State Fiscal Briefs

November 2020

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Virginia’s budget basics

According to the National Association of State Budget Officers (NASBO), Virginia’s total expenditures in fiscal year (FY) 2020 were $64.2 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2020 were $2.3 trillion, ranging from $4.7 billion in Wyoming to $337.7 billion in California.

Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.

Per the US Census Bureau, Virginia’s combined state and local direct general expenditures were $73.7 billion in FY 2017 (the most recent year census data were available), or $8,705 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $9,446.

Virginia’s largest spending areas per capita were elementary and secondary education ($2,081) and public welfare ($1,421). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.

Virginia’s combined state and local general revenues were $73.9 billion in FY 2017, or $8,735 per capita. National per capita general revenues were $9,592. Virginia uses all major state and local taxes. Virginia’s largest sources of per capita revenue were charges ($1,872), such as state university tuition and highway tolls, and property taxes ($1,652).

Virginia’s politics

Governor Ralph Northam, a Democrat, was elected in 2017 with 54 percent of the vote. The next gubernatorial election is in 2021. Virginia is the only state that does not let a sitting governor run for reelection. A governor can run for a non-consecutive second term, though.

Democrats control both the House of Delegates (55 Democrats to 45 Republicans) and Senate (21 Democrats to 19 Republicans). Control of the governor’s mansion and each house of the legislature gives Democrats a trifecta in Virginia. All Virginia House seats are on the ballot in 2021 because delegates serve two-year terms. Senators serve four-year terms, and their seats are on the ballot in 2023.

Virginia’s budget institutions, rules, and constraints

Virginia uses a biennial budget. The legislature is not required to pass a balanced budget, the governor is not required to sign one, and deficits may be carried over into the following year. However, the state has budget rules that require lawmakers to balance revenues and expenditures. Virginia does not have any tax and expenditure limits. The state does limit total authorized debt and debt service incurred by the state.

(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)

Virginia’s recent fiscal debates

  • Virginia accepted funds for expanding Medicaid eligibility created by the Affordable Care Act in May 2018. Before the legislation passed, the Urban Institute estimated that accepting Medicaid expansion would increase the state’s federal Medicaid funds 30.8 percent ($2.1 billion) and increase its state spending on Medicaid 4.6 percent ($193 million). Urban estimated that savings from Medicaid expansion (e.g., lower spending on uncompensated care) would, like with other states, fully or largely offset Virginia’s direct state spending increases. The original deal between Governor Northam and the legislature on Medicaid expansion included work requirements for newly eligible enrollees, but Governor Northam said Virginia would drop the rules after Democrats won control of the legislature in 2019. Further, courts have blocked other states from pursuing work requirements.
  • In 2018, Virginia dedicated $158 million in funding for the Washington Metropolitan Area Transit Authority (Metro). Most of the funds were diverted from other projects rather than raised through new taxes. The legislation was part of a joint effort with the District of Columbia and Maryland to improve the Washington, DC, region’s public transit system with dedicated funding for capital improvements. At the end of 2019, Governor Northam proposed increasing the state’s gas tax rate by 4 cents a gallon and indexing the rate to inflation going forward. He requested the new revenues to help pay for the state’s long list of other transportation needs.

Virginia’s current budget

Virginia passed its FY 2019–20 budget in June 2018. In December 2018, Governor Northam introduced amendments to the biennial budget, including more funds for the state’s newly expanded Medicaid program, salary increases for teachers, and additional revenue allocated to the state’s rainy-day fund. Governor Northam also proposed taking revenue related to conforming the state’s tax laws with the Tax Cuts and Jobs Act (TCJA) and using half of it for spending programs and half to change the state’s earned income tax credit from a nonrefundable credit into a refundable credit.

The legislature passed amendments to the biennial budget in May 2019. The enacted amendments included most of the governor’s requests, including more funds for Medicaid, a 2 percent increase in teacher salaries, and hundreds of millions of dollars allocated to the rainy-day fund. However, the legislature did not use any revenue related to the TCJA for spending programs or the state’s earned income tax credit. Instead the legislature passed legislation that increased the state’s standard deductions and provided a one-time tax rebate to all Virginia taxpayers of $110 for single filers and $220 for married filers.

Governor Northam released his proposed FY 2021–22 in December 2019 and gave his 2020 state of the state address in January 2020.

For more on Virginia’s budget, see