Both the Senate Finance and Appropriations and the House Appropriations Committees received briefings from Secretary of Finance Stephen E. Cummings on state revenues and Hurricane Helene relief efforts at meetings last week. State revenues turned in a strong performance in September, which is an important month for state finances, as it reflects individual income tax nonwithholding payments. Overall revenues increased by 12.4 percent in September, with this growth largely attributable to nonwithholding payments. On a fiscal year-to-date basis, General Fund revenues are 9.9 percent ahead of last year, almost entirely driven by growth in net individual income tax collections.
State revenues are comfortably outperforming the forecast; on a fiscal year-to-date basis, revenues are ahead of the forecast in the 2024 Appropriation Act by 9 percent, or $601.4 million. However, that forecast was developed in fall 2023 and assumed a mild recession in the fourth quarter of FY 2024, which did not materialize. Secretary Cummings summarized the state’s economy as “pretty darn good,” although the Administration will be paying close attention to several factors in developing a revised forecast in December. Consumer confidence, as measured by the Conference Board Consumer Confidence Index, weakened in September. Secretary Cummings’s memorandum to Governor Youngkin also notes that the timing of further interest rates cuts by the Federal Reserve Open Market Committee is uncertain, and cites several macroeconomic wild cards, including “escalating geopolitical tensions…and the possibility of protracted fiscal disputes at the federal level that could further weaken consumer and business confidence.”
Secretary Cummings shared updates on the state government response to Hurricane Helene, including a summary of Federal Emergency Management Agency (FEMA) disaster designations for affected counties. The state has authorized $20 million in disaster funding thus far to cover various state agency costs for staffing, travel, supplies, and transportation, among other needs; more funding may be needed as more damage assessments are completed, although the state expects some reimbursements from FEMA. Several members posed questions about how the state could prepare for and mitigate future flooding disasters given the expected increase in severe weather events.
Both committees also received a presentation by Dale F. Farino, CEO of the Virginia Alcoholic Beverage Control Authority, who discussed challenges in the spirits industry and their effect on ABC profits. ABC has revised its revenue forecast to reflect no growth in FY 2025 and 1 percent growth in FY 2026, rather than 5 percent growth each year, as predicted earlier. Mr. Farino outlined various strategies to enhance revenues and cut costs; several members expressed concerns about the effect of certain cost-savings strategies, such as holding positions vacant, on ABC’s regulatory responsibilities.
The Senate Finance and Appropriations Committee received a briefing on the new Virginia Clean Energy Innovation Bank, which has been developed by Virginia Energy using $10 million provided in the 2024 Appropriation Act, with the intention to pursue federal funds through the U.S. Department of Energy, and the goal of supporting clean power generation and energy infrastructure projects. Committee members posed a series of questions to Virginia Energy Director Glenn Davis about the Department’s authority to establish the Bank when the enabling legislation had been vetoed.
The Senate Finance and Appropriations Committee also received an update from the American Revolution 250 Commission on plans for the Virginia 250 Commemoration, including a report on the status of grant awards for local programming and the anticipated economic impact of Commemoration events in the Commonwealth.
The Department of Medical Assistance Services reported to the Senate Finance and Appropriations Committee about the status of Medicaid “unwinding.” Although eligibility redetermination of all Medicaid members after the conclusion of the public health emergency is now almost complete, this task is unfinished for a small portion of Medicaid members – generally members with more complex cases. Due to some deviation from the predicted Medicaid enrollment levels as “unwinding” was completed, DMAS finished FY 2024 with only a slim end-of-year balance and had to defer $195 million in certain payments until FY 2025 (which included an issue with the allocation of pharmacy rebate payments that had created an unanticipated $41 million General Fund cost in FY 2025). DMAS expects to use the $95 million in contingency funding set aside for Medicaid in the 2024 Appropriation Act, and Administration staff indicated that some additional FY 2024 surplus funds have been reserved to address these needs as well.
In addition to the September revenue report, the Hurricane Helene update, and the update from ABC, the House Appropriations Committee received an update from the Department of Behavioral Health and Developmental Services on progress in allocating the large increase in Developmental Disability Waiver slots approved in the 2024 Appropriation Act. These slots are being provided on a quarterly basis in order to allow CSBs and providers time to build capacity to serve the newly-eligible individuals.
VACo Contact: Katie Boyle