RICHMOND — With Democrats in full power heading into the upcoming General Assembly session, Gov. Ralph Northam wants to give the legislature $100 million each year to spend however it pleases.
“This is the governor recognizing that there is a new leadership, and giving them $100 million a year for their priorities,” Secretary of Finance Aubrey Layne said Monday. “It’s reaching out and saying we want to work together.”
Northam is laying out his biennial budget before the General Assembly’s budget-writing committees Tuesday morning, when he’ll propose an increase in the statewide gas tax, scrapping annual car inspections and upping the cigarette and tobacco products tax. He’ll also suggest setting up a state-based marketplace under the Affordable Care Act, $1.2 billion in new funding for K-12 education, $145 million to fund a tuition-free community college program for middle and low-income students and $13 million to implement gun control measures and more.
Speaking to a group of reporters at the Executive Mansion on Monday night, Northam called it a “historic budget.”
“I believe this is a fiscally conservative approach that gets to support quite a bit of additional initiatives,” Layne said.
Virginia lawmakers will begin work on a new two-year state budget with $1.6 billion banked in reserve and a revenue surplus enlarged by federal tax law changes.
Layne said total reserves are estimated to be $1.9 billion by the close of fiscal year 2022, exceeding 8% of total revenues.
New nongeneral fund policy proposals include an increase in the cigarette tax from 30 to 60 cents per pack. Other tobacco products would face an increase from 10% to 20% of manufacturer’s sale price. This money stays in the health care fund, which is used for health care initiatives.
Northam is proposing that the cigarette tax increase fund a state reinsurance program, which his administration anticipates would reduce marketplace premiums by 20%. Reinsurance programs provide payments to health insurers to help offset the costs of enrollees with large medical claims.
Northam also will pitch to legislators that Virginia offer a state-based health insurance exchange. Other states run their own marketplace, giving them the added flexibility that comes with that control to design standardized health plans with reduced cost-sharing and high-value services.
Transportation officials have been grappling with funding sources as gas tax revenue has been declining but vehicle miles traveled have increased.
Northam is proposing raising the gas tax 4 cents over three years, and tie it to inflation. This would take the gas tax to 34 cents, which is still below the national average. The goal is to ensure out-of-state drivers contribute their fair share.
He also wants to cut the vehicle registration fee in half and elimination vehicle safety inspections.
Earlier this year, a bill passed through the legislature with bipartisan support — with mostly Republicans voting against it — to increase the annual car inspection fee, bringing it to $20. Northam signed the bill into law.
There are no definitive studies proving that vehicle inspections improve safety, so the Northam administration wants to get rid of them. A pair of Republican legislators from Western Virginia have been considering introducing bills this upcoming session to either eliminate or roll back the car inspections.
Northam has been rolling out budget proposals the past few weeks. With K-12 education, he wants to boost funding for at-risk students and a 3% teacher pay raise in the second year of the budget. His tuition-free community college program emphasizes jobs in high-demand fields, such as health care and information technology. He aims to create an eviction prevention program as part of his effort to tackle affordable housing and eviction rates. He’s proposing $22 million to combat maternal and infant mortality and reduce the racial disparity in Virginia’s maternal mortality rate.
He wants to include the $200 million — $100 million each year — in the budget as a way to provide more flexibility to lawmakers to address priorities they’ve identified. Layne said this is the first time a Virginia governor has proposed this.
Layne said that Northam came up with this idea, and the legislators didn’t ask for it. It’s unknown if Democratic leadership has anything in mind for how they’d like to spend the money.
“It’s a new leadership and recognizing there may be different priorities than the old leadership had,” Layne said.