20 #38c)
• Restores $500,000 GF in FY 2021 and $1 million GF in FY 2022 for pre-release and post-incarceration services.  This funding had been included in the budget as passed in the 2020 regular session, but was unallotted in April.  (Item 482.20 #39c)

Elections

• Directs the distribution of $10 million in Coronavirus Relief Funds to general registrars based on population or need to assist with costs anticipated for the November 3 general election, to include additional printing and mailing costs, drop boxes, temporary staffing, polling place cleaning, and other costs associated with ensuring voter safety during the pandemic. (Item 479.10 #2c)

Economic Development/Workforce

• Directs the Department of Small Business and Supplier Diversity to examine the program eligibility criteria and maximum grant award to ensure that funds allocated to the Rebuild Virginia Grant program are deployed prior to the expiration of the federal Coronavirus Relief Funds, and directs the Department to expand the eligibility criteria to allow small businesses that have already received CARES Act funding from other sources to qualify. Directs $5 million in federal Coronavirus Relief Funds to increase the grant size for the program and expand the eligibility criteria.  (Item 128 #1c, Item 479.10 #2c)
• Directs the Virginia Employment Commission to establish a full-time position responsible for investigating and responding to legislative inquiries. (Item 131 #1c)
• Provides $2 million GF for workforce programs at the Virginia Community College System and Richard Bland College in partnership with the VA Ready program. (Item 221 #1c)
• Directs $210 million from the federal Coronavirus Relief Fund in FY 2021 to provide additional support for the state’s Unemployment Insurance program, and directs the Governor to work with the Virginia Employment Commission to determine the best use of the funds. (Item 479.10 #2c)
• Provides that if Coronavirus Relief Funds are unspent as of December 18, 2020, the funds are to be transferred to the Unemployment Compensation Fund. (Item 479.10 #2c)

Broadband

• Includes language directing the Broadband Advisory Council to assess allowing public broadband authorities to apply directly for Virginia Telecommunication Initiative funds without a private sector partner. The Department of Housing and Community Development is directed to submit feedback on the potential impacts of this policy change to the chairs of the money committees before the 2021 General Assembly session.  (Item 114 #1c)
• Accounts for use of $30 million in Coronavirus Relief Funds for broadband accessibility, as announced by the Governor last week. (Item 479.10 #2c)
• Retains Governor’s restoration of $16 million GF per year to the Virginia Telecommunication Initiative and provision of an additional $15 million in FY 2021, for a total appropriation of $84.5 million over the biennium.

Housing

• Designates $12.5 million from the Housing Trust Fund in FY 2021 to continue the Virginia Rent and Mortgage Relief Program after the expiration of federal Coronavirus Relief Funds in December 2020; includes language providing that financial assistance may be provided with these funds for past-due rent accumulated prior to April 1, 2020, and allowing landlords and tenants to access the program. (Item 113 #1c)
• Directs $3 million in Coronavirus Relief Funds to provide emergency housing for homeless individuals. (This funding would supplement the $8.8 million in Coronavirus Relief Funding already provided for this purpose.)  (Item 479.10 #2c)
• Replaces the eviction moratorium language included in the Governor’s proposed budget and establishes the terms by which landlords may evict a tenant for nonpayment. The amendment also provides that if a tenant refuses to apply for rental assistance and refuses to cooperate with their landlord in applying for rental assistance through the Virginia Rent and Mortgage Relief Program, the landlord can take action on or before December 31, 2020, to obtain possession of a dwelling unit for non-payment of rent. (Item 4-14 #2c)

Aid to Local Public Libraries

• Provides $1 million GF in FY 2021 for local libraries to expand broadband access to support job search assistance and virtual learning. (Item 247 #1c)

Child Care/Early Childhood

• Provides $16.6 million in federal Coronavirus Relief Funds in FY 2021 to supplement the $16.6 million GF that was proposed in the Governor’s August budget to contract with local partners to support child care; provides that the federal funds are to be expended prior to the GF allocation. (Item 350 #1c, Item 479.10 #2c)
• Directs $60 million in federal Coronavirus Relief Funds to be used to provide stabilization grants to child care providers and local community partnerships, with the goals of preserving the long-term capacity of the child care system during the pandemic and providing additional child care slots in the near term. VACo supported additional resources to enhance access to child care, which has been severely impacted by the pandemic.  (Item 479.10 #2c)
• Restores $37.3 million GF in FY 2022 to increase the Virginia Preschool Initiative per-pupil amount by 10 percent (the budget passed in March included this increase in FY 2021 and an additional increase in FY 2022, but these funds were unallotted in April). (Item 482.20 #31c)

Children’s Services Act

• Restores $250,000 GF in FY 2021 for completion of the rate study for private day placements originally directed by the 2018 General Assembly (this funding was unallotted in April). (Item 482.20 #11c)
• Includes language providing that local Community Policy Management Teams may adjust rates for private day placement services to account for virtual or distance learning so that the rate is commensurate with the level of service being provided. This language is a significant improvement over previous language considered in conference, which would have barred CPMTs from reducing rates for services that are not able to be provided in accordance with local contracts (unless the provider agreed), without requiring that the services provided be comparable to the stipulations of the contract.  (Item 292 #1c)

Behavioral Health

• Restores $2.1 million in FY 2021 and $4.2 million in FY 2022 for the Virginia Mental Health Access Program (which supports children’s access to mental health care). (Item 482.20 #16c)
• Restores $7.5 million GF in FY 2021 and $10 million GF in FY 2022 for discharge assistance plans to assist in providing community-based services for individuals at state hospitals who are clinically ready for discharge. (Item 482.20 #14c)
• Restores $3.75 million GF per year for public-private partnerships to reduce the census in state hospitals (this action would restore half of the funding included in the budget passed in March, but unallotted in April). (Item 482.20 #1c)
• Restores $3 million GF in FY 2021 and $17 million GF in FY 2022 for permanent supportive housing. (Item 482.20 #15c)
• Restores $2.5 million GF in FY 2022 for Medicaid rate increases for mental health services providers. (Item 482.20 #3c)
• Restores $10.3 million GF in FY 2022 for the redesign of Medicaid behavioral health services. (Item 482.20 #27c)
• Restores $7.6 million GF in FY 2022 for a Medicaid rate increase for psychiatric residential treatment facilities, effective July 1, 2021. (Item 482.20 #30c)

Social Services

• Restores $8.7 million GF in FY 2022 for prevention services at local departments of social services. (The budget as passed in March contained $12.5 million in FY 2021 and $17.4 million in FY 2022 for this purpose, which was unallotted in April.)  (Item 482.20 #46c)
• Restores approximately $580,000 GF in FY 2021 and $1.2 million GF in FY 2022 to fund a 15 percent increase in the Temporary Assistance to Needy Families cash assistance payment to two-parent families, beginning January 1, 2021 (a similar increase was provided to most TANF families beginning July 1, 2020, but the two-parent cash assistance is funded with GF dollars and the proposed funding was unallotted in April). (Item 482.20 #18c)

Natural Resources

• Eliminates language included in the Governor’s budget proposing a study to develop a plan for landfill operators to pay a solid waste disposal fee. VACo had opposed this language.  (Item 372 #1c)
• Modifies language in the Governor’s budget establishing a workgroup to review the long-term sustainability of the water quality enhancement fee. (Item 377 #1c)
• Limits language adopted at the reconvened session in April dealing with mitigation agreements for projects having a potential adverse impact on fish and wildlife so that the authority to require certain mitigation measures is limited to the Hampton Roads Bridge Tunnel Project. (Item 383 #1c)

Transportation

• Requires the Secretary of Transportation to report to the Governor and the Chairs of the “money committees” on actions taken by the Commonwealth Transportation Board to reallocate transportation funding among projects due to declining transportation revenues. (Item 430 #1c)

Utility Disconnection Moratorium

• Extends utility disconnection moratorium until 60 days after the end of the declared state of emergency, or until the Governor determines that economic and public health conditions have improved, whichever is sooner. For customers more than 30 days in arrears, the utility must offer repayment plans for past due accounts.  Such repayment plans shall last a term 6 months to 24 months, as determined by the customer to be most sustainable and affordable.  No utility may disconnect customers currently making timely payments under a repayment plan.  Utilities and customers may seek debt relief or mitigation from any available resource, may enter into another payment plan offered by the utility, and may renegotiate the terms of the repayment plan.  Utilities may seek relief from the disconnection moratorium if their accounts receivable arrearages exceed 1 percent of the utility’s annual operating revenue.  If relief is granted, disconnects may be resumed for the purpose of forcing a repayment plan.  (Item 4-14 #1c)
• Directs the use of $100 million in federal Coronavirus Relief Funds to provide assistance to utility customers with accounts over 30 days in arrears. Requires the State Corporation Commission to establish an application process in order to distribute funds directly to utilities for the purpose of efficiently providing direct assistance to customers, and directs the SCC to transfer funds to the Department of Housing and Community Development for distribution to utilities that do not fall under the jurisdiction of the SCC.  (Item 479.10 #2c)

Reserves

• Eliminates $89 million proposed deposit to the Revenue Stabilization Fund in FY 2022 (for the deposit that would be made in FY 2024), and redirects the funds to the Revenue Reserve Fund. (Item 274 #1c and Item 275 #1c)

Other

• Provides that language in the budget as passed in March authorizing remote meetings for public bodies during states of emergency also applies to joint meetings of public bodies. (Item 4-0.01 #1c)

VACo Contact:  VACo Legislative Team